UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 (Mark One)

For the quarterly period ended December 31, 2011

OR

Commission File Number 000-17861  

UNILENS VISION INC.

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (727) 544-2531 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    þ  Yes    ¨ No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     ¨ Yes    ¨ No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨ Yes    þ  No  

As of February 14, 2012 there were 2,369,354 outstanding shares of common stock.

1

UNILENS VISION INC.

FORM 10-Q

For the Quarterly Period Ended December 31, 2011

INDEX

PART I – FINANCIAL INFORMATION

Item 1 – Unaudited Financial Statements

Unilens Vision Inc.

Condensed Consolidated Balance Sheets

December 31, 2011 (Unaudited) and June 30, 2011

Unilens Vision Inc.

Condensed Consolidated Statements of Income and Changes in Accumulated Deficit

For Three and Six Months Ended December 31, 2011 and 2010

 (Unaudited) 

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

4

Unilens Vision Inc.

Condensed Consolidated Statements of Cash Flows

For Six Months Ended December 31, 2011 and 2010

(Unaudited)

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Unilens Vision Inc.
Notes to Condensed Consolidated Financial Statements
December 31, 2011

(Unaudited)

Note 1 — Basis of Presentation and Consolidation

Basis of Presentation

Unilens Vision Inc. operates through our wholly-owned subsidiary, Unilens Corp. USA, located in Largo, Florida. The accompanying consolidated financial statements (the “Financial Statements”) for the interim periods ended December 31, 2011 and 2010 (the “Interim Period”) are i) prepared on the basis of accounting principles generally accepted in the United States, ii) conform in all material respects with accounting principles generally accepted in Canada, and iii) are unaudited, but in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position, operations, and changes in financial results of the Interim Period.  The Financial Statements are not necessarily indicative of the results to be expected for the full year.  The Financial Statements do not contain the detail or footnote disclosure concerning accounting policies and other matters which would be included in full year financial statements, and therefore should be read in conjunction with the our audited financial statements for the year ended June 30, 2011. Additional information concerning us is contained in the Management Discussion and Analysis included in this quarterly report. 

Basis of Consolidation

These consolidated financial statements include the accounts of Unilens Vision Inc. and its wholly-owned subsidiary, Unilens Corp. USA and its wholly-owned subsidiary, Unilens Vision Sciences Inc. All significant intercompany transactions and balances have been eliminated in consolidation. 

Note 2 — Stock-Based Compensation, Stock Options and Stock

Stock-based payments are recorded using the fair value method of accounting for stock options.  Under this method, in addition to reflecting compensation expense for new share-based awards, expense is also recognized to reflect the remaining vesting period of awards that had been included in pro-forma disclosures in prior periods. There was no   stock compensation expense attributable to stock options charged against income for the fiscal quarter ended December 31, 2011, since no options were granted during such period and all options outstanding at the beginning of such period were fully vested. There was $790 of unrecognized  stock compensation expense attributable to stock options previously issued that vested on January 1, 2011, charged against income during the second fiscal quarter ended  December 31, 2010. There were no options granted during the fiscal quarter ended December 31, 2010.

Stock Option Plan and Stock Options

We have adopted a stock option plan (the “Stock Option Plan”).  The purpose of the Stock Option Plan is to advance the interests of the Company by providing directors, officers, employees and consultants with a financial incentive to continue to improve the performance of the Company and encourage them to remain with the Company.  The term of any option granted under the Stock Option Plan may not exceed 10 years.  The exercise price of each option must equal or exceed the market price of our stock as calculated on the date of grant. The maximum number of our common shares reserved for issuance under the Stock Option Plan cannot exceed 10% percent of our issued and outstanding common shares.  Options, in general, vest immediately except options granted to consultants performing investor relations activities vest at a minimum over a period of at least 12 months, 25% at the end of each three-month period.  No more than 5% of our issued and outstanding capital stock may be granted to any one individual in any twelve-month period and no more than 2% of our issued and outstanding capital stock may be granted to any one consultant in any twelve-month period.  

