UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20162018

OR

☐          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _____________

Commission file number: 0-11635000-11635

PHOTOMEDEX, INC.

(Exact name of registrant as specified in its charter)

2300 Computer Drive, Building G, Willow Grove, Pennsylvania 19090

(Address of principal executive offices, including zip code)

(215) 619-3600

(Issuer’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

NoneCommon Stock, $0.01 par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes¨ ☐  Nox ☒ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes¨ ☐  Nox ☒  

Indicate by check mark whether the registrant: (i) 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 (ii) has been subject to such filing requirements for the past 90 days.

Yesx ☒   No¨ ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Yesx ☐  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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YesxNo¨ ☒ 

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes¨ ☐  Nox ☒ 

As of June 29, 2018 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s common stock held by non-affiliates (based upon the closing sale price of such shares as reported on OTC Pink Market) was approximately $3.4 million. Shares of the registrant’s common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 31, 2017,28, 2019, the number of shares outstanding of our common stock was 4,361,094. The closing market price of our common stock as of March 30, 2017 was $1.81.27,336,249. 

DOCUMENTS INCORPORATED BY REFERENCE

None. 

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSINTRODUCTORY NOTES

Certain statementsUse of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this Annual Report on Form 10-K,report to “we,” “our” and “our company” refer to FC Global Realty Incorporated, a Nevada corporation, and its consolidated subsidiaries.

Special Note Regarding Forward Looking Statements

This report and the other materials we have filed or this Report, are "forward-looking statements." Thesewill file with the U.S. Securities and Exchange Commission, or the SEC, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including, but not limited to, statements regarding our business strategy, expectations and plans regarding our future operations and our future financial position. When used in this report or in the other materials we have filed or will file with the SEC, the words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “indicate,” “seek,” “project,” “plan,” “could,” “should,” or “would,” and similar expressions, are intended to identify forward-looking statements. Among the factors that could cause or contribute to material differences between our actual results and those indicated from the forward-looking statements are risks and uncertainties inherent in our business, including, but not limited to:

Additional factors that could cause or contribute to such differences include, but are not limited to, statements about the plans, objectives, expectations and intentions of PhotoMedex, Inc., a Nevada corporation (referred tothose discussed in this Reportreport, and in particular, the risks discussed under Item 1A. “Risk Factors”, as “we,” “us,” “our”, “registrant” or “the Company”), and other statements contained in this Report that are not historical facts. Forward-looking statements in this Report or hereafter includedwell as those discussed in other publicly available documents filedwe file with the Securities and Exchange Commission, or the Commission, reportsSEC. Except as required by law, we do not intend to our stockholders and other publicly available statements issued or released by us involve known and unknown risks, uncertainties and other factors which could cause our actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management's best estimates based upon current conditions and the most recent results of operations. When used in this Report, the words "will" "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are generally intended to identify forward-looking statements, becauseupdate these forward-looking statements involve risks and uncertainties. There are important factors that could causepublicly or to update the reasons actual results tocould differ materially from those expressed or implied byanticipated in these forward-looking statements, including our plans, objectives, expectations and intentions and other factors discussed under "Risk Factors." We undertake no obligation to update such forward-looking statements. These forward-looking statements include, but are not limited to, statements about:

even if new information becomes available in the future. In light of these risks, uncertainties, and assumptions, risksthe forward-looking events and uncertainties, thecircumstances discussed in this report may not occur and actual results could differ materially and events discussedadversely from those anticipated or implied in the forward-looking statements contained in this Annual Report on Form 10-K might not occur. Investorsstatements. Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements.

PART I

Our Company

Our company, founded in 1980, has recently transitioned from its former business as a skin health company to a company focused on real estate development and asset management, concentrating primarily on investments in, and the forward-looking statements,management and development of income producing real estate assets.

Until the sale of our consumer products division, we were a global skin health company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians, and consumers. Starting in 2014, we began to sell off certain business units and product lines and on January 23, 2017, we sold our last remaining major product line. Following this transaction, we had only minimal operations and assets remaining, of immaterial value to our company. We completed the process of liquidating the remaining legacy inventory and assets of the last minor business line during 2018, and we no longer operate within the skin health business.

Our focus is now to build our company into a leading real estate, asset management and development company concentrating primarily on investments in high yield income producing assets and other opportunistic commercial properties via direct property ownership and/or asset management. Our objective is to generate long term net asset value growth while adhering to institutional best practices and a deep research process for all investments.

For income producing properties, we intend to acquire assets that provide recurring income with the potential for income growth over the long-term. We believe there can be an attractive risk/reward profile to such properties based on the location and the underlying creditworthiness of the tenants. We intend to use such income generation to fund additional acquisitions and development opportunities and for general corporate purposes. In addition, we intend to invest in land assets that can be developed into income generating properties or properties for sale. We believe that our size and scale provide an opportunity to take advantage of smaller-tier assets that most traditional investors do not focus on due to size limitations, thus creating unique investment opportunities. In particular, we intend to target assets in secondary and tertiary markets that require minimal capital expenditures but generate initial unlevered cash flow yields that are higher than those in primary markets.

A second component of our investment strategy will revolve around sourcing asset management opportunities for which speakwe would operate as an asset manager of real estate properties. We are not structured as a Real Estate Investment Trust, or REIT, thus we have the ability to retain earnings and to operate in real estate asset management, development, and peripheral real estate activities, items that may be limited by REIT requirements. We will look to utilize our existing infrastructure to provide economies of scale to owners of real estate assets as we grow our portfolio over time.

