COMMITMENTS AND CONTINGENCIES	9 Months Ended
Sep. 30, 2011
COMMITMENTS AND CONTINGENCIES	10. COMMITMENTS AND CONTINGENCIES Litigation. On August 15, 2008, a competitor, Exergen Corp., filed suit in the United States District Court for the District of Massachusetts against Kidz-Med, Inc., ASRI and Tecnimed, Srl for patent infringement with regard to the Thermofocus thermometer. Under the Company’s distribution agreement with Tecnimed, Tecnimed is obligated to indemnify the Company against certain actions including this patent infringement action. However, as part of the Settlement Agreement discussed in Note 8 – Notes Payable, the Company agreed to cover its own fees and expenses in connection with this litigation and agreed to waive any claim for lost profits that may arise within the indemnification provision. The case is currently at the Markman Hearing stage. Tecnimed has provided the Company with a legal opinion that the thermometer does not violate the competitor’s patents. The Company is unable to make an independent assessment of this patent infringement action and is relying on Tecnimed’s defense of this case. As the Company believes that Tecnimed is capable and willing to defend the Company, and that the Company’s defense costs if any will not be significant, no provision for possible loss related to this litigation has been included in these consolidated financial statements. In March 2010, the competitor filed an additional complaint against ASRI and Kidz-Med, Inc. in the United States District Court for the District of Massachusetts, alleging that false advertising damaged the competitor. The competitor is seeking to enjoin the Company from future false advertising and to recover unspecified monetary damages. Based on the advice of counsel, the Company believes this case is without merit. The District Court has granted the Company’s motion to dismiss the complaint, however, Exergen has made a motion to reconsider that order and the motion is pending. On September 21, 2010, Tecnimed filed a complaint against the Company and its Kids-Med subsidiary in U.S. District Court for the Southern District of New York, alleging breach of a non-compete agreement and infringement on the Thermofocus trademark and trade dress. Further, the complaint alleges that the Company is in default on the payment of $209,802 of principal and $88,867 of interest under the notes due Tecnimed. (Since the initial filing of the complaint, a customer of the Company has paid Tecnimed approximately $46,000, which the Company applied as a reduction of principal. As of September 30, 2011, the Company is carrying a principal balance due Tecnimed of $163,947 and accrued interest of $86,929.) The Company has countersued Tecnimed for breach of the Settlement Agreement that the parties had entered into in 2009. On January 18, 2011, the U.S. District Court for Southern New York granted Tecnimed’s request for a preliminary injunction and ordered the Company to stop selling the Vera Temp in the allegedly infringing package and to recall the product in the contested packaging from customers. On February 11, 2011, after Tecnimed posted a $130,000 preliminary injunction bond with the Court to compensate the Company in the event Tecnimed does not prevail in this action, the Company sent recall notices out to its customers. The Company also complied with this injunction by changing its retail package to reflect the order of the Court. For the nine months ended September 30, 2011, the Company reversed previously recognized revenues from sales in the allegedly infringing package in the amount of $84,208. The Company now ships the thermometer to customers in its new, Court-approved package. The Company has incurred approximately $30,500 of direct costs specifically related to the recall, including shipping and repackaging costs. Of this amount, $5,500 was expensed during the second quarter of 2011 and the remainder was expensed as of December 31, 2010. In addition, the recall caused lost sales which the Company would seek to recover from the preliminary injunction bond should it prevail in the case. The Company has appealed the District Court’s preliminary injunction order to the United States Court of Appeals for the Second Circuit. That appeal has been fully briefed and a decision is expected in the first quarter of 2012. The Company has acknowledged the outstanding note and interest owed to Tecnimed, yet seeks to offset those amounts by the damages caused by Tecnimed’s breach of the Settlement Agreement. Tecnimed is seeking additional damages caused by the Company’s use of the allegedly infringing packaging. Based on advice of counsel, the Company does not believe it has significant exposure because Tecnimed had no material amount of sales in the United States at the time. Finally, Tecnimed is alleging it is entitled to recover its attorneys’ fees under the “exceptional case” provisions of the Lanham Act. Based on the advice of counsel, the Company believes that it is unlikely that this case would be deemed an exceptional case. The Company has, and may in the future, become a party to various claims, complaints and legal actions arising in the ordinary course of business. In the opinion of management, after consulting with counsel, there are currently no additional legal matters that would have a further material adverse effect on the financial statements of the Company taken as whole as of September 30, 2011. Employment agreements. In conjunction with the Disintegrator acquisition (See Note 7 – Patent, Contingent Note Payable and Contingent Compensation), the Company entered into a ten year employment agreement with a former executive and majority owner of Safeguard in addition to contingent compensation per the asset purchase agreement. The employment agreement calls for a base