Unilens Vision Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
December 31, 2011

 (Unaudited) 

At the Annual General Meeting of Shareholders held on March 25, 2010, the shareholders approved the Unilens’ Incentive Stock Option Plan. The initial maximum number of shares available for option grants under the Stock Option Plan is 236,935.

The following table describes the number and the exercise price of options that have been granted, exercised, or cancelled under the Stock Option Plan approved on March 25, 2010 during the six month period ended December 31, 2011:

As of December 31, 2011 we have 160,000 options outstanding and an additional 76,935 options available for future grants under the existing Incentive Stock Option Plan.

There was no cash proceeds, related to options exercised during the six months ended December 31, 2011, as no options were exercised.

The following table describes the number of options, exercise price, and expiry date of the options granted by the Company that were outstanding at December 31, 2011: 

We use the Black-Scholes pricing model to estimate the fair value of stock-based awards. The expected volatilities are based on the historical volatility of our stock price. Historical data is used to estimate option exercises and employee terminations within the valuation model. The expected term of options granted is based on historical exercise patterns of employees and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U S Treasury yield curve in effect at the time of the grant. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

As of December 31, 2011 the aggregate intrinsic value of options outstanding and options exercisable were both zero since the closing price of our common shares on that date of $3.29 were less then the exercise price.

7

Unilens Vision Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
December 31, 2011

(Unaudited)

Note 3 — Income per Common Share

Basic income per common share is calculated by dividing the income for the period by the weighted-average number of common shares outstanding during the period.

Diluted income per common share is calculated using the treasury stock method.  Under the treasury stock method, the weighted average number of common shares outstanding used for the calculation of diluted income per share assumes that the proceeds to be received on the exercise of dilutive stock options and warrants are used to repurchase common shares at the average market price during the period.

Note 4 — Inventories 

Note 5 — Supplemental Disclosure with Respect to Cash Flows

During the six months ended December 31, 2011, $72,689 of developmental costs related to our recently completed website shopping cart, were moved from other assets at June 30, 2011 to property, plant and equipment, on the accompanying condensed consolidated balance sheets.

Unilens Vision Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
December 31, 2011

(Unaudited)

Note 6 — Revenue Information

All of our assets and operations are located in the United States in one business segment. Our revenues are derived from royalty income received from our exclusive agreement with Bausch & Lomb Incorporated (“Bausch & Lomb”), for the use of our patented multifocal designs and technology, and from sales from our specialty optical lens business, which manufactures and distributes optical products that use our proprietary design and manufacturing technology. Sales from our specialty optical lens business come from the following lens categories, for the three and six months ended December 31, 2011and 2010:

Note 7 — Term Loan, Line of Credit and Interest Rate Swap

On November 9, 2009, the Company closed on a $6,900,000 5-year term loan facility and a new $1,500,000 line of credit with Regions Bank. The term loan facility, which had a six-month advance period, was entered into to fund the Stock Purchase Agreement in January 2010 and the new line of credit replaced the previous line of credit.

On March 31, 2011, the Company entered into an amendment to the term loan facility when the balance was $4,600,00, which reduced the minimum monthly principal payment from $100,000 to $54,762, plus accrued interest and retained the January 2015 expiration date, at which time a final balloon payment will be due. In addition, quarterly principal payments are payable to the extent the cash flow is in excess of certain specified amounts. The amendment, also redefined certain financial covenants and restrictions on the amount of cash dividend payments. The term loan bears interest at a floating rate of 30-day LIBOR plus 4.25% or 3.75% depending on whether the Company’s fixed charge coverage ratio is less than 1.75-to-1 or equal to or greater than 1.75-to-1, with a minimum interest rate of 4.75%.

The line of credit bears interest at a floating rate of 30-day LIBOR plus 3.25% or 3.75% depending on whether the ratio of the Company’s funded debt to its EBITDA is less than 1-to-1 or equal to or greater than 1-to-1, with a minimum interest rate of 4.75%. The maximum borrowings at any time may not exceed the lesser of (i) $1,500,000 or (ii) a sum equal to 80% of Qualified Accounts Receivables plus 50% of Qualified Inventory. The line of credit expired in November 2011, and was extended to November 2012, using the last one-year term extension option. The Company expects to have another line of credit or extension by the time this extension expires in November 2012.