Gadsden Transaction

On March 13, 2019, we entered into a stock purchase agreement, or the Gadsden Purchase Agreement with Gadsden Growth Properties, Inc., a Maryland corporation or Gadsden, pursuant to which, we will issue to Gadsden: (i) 708,485,395 shares of our common stock; (ii) a number of shares of our newly designated 7% Series A Cumulative Convertible Perpetual Preferred Stock that is equal to the number of shares of Gadsden’s 7% Series A Cumulative Convertible Perpetual Preferred Stock that are outstanding at the closing date, which is expected to be 889,075 shares; (iii) a number of shares of our newly designated Series B Non-Voting Convertible Preferred Stock that is equal to the number of shares of Gadsden’s Series B Non-Voting Convertible Preferred Stock that are outstanding at the closing date, which is expected to be 11,788,994 shares; and (iv) a number of shares of our 10% Series C Cumulative Convertible Preferred Stock that is equal to the number of shares of Gadsden’s 10% Series C Cumulative Convertible Preferred Stock that are outstanding on the closing date, which is expected to be 2,498,682 shares (which we collectively refer to as Our Securities). In consideration for Our Securities, Gadsden will transfer and assign to us: (i) all of the Class A limited partnership interests in Gadsden Growth Properties, L.P., a Delaware limited partnership, or OPCO, and (ii) all of the general partnership interests in OPCO. OPCO is the operating partnership of Gadsden that has all of its assets and liabilities. Accordingly, at the closing of the transactions contemplated by the Gadsden Purchase Agreement (which we refer to as the Gadsden Transaction), Gadsden will remain a private company with its only asset being Our Securities issued to it and we will acquire OPCO, including the Gadsden portfolio of real estate investments. Closing of the Gadsden Transaction is expected to occur within one week of the date hereof.

The Gadsden Purchase Agreement provides that 278,178,750 shares, or the Holdback Shares of our common stock that will be issued to Gadsden will be subject to forfeiture based on the reconciliation and adjustment of the net asset value of Gadsden’s assets and Gadsden’s proposed real estate investments that have not closed as of the closing date of the Gadsden Purchase Agreement (such investments referred to as the Scheduled Investments).

The number of Our Securities being issued to Gadsden at the closing is based upon an estimated net asset value of Gadsden of $211,573,000, or the Contract NAV. The Contract NAV includes Gadsden’s assets and all of its Scheduled Investments. The Gadsden Purchase Agreement provides for a reconciliation and adjustment of the final net asset value of Gadsden as follows:

The Gadsden Purchase Agreement also contains a mechanism for issuing additional shares of our common stock to Gadsden or our legacy stockholders, as applicable, if there is a loss determination. The Stock Purchase Agreement defines a loss determination as an event that gives rise to a loss due to a breach of a representation and warranty by a party or the failure of a covenant to be performed by a party that was not fully performed, in each case, after consideration of any express waiver or amendment. After the amount of a loss has been determined in accordance with the procedures set forth in the Gadsden Purchase Agreement, the amount of the loss will be paid by us as follows: (i) if our Board determines that the amount of the loss will be paid in cash, then such amount will be paid by check payable to the order of Gadsden or our legacy stockholders; or (ii) if our Board does not determine that the amount of the loss will be paid in cash, then such amount will be paid by us issuing and delivering shares of common stock with an aggregate fair value equal to the amount of the loss to Gadsden or our legacy stockholders. The Gadsden Purchase Agreement provides that no loss will be determined until the aggregate amount of losses claimed exceeds $100,000, it being acknowledged that from and after such threshold, all losses shall be subject to adjustment as set forth above.

The Gadsden Purchase Agreement contains customary representations and warranties of us and Gadsden, which survive the closing for a period expiring March 31, 2020, except for the representations and warrants contained in Sections 3.1(d)(i) (Authority), 3.1(k) (Taxes), 3.2(d)(i) (Authority) and 3.2(l) (Taxes), which shall survive for the applicable statute of limitations regarding such subject matters.

Additionally, the Gadsden Purchase Agreement provides for customary pre-closing covenants of the parties, including a covenant to conduct their respective businesses in the usual, regular and ordinary course substantially consistent with past practice and to refrain from taking certain actions without the other parties’ consent. The parties have also agreed not to solicit proposals relating to specified “Competing Transactions” (as defined in the Gadsden Purchase Agreement) or, subject to certain exceptions relating to the receipt of unsolicited offers that may be deemed to be “Superior Competing Transaction” (as defined in the Gadsden Purchase Agreement), enter into discussions concerning or provide information in connection with Competing Transactions.

We also agreed to take such actions as is necessary, which may include accepting the resignations of directors or removing directors without cause and filling the vacancies on our Board of Directors so that as of the closing, our Board of Directors shall consist of (i) the current members of the Board of Directors of Gadsden who are John Hartman, Larry E. Finger, Jay M. Gratz, B.J. Parrish, Russell C. Platt, James Walesa, and Robert G. Watson, Jr.; and (ii) our existing directors Dennis M. McGrath and Dolev Rafaeli. At the closing of the Gadsden Transaction, our executive officers are expected to be the executive officers of Gadsden. In addition, Gadsden agreed to take such actions as is necessary, which may include accepting the resignations of directors or removing directors without cause and filling the vacancies on the Board of Directors of Gadsden so that as of the closing, the Board of Directors of Gadsden shall consist of the same members as our Board of Directors described above.