salary of $10,000 per month beginning upon the receipt of $500,000 of combined new capital and revenue, and $20,000 per month beginning upon the receipt of $2,500,000 of combined new capital and revenue. The $20,000 per month base salary began accruing January 1, 2011. The employment agreement may be terminated by the executive in the event of default with prior notice, and by the Company for cause, or death or permanent disability of the executive. During the nine months ended September 30, 2011, the Company expensed $180,000 of base salary related to this agreement. At September 30, 2011, approximately $50,000 of base salary was unpaid. Effective April 5, 2007, the Company entered into an employment agreement with our chief executive officer. This agreement continues until (i) another chief executive officer is appointed by a majority of our Board of Directors, (ii) either party terminates in accordance with the provisions of the agreement, or (iii) his death or permanent disability. The agreement calls for a minimum salary of $10,000 per month plus additional cash and stock compensation upon the achievement of various milestones. The Company has not made certain cash payments due under the agreement. During the nine months ended September 30, 2011, the Company expensed $90,000 related to this agreement. As of September 30, 2011, $380,000 has been accrued as compensation payable. This employment agreement also called for the issuance of 2,500 fully-vested, restricted shares of the Company’s common stock upon execution. As of September 30, 2011, the shares had not been issued, however the Company has accrued $70,000 as an obligation to issue shares based on the closing price on the date of grant. On March 1, 2010, the Company entered into a five year employment agreement with an executive. The employment agreement calls for the monthly award of restricted shares of our common stock equivalent to $15,000 per month based on the average closing price for the month plus a 2% cash bonus for sales collected through June 30, 2010. Beginning on the later of July 1, 2010, or date the Company’s registration statement with the SEC becomes effective, the executive shall be entitled to a base salary of $12,000 per month, plus a 2% cash bonus for sales collected and a 2% common stock bonus for sales collected. The Company’s registration statement with the SEC became effective on January 14, 2011. The shares issuable for the stock bonus shall be determined based on the five day average closing price prior to the collection of the sale. The agreement also calls for the reimbursement of expenses including payment to the executive of up to $650 per month for office space. During the nine months ended September 30, 2011, the Company has paid $108,000 in accordance with this agreement. Service agreements. Beginning January 1, 2010, the Company and a marketing consultant entered into an amended agreement, whereby the consultant is entitled to receive warrants valued up to $1,987,500 based upon the execution of certain licensing agreements and upon the achievement of certain collected revenue targets. Upon achievement of the targets, warrants equivalent to the first $200,000 shall be issued based on the 30 day trailing weighted average price of the Company’s common stock. The exercise price is to be determined as 50% of the 30 day trailing weighted average price. All warrants are exercisable over 5 years from the date of issuance. Upon achievement of subsequent targets, beginning at $2,000,000 of revenues collected, warrants equivalent of up to $1,787,500 shall be issued based on the 30 day trailing weighted average price and an exercise price equal to the 30 day trailing weighted average price. The Company will account for warrants issuable when the targets are met. In addition, the consultant is entitled to a cash fee of $5,000 per month, plus reimbursement of out-of-pocket expenses, for services rendered through the conclusion of the agreement in August 2019. The fee is subject to escalation upon the achievement of certain collected revenue targets as a result of the consultant’s efforts. For the year ended December 31, 2010, the Company had incurred $131,903 for fees and expenses related to this amended agreement and paid $72,424. In January 2011, the Company and the consultant settled all amounts due through December 31, 2010, for the issuance of 12,000,000 shares of our common stock, $15,000 in cash and $2,480 of expenses. The shares were valued at $35,000 based on the value of unpaid services in accordance with the agreement between the parties. The 12,000,000 common shares (equivalent to 60,000 shares after the 200-to-1 reverse stock split) were issued on January 21, 2011. During the nine months ended September 30, 2011, the Company accrued cash fees of $45,000 related to this agreement. On July 27, 2011, the Company issued 72,727 common shares as payment for the $15,000 cash piece within the 2010 year end settlement. On September 3, 2011, the Company agreed to pay up to 7% of sales and 10% of investment funds received from direct introduction by a consultant. In addition, the Company agreed to issue 150,000 cashless warrants that may be converted into an equivalent amount of common shares. These warrants are issuable to 4 individuals associated with the consultant and are contingent upon the sale or investment of $50,000 resulting from the work of the consultant. Purchase and sale agreements. From time to time, the Company enters into agreements to purchase components and finished products for resale. The purchase agreements have various durations and require the Company to purchase certain minimum quantities. As of September 30, 2011, the Company had advanced $36,900 to a vendor is committed to pay an additional $86,100 prior to shipment of the product.