On April 15, 2011, the Company entered into a seven-year capital equipment credit facility for up to $500,000. The capital equipment credit facility bears interest at a floating rate of 30-day LIBOR plus 3.85%. The Company will pay interest only for the initial 8 months from closing, then principal plus accrued interest on a 76 month amortization schedule. This capital equipment financing was put in place for the purchase of manufacturing equipment for additional production capacity and efficiencies. On April 19, 2011 the Company funded the purchase of manufacturing equipment with a draw of $279,998 under the equipment credit facility. On December 30, 2011 the $279,998 draw under the capital equipment credit facility was repaid with cash from operations, and the capital equipment credit facility was closed.

9

Unilens Vision Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
December 31, 2011

(Unaudited)

The term loan and the line of credit are secured by a security interest in favor of Regions Bank in our inventory, accounts receivable, general intangibles, cash and principal United States patent. Under the term loan facility, the line of credit and the capital equipment facility, the Company is required to meet customary covenants regarding, among other things, the maintenance of specified cash flow leverage and fixed charge coverage ratios and the requirement of lender consent for significant transactions such as mergers, acquisitions, dispositions and other financings.

The Company was in compliance with all financial covenants and had outstanding balances on the term loan of $3,971,428 and no outstanding balance on the line of credit at December 31, 2011. On October 21, 2011 in accordance with the term loan financial covenants for cash flow in excess of certain specified amounts, the Company made a principal payment of $135,714.

On August 6, 2010, the Company entered into an interest rate swap agreement facilitated by Regions Bank to manage cash flow exposure to interest rate changes with a notional amount of $5,300,000 which is scheduled to mature in January 2015. The Company does not enter into this type of financial instrument for trading or speculative purposes. The swap effectively converts the variable rate debt under the term loan as amended on March 31, 2011 of LIBOR plus 4.25% (previously 3.75%) with a minimum interest rate of 4.75%, to a fixed rate of 5.66% (previously 5.16%), without exchanging the notional principal amount. This agreement was designed as a cash flow hedge and is reflected at fair value in the condensed consolidated balance sheet as a component of total liabilities, and the related gains or losses are deferred in stockholders’ equity as a component of accumulated other comprehensive income or loss.

If in the future the interest rate swap agreement is determined to be ineffective or is terminated before the contractual termination date, or if it becomes probable that the hedged variable cash flows associated with the variable rate borrowing would stop, the Company would be required to reclassify into earnings all or a portion of the unrealized losses on cash flow hedges included in accumulated other comprehensive income (loss).

 Note 8 — Fair Value Disclosures

The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy under the guidance are described below:

In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s interest rate swap, which is included as a component of total liabilities in the condensed consolidated balance sheet. The fair value is based on the expected cash flows over the life of the swap from a pricing model using a specific market environment.

10

Unilens Vision Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
December 31, 2011

(Unaudited)

The following presents the balances and net changes in the accumulated other comprehensive loss related to the interest rate swap, net of income taxes.

Note 9 — Recent Accounting Standards

Recent codified pronouncements by the FASB are not believed by management to have a material impact on the Company’s present or future financial statements.

Note 10 — Subsequent Events

On February 1, 2012, our Board of Directors declared our regular quarterly cash dividend, at the rate of $0.045 per common share, payable February 24, 2012, to stockholders of record at the close of business on February 10, 2012. This is the 22^nd consecutive quarterly cash dividend declared.

Item 2 – Management’s Discussion & Analysis of Financial Condition and Results of Operations

The following management discussion and analysis (“MDA”) provides information on the activities of Unilens Vision Inc. and should be read in conjunction with our quarterly condensed consolidated financial statements and notes thereto for the three and six months ended December 31, 2011 (the “Financial Statements”), as well as our Annual Report on Form 10-K for the fiscal year June 30, 2011, filed with the Securities and Exchange Commission.  The Financial Statements have been prepared in United States dollars and in conformity with United States generally accepted accounting principles (“US GAAP”). Unless otherwise indicated, all dollar amounts disclosed in this MDA are expressed in United States Dollars.