Consummation of the Gadsden Transaction is subject to various conditions, including, among others, customary conditions relating to: (i) approval of the Gadsden Transaction by the vote of Gadsden’s stockholders holding two-thirds of the outstanding shares of Gadsden’s common stock, Gadsden’s 7% Series A Cumulative Convertible Perpetual Preferred Stock entitled to vote thereon (on an as-converted basis) and Gadsden’s 10% Series C Cumulative Convertible Perpetual Preferred Stock entitled to vote thereon (on an as-converted basis); (ii) absence of injunction by any court or other tribunal of competent jurisdiction and absence of law that prevents, enjoins, prohibits or makes illegal the consummation of the Gadsden Transaction; (iii) receipt of all consents, approvals and authorizations legally required to be obtained to consummate the Gadsden Transaction; and (iv) receipt of customary legal opinions from counsel to us and Gadsden. The obligation of each party to consummate the Gadsden Transaction is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions), the other party having performed in all material respects its obligations under the Gadsden Purchase Agreement, and the absence of a material adverse effect on each party.

In addition, the obligation of Gadsden to complete the Gadsden Transaction is subject to the satisfaction (or waiver, to the extent permitted by applicable law) of the following conditions: we shall have, on a consolidated basis, not less than $800,000 of unrestricted cash; and we shall have received a letter of resignation from each member of our Board of Directors, other than the directors who are to be members of the Board after the Gadsden Transaction.

The Gadsden Purchase Agreement may be terminated at any time prior to the closing, in any of the following ways: (i) by mutual written consent of us and Gadsden; (ii) by either Gadsden or us if the Gadsden Transaction shall not have occurred on or prior to March 31, 2019; provided, that a party that has materially failed to comply with any obligation of such party set forth the Gadsden Purchase Agreement shall not be entitled to exercise its right to terminate; (iii) by Gadsden upon a breach of any representation, warranty, covenant or agreement on the part of us as set forth in the Gadsden Purchase Agreement, or if there shall have been a material adverse effect; (iv) by us upon a breach of any representation, warranty, covenant or agreement on the part of Gadsden as set forth in the Gadsden Purchase Agreement, or if there shall have been a material adverse effect; (v) by either Gadsden or us if any order by any governmental entity of competent authority preventing the consummation of the Gadsden Transaction shall have become final and nonappealable; (vi) by either Gadsden or us if Gadsden stockholder approval shall not have been obtained; (vii) by either Gadsden or us prior to obtaining Gadsden stockholder approval if Gadsden or us has delivered a notice of a Superior Competing Transaction (provided that for the termination to be effective, such party shall have paid the applicable termination fee); (viii) by Gadsden if our Board of Directors shall have withdrawn, qualified or modified in a manner adverse to Gadsden, or shall recommend that the ours stockholders approve or accept a Competing Transaction, or if we shall have delivered a notice of a Superior Competing Transaction or shall have publicly announced a decision to take any such action; or (ix) by us if Gadsden’s board of directors shall have withdrawn, qualified or modified in a manner adverse to us, or shall have failed to make when required, its recommendation to approve the Gadsden Purchase Agreement, or shall recommend that Gadsden’s stockholders approve or accept a Competing Transaction, or if Gadsden shall have delivered a notice of a Superior Competing Transaction or shall have publicly announced a decision to take any such action.

Gadsden is required to pay a termination fee of $200,000 if the Gadsden Purchase Agreement is terminated: (i) by Gadsden at any time prior to the receipt of Gadsden stockholder approval upon delivery of a notice of a Superior Competing Transaction; (ii) by us upon any of the events described in subsection (ix) of the preceding paragraph; or (iii) by us if Gadsden stockholder approval shall not have been obtained and (A) prior to such termination, a person has made any bona fide written proposal relating to a Competing Transaction which has been publicly announced prior to the Gadsden’s stockholder meeting and (B) within twelve months of any such termination, Gadsden or any subsidiary of Gadsden shall consummate a Competing Transaction, or enter into a written agreement with respect to a Competing Transaction that is ultimately consummated with any person.

We are required to pay a termination fee of $250,000 if the Gadsden Purchase Agreement is terminated: (i) by us upon delivery of a notice of a Superior Competing Transaction; (ii) by Gadsden upon any of the events described in subsection (viii) of the paragraph above regarding termination; (iii) by Gadsden, upon a breach of certain representations, warranties, covenants or agreements on our part set forth in Gadsden Purchase Agreement; or (iv) or by Gadsden if Gadsden stockholder approval shall not have been obtained and (A) prior to such termination, a person has made any bona fide written proposal relating to a Competing Transaction which has been publicly announced prior to the termination of the Gadsden Purchase Agreement and (B) within twelve months of any such termination, we or any subsidiary of us shall consummate a Competing Transaction, or enter into a written agreement with respect to a Competing Transaction that is ultimately consummated with any person.

If the Gadsden Purchase Agreement is validly terminated, the Gadsden Purchase Agreement will terminate (except for the provisions described Section 5.2 (Access to Information; Confidentiality and Confidentiality Agreement), Section 7.1 (Termination), Section 7.2 (Break-Up Fees and Expenses), Section 7.3 (Effect of Termination) and Article VIII (Survival of Representations and Warranties, Indemnification) of the Gadsden Purchase Agreement, which provisions shall survive such termination), and there will be no other liability on the part of either party to the other except for the termination fees and expenses described above; provided, that no party will be relieved from liability for fraud or a willful breach, or our failure to issue and deliver Our Securities upon satisfaction of the conditions to closing set forth in the Gadsden Purchase Agreement, in which case the aggrieved party will be entitled to all rights and remedies available at law or in equity.

We will have available approximately $800,000 of cash available at the closing of the Gadsden Transaction. This amount is expected to be used to pay compensation to our directors of $250,000; compensation to our Chief Executive Officer of $100,000; purchase of 15,200 shares of Gadsden’s 7% Series A Cumulative Convertible Perpetual Preferred Stock from an affiliate of a Gadsden board member for an aggregate purchase price of $380,000; and $70,000 for audit, accounting and other professional fees and working capital. Accordingly, we will continue to require to raise additional capital to fund its operations and pay our operating expenses. There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms and conditions, if at all.