10. COMMITMENTS AND CONTINGENCIES

Litigation. On August 15, 2008, a competitor, Exergen Corp., filed suit in the United States District Court for the District of Massachusetts against Kidz-Med, Inc., ASRI and Tecnimed, Srl for patent infringement with regard to the Thermofocus thermometer. Under the Company’s distribution agreement with Tecnimed, Tecnimed is obligated to indemnify the Company against certain actions including this patent infringement action. However, as part of the Settlement Agreement discussed in Note 8 – Notes Payable, the Company agreed to cover its own fees and expenses in connection with this litigation and agreed to waive any claim for lost profits that may arise within the indemnification provision. The case is currently at the Markman Hearing stage. Tecnimed has provided the Company with a legal opinion that the thermometer does not violate the competitor’s patents. The Company is unable to make an independent assessment of this patent infringement action and is relying on Tecnimed’s defense of this case. As the Company believes that Tecnimed is capable and willing to defend the Company, and that the Company’s defense costs if any will not be significant, no provision for possible loss related to this litigation has been included in these consolidated financial statements. In March 2010, the competitor filed an additional complaint against ASRI and Kidz-Med, Inc. in the United States District Court for the District of Massachusetts, alleging that false advertising damaged the competitor. The competitor is seeking to enjoin the Company from future false advertising and to recover unspecified monetary damages. Based on the advice of counsel, the Company believes this case is without merit. The District Court has granted the Company’s motion to dismiss the complaint, however, Exergen has made a motion to reconsider that order and the motion is pending.

On September 21, 2010, Tecnimed filed a complaint against the Company and its Kids-Med subsidiary in U.S. District Court for the Southern District of New York, alleging breach of a non-compete agreement and infringement on the Thermofocus trademark and trade dress. Further, the complaint alleges that the Company is in default on the payment of $209,802 of principal and $88,867 of interest under the notes due Tecnimed. (Since the initial filing of the complaint, a customer of the Company has paid Tecnimed approximately $46,000, which the Company applied as a reduction of principal. As of September 30, 2011, the Company is carrying a principal balance due Tecnimed of $163,947 and accrued interest of $86,929.) The Company has countersued Tecnimed for breach of the Settlement Agreement that the parties had entered into in 2009. On January 18, 2011, the U.S. District Court for Southern New York granted Tecnimed’s request for a preliminary injunction and ordered the Company to stop selling the Vera Temp in the allegedly infringing package and to recall the product in the contested packaging from customers. On February 11, 2011, after Tecnimed posted a $130,000 preliminary injunction bond with the Court to compensate the Company in the event Tecnimed does not prevail in this action, the Company sent recall notices out to its customers. The Company also complied with this injunction by changing its retail package to reflect the order of the Court. For the nine months ended September 30, 2011, the Company reversed previously recognized revenues from sales in the allegedly infringing package in the amount of $84,208. The Company now ships the thermometer to customers in its new, Court-approved package. The Company has incurred approximately $30,500 of direct costs specifically related to the recall, including shipping and repackaging costs. Of this amount, $5,500 was expensed during the second quarter of 2011 and the remainder was expensed as of December 31, 2010. In addition, the recall caused lost sales which the Company would seek to recover from the preliminary injunction bond should it prevail in the case. The Company has appealed the District Court’s preliminary injunction order to the United States Court of Appeals for the Second Circuit. That appeal has been fully briefed and a decision is expected in the first quarter of 2012. The Company has acknowledged the outstanding note and interest owed to Tecnimed, yet seeks to offset those amounts by the damages caused by Tecnimed’s breach of the Settlement Agreement. Tecnimed is seeking additional damages caused by the Company’s use of the allegedly infringing packaging. Based on advice of counsel, the Company does not believe it has significant exposure because Tecnimed had no material amount of sales in the United States at the time. Finally, Tecnimed is alleging it is entitled to recover its attorneys’ fees under the “exceptional case” provisions of the Lanham Act. Based on the advice of counsel, the Company believes that it is unlikely that this case would be deemed an exceptional case.

The Company has, and may in the future, become a party to various claims, complaints and legal actions arising in the ordinary course of business. In the opinion of management, after consulting with counsel, there are currently no additional legal matters that would have a further material adverse effect on the financial statements of the Company taken as whole as of September 30, 2011.