Operating results are not necessarily indicative of results that may occur in future periods. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in the forward-looking statements as a result of many factors including, but not limited to, those set forth under “Cautionary Statement About Forward-Looking Statements” and “Risk Factors” in Item 1A. included in our Annual Report on Form 10-K. All forward-looking statements included in this document are based on the information available to us on the date of this document and we assume no obligation to update any forward-looking statements contained in this Quarterly Report on Form 10-Q.

Overview

We license, manufacture, distribute and market specialty optical lens products using our proprietary design and manufacturing technology. Our products are sold primarily in the United States solely to eye care professionals through in house sales representatives and a network of distributors. Our lens products are marketed as a family of specialty vision correction products that can serve the majority of the population’s vision correction needs. Our specialty optical lens business is divided into four categories: (i) disposable lenses; (ii) custom soft lenses; (iii) gas permeable lenses; and (iv) replacement and other lenses. During the three months ended December 31, 2011 the Company’s C-Vue disposable products accounted for approximately 57% of sales.

Sales of our specialty optical lens products accounted  for the largest percentage of our total revenues, constituting approximately 69% while royalty income derived from our exclusive license of our patented multifocal design to Bausch & Lomb was approximately 31% during the three months ended December 31, 2011.

Economic conditions in the United States have restrained our growth. We are however optimistic about the long-term outlook for the contact lens market and the specialty contact lens market, in particular.

Market demographics indicate that speciality contact lenses will continue to be the fastest growing segment of the contact lens market. Specialty contact lenses include toric, toric multifocal, and cosmetic lenses. We believe that our custom soft speciality lenses including our C-Vue multifocal for presbyopia, our C-Vue custom toric for correcting astigmatism and the C-Vue Advanced toric multifocal lens, will continue to grow over time due to market demographics favoring  specialty lenses.  

We believe market demographics favoring specialty contact lenses will continue to drive our revenue and earnings. In January 2011, we launched our new C-VUE Advanced^® HydraVUE™ line of silicone hydrogel custom contact lenses for monthly replacement. They are completely customizable, and feature a risk-free trial program.

A significant portion of our net income is derived from our exclusive license with Bausch & Lomb and such royalty income is a major component of our profitability. However, there can be no assurance, that such royalty income from Bausch & Lomb will grow or that Bausch & Lomb will continue to sell products in the future utilizing our technology.

The contact lens market is highly competitive.  We compete with industry leaders, such as Vistakon, a unit of Johnson and Johnson, Bausch & Lomb, Ciba Vision Corporation, a division of Alcon/Novartis AG, and Cooper Vision, Inc. a unit of Cooper Vision Companies, Inc.  Our ability to compete successfully is dependent in part on eye care professionals’ perceptions of product quality, product development, technical innovation, and price.   

We have a supply agreement with one supplier for the manufacture of our molded C-Vue multifocal lens, which currently accounts for approximately 49% of our quarterly sales.  The agreement is renewable from year to year and is terminable pursuant to customary termination clauses. Although to date the supplier has met our requirements, there can be no assurances that it will continue to do so.

Second Quarter Highlights

·         Sales and total revenue for the second quarter of fiscal 2012 increased 4.8% and 0.2% compared to the second quarter of fiscal 2011.

·         Earnings per share were $0.12 compared to $0.15 in the second quarter of fiscal 2011.

·         Made an additional term loan payment of $135,714 due to the cash recapture provision under the term loan covenants.

·         Paid off our equipment lease line with cash from operations which had a balance of approximately $280,000.

·         Paid our 21^st consecutive quarterly dividend, at $0.045 per share in November 2011. On February 1, 2012 we declared our 22^nd consecutive quarterly dividend, at an annual rate of $0.18 per share or $0.045 per share quarterly, a dividend yield of 5.8% based on the January month end closing price of $3.10.