We had previously entered into an agreement and plan of merger, or the Merger Agreement, with FC Merger Sub, Inc., a Maryland corporation and our wholly-owned subsidiary, or FC Merger Sub, Gadsden and OPCO on November 8, 2018, which as amended on December 27, 2018, January 14, 2019 and January 25, 2019, pursuant to which FC Merger Sub would have merged with and into Gadsden, with Gadsden surviving the merger as a wholly-owned subsidiary of our company. In connection with the proposed merger, on November 9, 21018, we filed a registration statement on Form S-4 (No. 333-228304). The staff of the SEC was furloughed due to the U.S. Federal Government’s recent shutdown which resulted, among other things, that the review and expected timing for the registration statement was delayed to the extent that the merger would have required additional amendments to the registration statement and the timing for the consummation of the proposed merger was not certain. The parties therefore determined to terminate the Merger Agreement on March 13, 2019 in connection with the Gadsden Purchase Agreement and we withdrew the registration statement.

Contribution Transaction

On March 31, 2017, we entered into an Interest Contribution Agreement with First Capital Real Estate Operating Partnership, L.P., or FCOP, First Capital Real Estate Trust Incorporated, or FCREIT, and FC Global Realty Operating Partnership, LLC, our wholly-owned subsidiary. The parties entered into amendments to the Interest Contribution Agreement on August 3, 2017, October 11, 2017 and December 22, 2017. Pursuant to the Interest Contribution Agreement, as amended (which we collectively refer to as the Contribution Agreement), FCOP contributed certain real estate assets to us. In exchange, FCOP received shares of our common stock and Series A Convertible Preferred Stock as described below. We refer to this transaction as the Contribution Transaction.

On May 17, 2017, FCOP transferred $10 million agreed upon value of assets to us, consisting of the following:

The proposed gas station sites are located in Atwater and Merced, California and had an agreed upon value at the time of acquisition of $2.6 million. We intend to explore our options for the development of these properties. We may (i) lease a property to a developer who will handle all further development of the property, with us receiving monthly lease payments from the developer; (ii) engage a contractor to develop a property to a certain level, then lease it to a developer which will handle the final development and leasing of the property, with us receiving monthly payments from the developer; or (iii) engage a contractor to completely develop a property, then lease it directly to a tenant who will remit monthly lease payments back to us. The option or options selected for these properties will depend upon the types of tenants interested in operating gas stations and/or related ventures on those properties, as well as our capitalization and available financial resources. In these arrangements, the construction and/or management of the properties are or will be handled by third-party firms which specialize in such work. Therefore, we anticipate that we will not need to hire significant additional personnel to develop, maintain and manage these properties. As for funding for any costs associated with these properties’ development, although we cannot provide any assurance that we will be able to obtain funding, we will seek funding from one or more of the following potential sources (i) funding from third-party investors; (ii) funding as a result of loans secured by the properties; or (iii) joint-funding arrangements with developers and/or managers of these properties.

The residential development in New Mexico consists of approximately 250, non-contiguous, single family residential lots, and a 10,000 square-foot club house, which is under construction. The agreed upon value of this property at the time of acquisition was approximately $7.4 million. This property already has a management and construction arrangement in place. We are the minority holder in that property, holding a 17.9133% interest.

In exchange for these assets, we issued to FCOP 879,234 shares of our common stock, which represented approximately 19.9% of its issued and outstanding common stock immediately prior to the closing date, at a per share value of $2.5183, or $2.2 million in the aggregate. We issued the remaining $7.8 million of the approximately $10 million consideration to FCOP in the form of 123,668 shares of its then newly designated non-voting Series A Convertible Preferred Stock, which were subsequently converted into common stock.

The number of shares of common stock issued to FCOP and to be issued upon conversion of the Series A Convertible Preferred Stock was determined by dividing the $10 million value of the assets by $2.5183, a specified price per share value which represents a 7.5% premium above the volume-weighted average price of all on-exchange transactions in its common stock executed on The Nasdaq Capital Market, during the forty-three (43) trading days prior to the trading day immediately prior to the public announcement of the transaction by us and FCREIT on March 31, 2017, as reported by Bloomberg L.P. We believe that the trading price of our common stock at the time of the Contribution Transaction represented the value of our prior medical device business and not our new real estate development business. No appraisals were obtained for these properties by us, however we did receive draft copies of appraisals obtained by FCOP. The value of the contributed assets was arrived at by the mutual agreement of the parties after analyzing each of the assets in comparison to historical sales of similar land parcels and reviewing the draft appraisals received from FCOP. In other words, the valuation was arrived at by negotiation and arms-length agreement based upon each party’s review of sales prices for comparable properties and without the benefit of a formal appraisal.

The Contribution Agreement contemplated that additional contributions would be made prior to December 31, 2017 if FCOP completed its purchase of additional properties; however, FCOP failed to acquire those additional properties before the December 31, 2017 deadline and, therefore, only the closing described above was completed.

In January 2018, we learned of a suit filed in November 2017 by the holder of the majority interest in Avalon Jubilee, LLC. The suit was filed against the previous holders of the two interests and alleged that the right of first refusal contained in the operating agreement for Avalon Jubilee, LLC had not been honored, thereby not allowing the majority holder its option to purchase those interests. While we were not named in the suit, the suit did name several ‘John Does’ as defendants and cast doubt upon the legitimacy of the transfer of the interest in Avalon Jubilee, LLC to us. As a result of this discovery, we were required under accounting rules to write down our investment in Avalon Jubilee, LLC by about $1 million, and expended additional funds to enter into negotiations with the majority interest holder to resolve our ownership of its interest in Avalon Jubilee, LLC. On April 27, 2018, we and certain of our subsidiaries entered into an agreement with Alpha Alpha LLC, the majority holder, and Presidential Realty Corporation and certain of its subsidiaries, the other holder, under which our subsidiary, First Capital Avalon Jubilee LLC, was recognized as a 17.9133% member in Avalon Jubilee, LLC, and the operating agreement and other documents for that venture were so amended to reflect that acknowledgement. 

