Business Segments and Geographic Data

6 Months Ended

Jun. 30, 2011

Business Segments and Geographic Data

Business Segments and Geographic Data

Note 13

Business Segments and Geographic Data:

Effective January 1, 2010, the Company reorganized its business into four operating units to better align its organization based upon the Company's management structure, products and services offered, markets served and types of customers. The Physician Domestic segment derives its primary revenues from XTRAC procedures performed by dermatologists, the sales of XTRAC laser sales, and the sales of skincare and LED products in the United States. The Physician International segment, in comparison, generates revenues from the sale of equipment, skincare and LED products to dermatologists outside the United States through a network of distributors. The Other Channels segment derives revenues by selling skincare and LED products to indoor tanning and spa markets and to on-line and television retail consumer markets for home use on both a domestic and an international basis. The Surgical Products segment generates revenues by selling laser products and disposables to hospitals and surgery centers on both a domestic and an international basis. Management reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance.

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Unallocated assets include cash, prepaid expenses and deposits. Goodwill of $12,793,455, $4,037,934 and $2,737,811 has been allocated to the Physician Domestic, Physician International and Other Channels segments, respectively, based upon the fair value of the reporting segments as of June 30, 2011 and December 31, 2010. (See Note 5, Goodwill and Other Intangible Assets).

The Company revised its results of operations for its business segments for the three and six months ended June 30, 2010 to reflect a reclass between the Physician International and Surgical Products costs of revenues. The correction had no effect on the Company's previously reported net loss, consolidated balance sheet, or net cash flows, and is not considered material to any previously reported consolidated financial statements.

The following tables reflect results of operations from our business segments for the periods indicated below:

Three Months Ended June 30, 2011 (unaudited)

	PHYSICIAN DOMESTIC			PHYSICIAN INTERN'L			OTHER CHANNELS			SURGICAL PRODUCTS			TOTAL
Revenues	$	5,299,252		$	1,714,515		$	646,486		$	745,303		$	8,405,556
Costs of revenues		2,434,866			1,088,339			342,796			436,342			4,302,343
Gross profit		2,864,386			626,176			303,690			308,961			4,103,213
Gross profit %		54.1	%		36.5	%		47.0	%		41.5	%		48.8	%
Allocated operating expenses:
Selling, general and administrative		2,871,910			118,954			225,727			16,399			3,232,990
Engineering and product development		227,563			116,446			45,278			54,040			443,327
Unallocated operating expenses		-			-			-			-			2,654,793
		3,099,473			235,400			271,005			70,439			6,331,110
Income (loss) from operations		(235,087	)		390,776			32,685			238,522			(2,227,897	)
Interest expense, net		-			-			-			-			(891,080	)
Change in fair value of warrant		-			-			-			-			(1,026,888	)
Net (loss) income	$	(235,087	)	$	390,776		$	32,685		$	238,522		$	(4,145,865	)

Three Months Ended June 30, 2010 (unaudited)

	PHYSICIAN DOMESTIC			PHYSICIAN INTERN'L			OTHER CHANNELS			SURGICAL PRODUCTS			TOTAL
Revenues	$	5,369,224		$	1,196,694		$	638,096		$	807,023		$	8,011,037
Costs of revenues		2,520,401			814,923			378,365			371,580			4,085,269
Gross profit		2,843,823			381,771			259,731			435,443			3,925,768
Gross profit %		53.1	%		31.9	%		40.7	%		54.0	%		49.0	%
Allocated operating expenses:
Selling, general and administrative		2,590,864			263,888			143,124			32,924			3,030,800
Engineering and product development		107,933			68,185			72,458			31,235			279,811
Unallocated operating expenses		-			-			-			-			1,724,013
		2,698,797			332,073			215,582			64,159			5,034,624
Income (loss) from operations		150,026			49,698			44,149			371,284			(1,108,856	)
Interest expense, net		-			-			-			-			(885,001	)
Change in fair value of warrants		-			-			-			-			833,425
Net (loss) income	$	150,026		$	49,698		$	44,149		$	371,284		$	(1,160,432	)

Six Months Ended June 30, 2011 (unaudited)

	PHYSICIANDOMESTIC			PHYSICIAN INTERN'L			OTHER CHANNELS			SURGICAL PRODUCTS			TOTAL
Revenues	$	10,287,968		$	3,548,357		$	1,265,723		$	1,526,230		$	16,628,278
Costs of revenues		4,912,549			2,204,917			666,649			910,592			8,694,707
Gross profit		5,375,419			1,343,440			599,074			615,638			7,933,571
Gross profit %		52.2	%		37.9	%		47.3	%		40.3	%		47.7	%
Allocated operating expenses:
Selling, general and administrative		5,816,165			262,500			456,779			49,101			6,584,545
Engineering and product development		450,217			238,699			90,508			120,228			899,652
Unallocated operating expenses		-			-			-			-			4,415,085
		6,266,382			501,199			547,287			169,329			11,899,282
Income (loss) from operations		(890,963	)		842,241			51,787			446,309			(3,965,711	)
Interest expense, net		-			-			-			-			(1,778,157	)
Change in fair value of warrant		-			-			-			-			(1,310,410	)
Net (loss) income	$	(890,963	)	$	842,241		$	51,787		$	446,309		$	(7,054,278	)

Six Months Ended June 30, 2010 (unaudited)

	PHYSICIANDOMESTIC			PHYSICIAN INTERN'L			OTHER CHANNELS			SURGICAL PRODUCTS			TOTAL
Revenues	$	9,244,211		$	2,426,775		$	1,418,887		$	1,608,092		$	14,697,965
Costs of revenues		4,502,840			1,507,636			793,231			875,899			7,679,606
Gross profit		4,741,371			919,139			625,656			732,193			7,018,359
Gross profit %		51.3	%		37.9	%		44.1	%		45.5	%		47.8	%
Allocated operating expenses:
Selling, general and administrative		5,378,171			538,290			329,080			71,110			6,316,651
Engineering and product development		222,937			163,378			168,521			64,251			619,087
Unallocated operating expenses		-			-			-			-			3,522,036
		5,601,108			701,668			497,601			135,361			10,457,774
Income (loss) from operations		(859,737	)		217,471			128,055			596,832			(3,439,415	)
Interest expense, net		-			-			-			-			(1,538,844	)
Change in fair value of warrants		-			-			-			-			(97,956	)
Net (loss) income	$	(859,737	)	$	217,471		$	128,055		$	596,832		$	(5,076,215	)

	June 30, 2011		December 31, 2010
	(unaudited)
Assets:
Total assets for reportable segments	$	43,851,271	$	44,986,796
Other unallocated assets		3,823,023		4,508,922
Consolidated total	$	47,674,294	$	49,495,718

For the three and six months ended June 30, 2011 and 2010 there were no material net revenues attributed to any individual foreign country. Net revenues by geographic area were, as follows:

	Three Months Ended June 30, (unaudited)				Six Months Ended June30, (unaudited)
	2011		2010		2011		2010
Domestic	$	6,485,271	$	6,815,561	$	12,637,784	$	12,273,834
Foreign		1,920,285		1,195,476		3,990,494		2,424,131
	$	8,405,556	$	8,011,037	$	16,628,278	$	14,697,965

The Company discusses segmental details in its Management Discussion and Analysis found elsewhere in this Quarterly Report on Form 10-Q.