American Scientific Resources (ASFX)

[Artiztic1]

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.



They’ve already complied with the recall, and have redesigned the packaging. Sounds like the worse is over in regards to Tecnimed.


http://www.sec.gov/Archives/edgar/data/1114605/000114420411066299/v236364_10q.htm