Shortly after the Avalon matter was resolved, we discovered that one of the other properties transferred to us by FCOP, known as Greensands II, was not the property described in the documents underlying the transaction, including a draft appraisal used as part of the valuation determination for the stock issued by us to FCOP for the transaction. The property valued in that appraisal was actually a neighboring property once owned by FCOP and known as Greensands I; however the appraisal referred to it as Greensands II. The actual property transferred was significantly smaller than the property which FCOP believed it was purchasing. A subsequent re-appraisal and re-valuation of the actual property received resulted in a write-down of the property’s value by $1.4 million. That adjustment required us to restate our 2017 financials as reported in our Annual Report on Form 10-K. We are not under any obligation,10-K/A for the year ended December 31, 2017, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a resultdelayed by several days the filing of new information, future events or otherwise. All subsequent forward-looking statements attributable toour Quarterly Report on Form 10-Q for the period ended March 31, 2018, resulting in us or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.incurring significant additional accounting and legal fees for those filings.

PART ISee “—Litigation—Suneet Singal Litigation” below for more details regarding these two matters.

Item 1. We elected to early adopt ASU 2017-01,Business

Our Company(dollar amounts in thousands except where indicated Combinations (Topic 805) Clarifying the Definition of a Business.Accordingly, the determination of whether the transaction represents a business combination was evaluated by applying ASU 2017-01 guidance. We have determined that the group of assets assumed do not include (and also, none of them on a stand-alone basis) include, an input and for per-share amounts)a substantive process that together significantly contribute to the ability to create output and thus it was determined that the contribution represents an acquisition of assets rather than a business combination. Accordingly, the total sum of the fair value of consideration given (i.e., the fair value of the equity interests issued) together with the transaction costs, was allocated to the individual assets acquired and liabilities assumed based on their relative fair values at the date of acquisition. Such allocation did not give rise to goodwill.

Our Prior Business Operations

Under its previous name, PhotoMedex, Inc., re-incorporated in Nevada on December 30, 2010, originally formed in Delaware in 1980, andour company was, until the recent sale of the Company’s last significant business unit (its consumer products division which was sold to ICTV Brands, Inc., or ICTV, on January 23, 2017 (see Note 2, Discontinued Operations, to our consolidated financial statements), as described below and in other sections of this report, has been a Global Health products and servicesglobal skin health company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers. We have provided proprietary products and services that addressaddressed skin diseases and conditions including psoriasis, acne, actinic keratosis (a precursor to certain types of skin cancer), photo damage and photo damage. Our past experience in the physician market has provided the platform to expand our skin health solutions to spa markets, as well as traditional retail, online and infomercial outlets for home-use products. Through our subsidiary Radiancy, Inc., which was merged into PhotoMedex in 2011, our professional product line increased its offerings using Radiancy’s LHE medical device portfolio to include acne clearance, skin tightening, psoriasis care and hair removal sold to physician clinics and spas.

Starting in August 2014, the Company began to restructure its operations and redirect its efforts in a manner that management expected would result in improved results of operations and address certain defaults in its commercial bank loan covenants. During this time the Company has also sold off certain business units and product lines to support this restructuring culminating in PhotoMedex’s shareholders approving the sale of its consumer products division to ICTV Brands, Inc. on January 23, 2017, which represented the sale of substantially all of the Companies remaining assets (See Acquisitions and Dispositions - Pending Transaction below and Note 18 - Subsequent Event).

Reasons for the Asset Sale

The decision by the Board to approve the entry into the Asset Purchase Agreement with ICTV was based on a careful evaluation of the Company's strategic alternatives following an extensive strategic review process. Over the past two years, in an effort to find a buyer for this business, over 151 entities were contacted; only a few entities then entered into a non-disclosure agreement with the Company to conduct due diligence work, and none of those entities then made an offer for the business. Due to the Company’s financial condition and the uncertainty of the Company’s ability to continue as a going concern, the Company did not engage financial and legal advisors to prepare a fairness opinion on the ICTV deal, as such an opinion would be quite expensive and would strain the Company’s remaining financial resources. In addition, the Company did not feel a fairness opinion was necessary considering so much effort had been put into finding a suitable candidate and yet the Company ended up with only one offer for the purchase of the Radiancy Consumer Products Business, so it appeared there were no other offers available. After considering the Company's strategic alternatives, the opportunities for the rather immaterial operational assets following the sale of the Consumer Business, the Board determined that the sale of the Radiancy Business pursuant to the terms of the Asset Purchase Agreement was desirable and in the best interests of the Company.

Our Board considered a number of factors before deciding to enter into the Asset Purchase Agreement, including, among other things, the price to be paid by the Purchaser, the strategic and financial benefits that the Asset Sale will provide to the Company, the Company’s extensive search process with respect to the sale of the Radiancy Business that led the Company to enter into the Asset Purchase Agreement, the future business prospects of the Radiancy Business and the terms and conditions of the Asset Purchase Agreement. Our Board also considered the Company’s current financial condition, including that without an imminent injection of cash, we would likely default on certain outstanding indebtedness that could lead to the Company’s bankruptcy or liquidation.