Results of Operations

The following table sets forth, for the periods indicated, certain data derived from our Condensed Consolidated Statements of Income and Changes in Accumulated Deficit and certain of such data expressed as a percentage of total revenues:

The following table sets forth, for the periods indicated, certain data derived from our Condensed Consolidated Statements of Income and Changes in Accumulated Deficit and certain of such data expressed as a percentage of sales:

Second Quarter

During the three months ended December 31, 2011 (the “Current Quarter”) we earned income before tax of $414,861 compared to income before tax of $519,659 for the three months ended December 31, 2010 (the “Prior Quarter”).  The decrease in income before tax during the Current Quarter of $104,798 was from a decrease in royalty income from Bausch & Lomb of $61,709 to $653,894 in the Current Quarter as compared to $715,603 in the Prior Quarter, (ii) a increase in gross margin of $27,180 from higher sales (iii) excluding cost of sales, an increase in expenses of $71,224 as described below, and (iv) a decrease in other items primarily interest expense, and other income of $955. After recording income tax expense of $133,235, we had net income of $281,626 or $0.12 per diluted share, for the Current Quarter. In comparison, in the Prior Quarter we had net income of $350,237 or $0.15 per diluted share after recording income tax expense of $169,422.

Sales during the Current Quarter were $1,459,411, an increase of $66,317 (4.8%), as compared to sales of $1,393,094 during the Prior Quarter. The disposable lens category decreased by 2.2% as sales of our C-Vue disposable multifocal lenses continue to be affected by economic conditions in the U.S. as well as competition from competitor product offerings and promotional programs. Our custom soft lens category increased by 43.3%, primarily due to increased demand of our new C-Vue Advanced^® HydraVUE™ line of silicone hydrogel custom contact lenses for monthly replacement, launched in January of 2011. Our  gas permeable lens category decreased 7.2% primarily due to the continued overall decline in gas permeable fits in the contact lens industry. The replacement and other lens category decreased by 18.3% due to the expected decline in product lines that are nearing the end of their life cycle.  

Gross margin increased 0.2% to 37.2% in the Current Quarter compared to 37.0% in the Prior Quarter due primarily to sales mix changes from higher margin products offset some by the maturation of the C-VUE Advanced Toric Multifocal free trial program.

During the Current Quarter, as compared to the Prior Quarter, expenses increased $71,224. Administrative expenses increased $22,945 primarily due to increases in payroll and related expenses and increased corporate governance expenses. Sales and marketing expenses increased $44,361primarily due to marketing development costs associated with our C-Vue Advanced^® HydraVUE™ line as well as increased commissions paid on higher sales, while  research and development expenses increased $3,918 during the Current Quarter, as compared to the Prior Quarter.

We record income tax and income taxes payable at the statutory rates. During the Current Quarter and the Prior Quarter we recorded income tax expense of $133,235 and $169,422, respectively. The effective tax rate for the Current Quarter was 32.1% compared to 32.6% in the Prior Quarter.

Six Months

During the six months ended December 31, 2011 (the “Current Year”) we earned income before tax of $897,297 compared to income before tax of $1,013,823 for the six months ended December 31, 2010 (the “Prior Year”).  The decrease in income before tax during the Current Year of $116,526 was from a decrease in royalty income from Bausch & Lomb of $90,715 to $1,285,094 in the Current Year as compared to $1,375,809 in the Prior Year, (ii) a increase in gross margin of $42,161 from higher sales (iii) excluding cost of sales, an increase in expenses of $69,870 as described below, and (iv) a decrease in other items primarily interest expense, and other income of $1,898. After recording income tax expense of $292,217, we had net income of $605,080 or $0.26 per diluted share, for the Current Year. In comparison, in the Prior Year we had net income of $682,086 or $0.29 per diluted share after recording income tax expense of $331,737.

Sales during the Current Year were $3,035,941, an increase of $113,273 (3.9%), as compared to sales of $2,922,668 during the Prior Year. The disposable lens category decreased by 5.2% as sales of our C-Vue disposable multifocal lenses continue to be affected by economic conditions in the U.S. as well as competition from competitor product offerings and promotional programs. Our custom soft lens category increased by 43.6%, primarily due to increased demand of our new C-Vue Advanced^® HydraVUE™ line of silicone hydrogel custom contact lenses for monthly replacement. Our  gas permeable lens category decreased 9.9% primarily due to the continued overall decline in gas permeable fits in the contact lens industry. The replacement and other lens category decreased by 5.4% from the expected decline in product lines that are nearing the end of their life cycle offset by sales increases of Unilens replacement products due to the discontinuation of replacement lens products from several of our competitors.

