Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

8. RELATED PARTY TRANSACTIONS

During the three and nine months ended September 30, 2012 and 2011, the Company sold products to companies affiliated with its Chairman, President and Chief Executive Officer. The affiliated companies distribute the products outside of the United States and Canada. The Company also provides administrative services to these companies. Sales to the affiliated companies aggregated approximately $386,000 and $325,000during the three months ended September 30, 2012 and 2011, respectively, and $997,000 and $1,159,000for the nine months ended September 30, 2012 and 2011, respectively.  Administrative fees aggregated approximately $70,000 and $78,000during the three months ended September 30, 2012 and 2011, respectively, and $216,000 and $178,000for the nine months ended September 30, 2012 and 2011, respectively.  The Company had accounts receivable from the affiliated companies in connection with the product sales and administrative services aggregating approximately $336,000 and $495,000 at September 30, 2012 and December 31, 2011, respectively. Transactions with the affiliated companies were made in the ordinary course of business.   While the terms of sale to the affiliated companies differ from other customers, the affiliated companies bear their own warehousing, distribution, advertising, selling and marketing costs, as well as their own freight charges (the company pays freight charges in connection with sales to its domestic customers on all but small orders).  Moreover, the Company does not pay sales commissions with respect to products sold to the affiliated companies.  As a result, the Company believes its profit margins with respect to sales to the affiliated companies are similar to the profit margins with respect to sales to its larger domestic customers. 

A subsidiary of the Company currently uses the services of an entity that is owned by the Chairman, President and Chief Executive Officer of the Company to conduct product research and development, marketing and advertising.  The Company paid the entity approximately $10,500 for each of the three month periods ended September 30, 2012 and 2011, and $31,500 for each of the nine month periods ended September 30, 2012 and 2011, under this arrangement.

The Company leases office and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer.  The Company believes that the rental payments are below market rates.  See Note 9 for a description of the lease terms.

On December 6, 2010, the Company redeemed a warrant held by its Chairman, President and Chief Executive Officer to purchase 500,000 shares of its Common Stock at an exercise price of $0.836 per share.  The warrant initially was issued to him in connection with financing he provided to the Company in December 2005.  The aggregate redemption price of the warrant was $471,950, which was based on the difference between the closing price of the Company's Common Stock on December 6, 2010 and the exercise price of the warrant.  The Company issued a note to the Chairman, President and Chief Executive Officer in an amount equal to the redemption price, which bore interest at the rate of 3% per annum.  On January 5, 2011, the Company paid all outstanding principal and interest on the note.  The redemption, which was approved by the independent directors of the Board of Directors, was effected in order to prevent the dilutive effect of the exercise of the warrant.

A director of the Company is Regional Executive Vice President of an entity from which the Company sources most of its insurance needs at an arm’s length competitive basis.  During the three months ended September 30, 2012 and 2011, the Company paid an aggregate of approximately $171,000 and $304,000, respectively, and during the nine months ended September 30, 2012 and 2011, the Company paid an aggregate of approximately $443,000 and $528,000 respectively, in insurance premiums on policies obtained through the entity.