Ultimately, the Board of Directors concluded that the price offered by ICTV was a fair offer for the consumer products division, given that the Asset Sale to ICTV represented the only deal available to the company that would likely close in a timely manner, that the previous deal would not be resumed as it was beyond the current capability of DS Healthcare, that the alternative of bankruptcy would wipe out shareholder equity and likely result in little to no payments to vendors, and that the Asset Sale would provide the Company with a cash infusion to achieve the following considerations and objectives:

As stated above, PhotoMedex has been engaged in an exhaustive and a multi-pronged effort over the past two and a half years to sell its consumer products division, either as an individual asset sale or through the sale of the subsidiary owning the Radiancy, Inc. division.

Following the purchase of LCA-Vision, Inc. (see Acquisitions and Dispositions, below), PhotoMedex defaulted upon its credit agreement (the “Credit Agreement”) with JP Morgan Chase in May 2014. At the time of the default, the entire $85 million credit arrangement under the Credit Agreement was outstanding. As a result of that default, and as a condition of the forbearance agreements that we had entered into with the Bank, the Company began marketing its various product divisions, both as independent offerings and as components in the overall sale of PhotoMedex itself, to numerous entities in order to obtain the funds to repay that Credit Agreement. The entire $85 million, plus applicable interest, was repaid in full to JP Morgan Chase in June 2015 following the sale of the Company’s LCA and XTRAC product divisions.

Beginning in mid-2014, PhotoMedex contracted with two investment banks (Canaccord Genuity, LLC and Nomura Securities, Inc.) to sell one, several or all of its product divisions and the Company itself. Through this process, Nomura contacted a total of 151 parties including financial sponsors and strategic parties for the Radiancy Business and/or parties who could provide incremental working capital to the Company. This process yielded 36 interested parties that signed a Non-Disclosure Agreement (NDA), and, subsequently, conducted a due diligence investigation of this division, including meetings with management, facility visits, and document review through a data room. None of these parties submitted Letters of Interest (LOI) for the purchase of the division.

While other sales of the LCA and XTRAC divisions were concluded and were monetarily sufficient to pay off in full the defaulted Credit Agreement, PhotoMedex’s overall finances had been negatively affected as a result of the default and the resulting prolonged forbearance workout process.

In the middle of 2015, after failing to locate a buyer for the consumer division, PhotoMedex terminated its engagement with Nomura as an investment bank. In light of its ongoing financial constraints, PhotoMedex engaged in short term lending facilities and continued to explore avenues to sell one or more of its business lines in order to raise needed capital for the Company. In particular, PhotoMedex made multiple attempts to market and sell the consumer products division. Following the termination of Nomura as an investment advisor, Photomedex maintained an active data room and entertained several entities that signed NDAs including Hawk Capital, Femme Pharma, Aerus Health, and the three entities which indicated interest in purchasing the consumer division and ultimately provided Letters of Intent: DS Healthcare, Viatek Consumer Products Group, Inc., and ICTV Brands, Inc.

In May 2015, the Company was introduced to the principals of DS Healthcare which led to our mutual companies entering into a series of agreements by which DS Healthcare would purchase not just the consumer products division, but Radiancy, Inc. itself, another subsidiary, PhotoMedex Technology, Inc. including its Neova skincare product line, as well as ancillary foreign subsidiaries and assets. However, as disclosed in the Company’s previous filings under Forms 8-K, 10-K and 10-Q, DS Healthcare had withheld material information from PhotoMedex during those negotiations, information which became public after the signing of the agreements to sell those assets and the public disclosure of the proposed transaction. That information resulted in a breach by DS Healthcare of the signed agreements and the resulting cancellation of the transaction with that company.

PhotoMedex then attempted to contact other parties who had, in the past, expressed an interest in purchasing the division, but at this time those parties were no longer interested in obtaining this product group. The only parties who expressed interest were Viatek Consumer Products Group, Inc., and ICTV Brands, Inc.

Viatek’s interest was in part an interest in the business and in part an attempt to settle ongoing patent infringement and commercial litigation between Radiancy, Inc. and Viatek. PhotoMedex entered into due diligence and negotiations with Viatek, as described in Background of the Asset Sale beginning on page 57. While Viatek provided an initial LOI, it then immediately began attempting to re-negotiate the deal, continually trying to lower the purchase price and more particularly, lower the guaranteed cash portion of the transaction.

PhotoMedex was also engaged in discussions with ICTV Brands. Its initial offer with regard to the consumer products division was not a purchase, per se, but rather a licensing agreement for the products of that division which would contain no specific guarantees with regard to payments to be received by the Company. As a result, at the time, PhotoMedex favored the Viatek transaction, both because it did provide some level of guaranteed cash payments and because it would also resolve longstanding litigation between the parties.

However, Viatek’s continuous attempts to lower the purchase price and the amount of guaranteed cash to be paid was a cause for concern by the board of PhotoMedex, particularly in light of Viatek’s past history of walking away from financial transactions. Under the terms of the Viatek LOI, PhotoMedex had agreed to a no-shop provision, and while that agreement was in force, the Company was restricted from seeking alternative buyers. At the time the board was re-evaluating the Viatek transaction, and attempting to reach an agreement with Viatek to terminate the LOI and settle the patent litigation, ICTV returned with a structured proposal to purchase the consumer products division in its entirety, with a guaranteed cash payment, a second payment guaranteed by a Letter of Credit, and then a royalty payment based upon future revenue streams.

The Board reviewed and compared the two transactions. Given that the ICTV Brands offer provided a final negotiated asset purchase agreement, guaranteed a higher cash payment and a longer-term royalty and thus a higher return to the Company, as compared to Viatek’s continued attempts to lower the transaction price while eliminating the upfront cash payment, the board determined that the ICTV Brands offer was a superior offer for the consumer products division.