Gross margin was flat at 39.2% in both the Current Year and the Prior Year due primarily to sales mix changes from higher margin products and the maturation of the C-VUE Advanced Toric Multifocal free trial program.

During the Current Year, as compared to the Prior Year, expenses increased $69,870. Administrative expenses increased $23,133 due to increases in payroll and related expenses and increases in director fees. Sales and marketing expenses increased $40,037 due to higher advertising and sales and payroll related expenses and research and development expenses increased $6,700 during the Current Year, as compared to the Prior Year.

We record income tax and income taxes payable at the statutory rates. During the Current Year and the Prior Year we recorded income tax expense of $292,217 and $331,737, respectively. The effective tax rate for the Current Year was 32.6% compared to 32.7% in the Prior Year.

Liquidity and Capital Resources

Cash and cash equivalents were $195,100 at December 31, 2011 compared to $ 601,360 at June 30, 2011.  The following is a summary of the change in our cash and cash equivalents:

As of December 31, 2011, we had working capital of $1,020,020 representing a decrease of $395,248 from our working capital at June 30, 2011. The decrease in working capital was principally due to a decrease in royalty and other receivables, offset by an increase in cash.

During the six months ended December 31, 2011, we generated $940,424 positive cash from operations representing an increase of $444,984 from $495,440 generated during the Prior Year. The increase was due primarily to the reduction of royalty and other receivables, due to the payment received, for the one-time price correction receivable recorded in the fourth quarter of fiscal year 2011, offset by reductions in accounts payable and accrued expenses. Investing activities for the Current Year were for the purchase of capital additions. Total capital additions were $461,847 primarily for manufacturing equipment and from developmental costs related to our recently completed website shopping cart. Cash used for these capital additions was $389,158, an increase of $258,074 from the Prior Year. Financing activities during the Current Year consisted primarily of principal repayments under our term loan facility of $464,286 compared to $600,000 in the Prior Year and the repayment of $279,998 and closing of the capital equipment credit facility with cash from operations. In addition financing activities included the payment of $213,242of dividends to our shareholders compared to $426,484 of dividends in the Prior Year. The lower term loan principal and dividend payments in the Current Year are related to the amendment to our term loan facility in March 2011, which improved our cash flow by decreasing our monthly principal payments from $100,000 to $54,762 and reducing our quarterly dividend payments by 50% from $0.09 to $0.045 per common share. In October 2011, per the redefined financial covenants of our amended term loan facility, we made an additional principal payment of $135,714. Cash income taxes paid during the Current Quarter were $171,000 compared to $453,000 paid in the Prior Year.

Critical Accounting Policies & Estimates

This Management’s Discussion and Analysis is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make certain estimates and apply judgment. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our consolidated financial statements.  While we believe the historical experience, current trends and other factors considered, support the preparation of our consolidated financial statements in conformity with generally accepted accounting principles, actual results could differ from our estimates, and such differences could be material.

There have been no changes to our critical accounting policies during the six months of fiscal 2012.

For a further discussion of the judgments we make in applying our accounting policies, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our 2011 Form 10-K.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Our market risks in the normal course of business are related to changes in interest rates, which at December 31, 2011 are similar to those disclosed in the 2011 Annual Report on Form 10-K.

Item 4 – Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act) as of the end of the period covered by this Quarterly Report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2011.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act) that occurred during the period covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

16

None

Item 1A – Risk Factors

There have been no material changes to the risk factors set forth under Part I, Item 1A of our 2011 Annual Report on Form 10-K.

Item 2 –  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3 – Defaults Upon Senior Securities

None

Item 4 – (Removed and Reserved)

Reserved

Item 5 – Other Information

None

Item 6 – Exhibits 

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.