Employment agreements. In conjunction with the Disintegrator acquisition (See Note 7 – Patent, Contingent Note Payable and Contingent Compensation), the Company entered into a ten year employment agreement with a former executive and majority owner of Safeguard in addition to contingent compensation per the asset purchase agreement. The employment agreement calls for a base salary of $10,000 per month beginning upon the receipt of $500,000 of combined new capital and revenue, and $20,000 per month beginning upon the receipt of $2,500,000 of combined new capital and revenue. The $20,000 per month base salary began accruing January 1, 2011. The employment agreement may be terminated by the executive in the event of default with prior notice, and by the Company for cause, or death or permanent disability of the executive. During the nine months ended September 30, 2011, the Company expensed $180,000 of base salary related to this agreement. At September 30, 2011, approximately $50,000 of base salary was unpaid.

Effective April 5, 2007, the Company entered into an employment agreement with our chief executive officer. This agreement continues until (i) another chief executive officer is appointed by a majority of our Board of Directors, (ii) either party terminates in accordance with the provisions of the agreement, or (iii) his death or permanent disability. The agreement calls for a minimum salary of $10,000 per month plus additional cash and stock compensation upon the achievement of various milestones. The Company has not made certain cash payments due under the agreement. During the nine months ended September 30, 2011, the Company expensed $90,000 related to this agreement. As of September 30, 2011, $380,000 has been accrued as compensation payable. This employment agreement also called for the issuance of 2,500 fully-vested, restricted shares of the Company’s common stock upon execution. As of September 30, 2011, the shares had not been issued, however the Company has accrued $70,000 as an obligation to issue shares based on the closing price on the date of grant.

On March 1, 2010, the Company entered into a five year employment agreement with an executive. The employment agreement calls for the monthly award of restricted shares of our common stock equivalent to $15,000 per month based on the average closing price for the month plus a 2% cash bonus for sales collected through June 30, 2010. Beginning on the later of July 1, 2010, or date the Company’s registration statement with the SEC becomes effective, the executive shall be entitled to a base salary of $12,000 per month, plus a 2% cash bonus for sales collected and a 2% common stock bonus for sales collected. The Company’s registration statement with the SEC became effective on January 14, 2011. The shares issuable for the stock bonus shall be determined based on the five day average closing price prior to the collection of the sale. The agreement also calls for the reimbursement of expenses including payment to the executive of up to $650 per month for office space. During the nine months ended September 30, 2011, the Company has paid $108,000 in accordance with this agreement.

Service agreements. Beginning January 1, 2010, the Company and a marketing consultant entered into an amended agreement, whereby the consultant is entitled to receive warrants valued up to $1,987,500 based upon the execution of certain licensing agreements and upon the achievement of certain collected revenue targets. Upon achievement of the targets, warrants equivalent to the first $200,000 shall be issued based on the 30 day trailing weighted average price of the Company’s common stock. The exercise price is to be determined as 50% of the 30 day trailing weighted average price. All warrants are exercisable over 5 years from the date of issuance. Upon achievement of subsequent targets, beginning at $2,000,000 of revenues collected, warrants equivalent of up to $1,787,500 shall be issued based on the 30 day trailing weighted average price and an exercise price equal to the 30 day trailing weighted average price. The Company will account for warrants issuable when the targets are met. In addition, the consultant is entitled to a cash fee of $5,000 per month, plus reimbursement of out-of-pocket expenses, for services rendered through the conclusion of the agreement in August 2019. The fee is subject to escalation upon the achievement of certain collected revenue targets as a result of the consultant’s efforts. For the year ended December 31, 2010, the Company had incurred $131,903 for fees and expenses related to this amended agreement and paid $72,424. In January 2011, the Company and the consultant settled all amounts due through December 31, 2010, for the issuance of 12,000,000 shares of our common stock, $15,000 in cash and $2,480 of expenses. The shares were valued at $35,000 based on the value of unpaid services in accordance with the agreement between the parties. The 12,000,000 common shares (equivalent to 60,000 shares after the 200-to-1 reverse stock split) were issued on January 21, 2011. During the nine months ended September 30, 2011, the Company accrued cash fees of $45,000 related to this agreement. On July 27, 2011, the Company issued 72,727 common shares as payment for the $15,000 cash piece within the 2010 year end settlement.

On September 3, 2011, the Company agreed to pay up to 7% of sales and 10% of investment funds received from direct introduction by a consultant. In addition, the Company agreed to issue 150,000 cashless warrants that may be converted into an equivalent amount of common shares. These warrants are issuable to 4 individuals associated with the consultant and are contingent upon the sale or investment of $50,000 resulting from the work of the consultant.

Purchase and sale agreements. From time to time, the Company enters into agreements to purchase components and finished products for resale. The purchase agreements have various durations and require the Company to purchase certain minimum quantities. As of September 30, 2011, the Company had advanced $36,900 to a vendor is committed to pay an additional $86,100 prior to shipment of the product.