Moreover, while the ICTV price was lower than that offered by DS Healthcare, the DS Healthcare offer was an all-stock deal which, if converted at the last traded price for DS Healthcare’s stock ($0.66/share) would be equal to or lower than the ICTV cash offer. At that time, there were no other offers for the product line, despite repeated and multiple attempts to market the line to other parties over the preceding two years. The DS Healthcare transaction had been terminated. DS Healthcare was not, at that time and to this day, in a legal or financial condition to close the transaction, given that it was not in compliance with its filings before the U.S. Securities and Exchange Commission and that its finances and stock price had materially suffered as a result of the events involving its board and executive officers. The only other offer on the table for the division was from a company, Viatek, which had already lowered its offer multiple times and was, at the time PhotoMedex received the offer from ICTV, attempting to lower its offer yet again and to remove any guaranteed cash payments from the offer.

The board recommended the sale of the division and the PhotoMedex shareholders agreed by approving the transaction on January 19, 2017 for several reasons. The sale to ICTV would provide cash to the Company with which to pay outstanding debts to vendors and creditors. In the process of locating buyers for the assets or finding alternative sources of financing, the management and board members agreed to forebear on payment of salaries and board-related payments to reduce the Company’s financial obligations and allow the Company to survive. While there were certain outstanding payments that are due to the board, those payments were not a defining concern to the board during its review. While the board was aware it would likely receive no compensation in the event of a bankruptcy reorganization, neither would the vendors or shareholders likely reach a favorable outcome in such a case. Thus, what was of greater concern was the ability to resolve the outstanding payables to the Company’s trade creditors, which would be necessary in order to allow the Company space to begin marketing its remaining LHE business line, and also offer a clear path to enter into possible strategic transactions with regard to the Company, which would allow the Company the opportunity to resume its growth and provide some return to its shareholders. Absent completion of this transaction, PhotoMedex would have no recourse but to enter into a restructuring through bankruptcy, which would wipe out all shareholder value and guarantee that the shareholders, vendors and other creditors of the Company would receive little to no value on their debts and investments. As a result, the board does not believe there were any negative factors with regard to the sale of the consumer products division to ICTV, as the sale will allow the Company to continue its existence, satisfy its debts, and explore methods of increasing the investment return to its shareholders.

Activities of PhotoMedex Following the Asset Sale

Following the Asset Sale, the Company plans to primarily focus on collecting the remaining payments, if any, from ICTV under the Letter of Credit, as well as any ongoing royalty payments (up to a maximum of $4.5 million in royalty payments from ICTV). We will also continue to defend and prosecute the existing litigation involving the Company (including the claim by the Company against DS Healthcare regarding the failed acquisition earlier in 2016), and will consider other strategic investments or alternatives for the Company including merger opportunities to build shareholder value as well as to determine what can be done to create value out of the remaining LHE assets despite their relatively immaterial value.

Liquidity and Going Concern

As of December 31, 2016, the Company had an accumulated deficit of $115,635 and shareholders deficit of $1,408. To date, the Company has dedicated most of its financial resources to sales and marketing, general and administrative expenses and research and development.

Cash and cash equivalents as of December 31, 2016 were $2,677, including restricted cash of $342. The Company has historically financed its activities with cash from operations, the private placement of equity and debt securities, borrowings under lines of credit and, in the most recent periods with sale of certain assets and business units. The Company will be required to obtain additional liquidity resources in order to support its operations. The Company is addressing its liquidity needs by seeking additional funding from lenders as well as collecting amounts due from past sales of business assets and amounts due from asset sales that occurred after the year ending December 31, 2016 (see Acquisitions below and in other areas of this report). There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources required for the short and long-term support of its operations. In light of the Company’s recent operating losses and negative cash flows, the termination of a pending merger agreement (see Acquisitions and Dispositions below) and the uncertainty of collecting further amounts due from sales of its product lines, there is no assurance that the Company will be able to continue as a going concern.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of liabilities that may result from the outcome of this uncertainty.

On January 6, 2016, PhotoMedex, Inc. received an advance of $4 million, less a $40 financing fee (the “January 2016 Advance”), from CC Funding, a division of Credit Cash NJ, LLC, (the "Lender"), pursuant to a Credit Card Receivables Advance Agreement (the "Advance Agreement"), dated December 21, 2015. The Company’s domestic subsidiaries, Radiancy, Inc.; PTECH; and Lumiere, Inc., were also parties to the Advance Agreement (collectively with the Company, the “Borrowers”). Each Advance was secured by security interest in defined collateral representing substantially all the assets of the Company. Concurrent with the funding of the loan agreement, the Company established a $500 cash reserve account in favor of the lender to be used to make loan payments in the event that weekly remittances, net of sales return credits and other bank charges or offsets, were insufficient to cover the weekly repayment amount due the lender.

Subject to the terms and conditions of the Advance Agreement, the Lender was to make periodic advances to the Company (collectively with the January 2016 Advance and the April 2016 Advance described below, the “Advances”). The proceeds were used for general corporate purposes.

All outstanding Advances were repaid through the Company’s existing and future credit card receivables and other rights to payment arising out of our acceptance or other use of any credit or charge card (collectively, “Credit Card Receivables”) generated by activities based in the United States.

On April 29, 2016, the Company received an advance of $1 million, less a $10 financing fee (the “April 2016 Advance”), from the Lender pursuant to the Advance Agreement.

On June 17, 2016, the Company received an advance of $550, less a $50 financing fee (the “June 2016 Advance”), from the Lender pursuant to the Advance Agreement.

The above described advances were paid in full on July 29, 2016 and the security interest in the defined collateral was released from lien.

The restricted cash account includes $253 from the Neova Escrow Agreement (see Acquisitions and Dispositions below). Restricted cash also includes $89 reflecting certain commitments connected to our leased office facilities in Israel. Additionally the Company gained access to previously restricted cash amounts of $724 that were held in escrow as of the one year anniversary of the sale of the XTRAC and VTRAC business on June 22, 2015, from which $125 was paid to MELA Science, the purchaser of that business which amount was reflected within the loss from discontinued operations.

On August 30, 2016, the Company entered into an Asset Purchase Agreement for the sale of its Neova product line. The sale was completed on September 15, 2016 resulting immediate proceeds to the company of $1.5 million and the Company recorded a loss of $1,731 from the transaction during the three months ended September 30, 2016. (See Acquisitions and Dispositions below)unwanted hair.

On October 4, 2016, the Companywe entered into an Asset Purchase Agreementasset purchase agreement with ICTV for the sale of its Consumer Divisionour consumer division for $9.5 million, including $5 million in cash payable in two tranches ($3 million at closing and $2 million 90 days after closing) plus a $4.5 million royalty agreement. (See Note 18 Subsequent Event and Acquisitions and Dispositions below). On January 23, 2017, the CompanyWe also entered into a First Amendment (the “First APA Amendment”) to the Asset Purchase Agreement. This transaction was completed on January 23, 2017.

All references to the Neova, the Consumer or Radiancy business and/or XTRAC product divisions within this Form 10-K are intended for historical purposes only and for the interpretation of past revenue and business results, and do not form a part of the Company’s future business and revenue plans.

Acquisitions and Dispositions (dollar amounts in thousands except where indicated and for per-share amounts)

On May 12, 2014, PhotoMedex acquired 100% of the shares of LCA-Vision Inc. ("LCA-Vision" or "LCA"); the Company then sold 100% of the shares of LCA for $40 million in cash effective January 31, 2015. The results of operations of LCA-Vision have been included into the Company's consolidated financial statements for the year ended December 31, 2015 as a discontinued operation.

On June 22, 2015, the Company, sold the assets, and related liabilities, of the XTRAC and VTRAC business for $42.5 million in cash, including restricted cash of $750 to be held in escrow for twelve months.

The Company used the proceeds from the sale of the LCA and XTRAC/VTRAC transactions to fully pay off and satisfy the $85 million senior secured credit facilities entered into with JP Morgan Chase as part of financing the acquisition of LCA.

On March 31, 2016 we completed the sale to The Lotus Global Group, Inc. of all of the tangible and intangible assets of the Omnilux product line for $220 ($110 was received as a refundable deposit during December 2015 in advance and $110 was received in April 2016), pursuant to the Agreement for Sale of Assets dated March 31, 2016. Management does not believe that the sale of the Omnilux product line represented a strategic shift for the Company. As a result, the above transaction has not been reflected in the accompanying consolidated financial statements as discontinued operations. The Company recorded a loss on the disposal of those assets in the amount of $843 for the year ended December 31, 2016.

Sale of Neova product line

On August 30, 2016, the Company and its subsidiary PhotoMedex Technology, Inc. (“PTECH”) entered into an Asset Purchase Agreement (the “Neova Asset Purchase Agreement”) with Pharma Cosmetics Laboratories Ltd., an Israeli corporation, and its subsidiary Pharma Cosmetics Inc., a Delaware corporation (together “PHARMA”) to acquire the Neova® skincare business (the “Transferred Business”) from PTECH, for a total purchase price of $1.8 million (the “Neova Purchase Price”). This transaction was completed on September 15, 2016, (the “Closing Date”). On that date, pursuant to the terms of the Neova Asset Purchase Agreement, PHARMA acquired all of the assets related to and associated with the Transferred Business, including but not limited to intellectual property, product inventory, accounts receivable and payable, and other tangible and intangible assets connected with the conduct of that Transferred Business. In exchange for these assets, the Company received a net payment from PHARMA of $1.5 million, subject to a post-closing working capital adjustment.

Also on that date, the parties entered into a First Amendment (the “First Neova APA Amendment”) to the Neova Asset Purchase Agreement, which provided that PHARMA would hold in trust the sum of $50 until such time as PhotoMedex and PTECH obtain a signed Worldwide Trademark Co-existence Agreement and Consent to Assignment from Singer-Kosmetik GmbH, a German company formed under the laws of Germany, (“Singer”) regarding the use by both Singer and the Transferred Business of their respective trademarks. Thattransition services agreement, was obtained from the relevant parties, and the $50 held in trust by Pharma was released to PhotoMedex on October 28, 2016.

Management does not believe that the sale of the Neova product line represents a strategic shift for the company. As a result, the above transaction has not been reflected in the accompanying consolidated financial statements as discontinued operations. The Company recorded a loss on the disposal of those assets in the amount of $1,731 for the year ended December 31, 2016.

The Neova Purchase Price is subject to a post-closing working capital adjustment, pursuant to which the Neova Purchase Price paid to the Company at closing will be adjusted up or down by an amount equal to the difference between the defined actual working capital and the target net working capital of $200. Target working capital is defined as the net Accounts Receivable less trade Accounts Payable related to the Transferred Business as of the closing date. The Neova Asset Purchase Agreement also contains customary representations, warranties and covenants by each of the Company, PTECH and PHARMA, as well customary indemnification provisions among the parties. There is not expected to be any working capital adjustment as of the measurement date which was 60 days after closing.

The parties entered into several ancillary agreements as part of this transaction, including a Neova Escrow Agreement and a Neova Transition Services Agreement. Under the Neova Escrow Agreement, $250 of the Purchase Price (the "Escrow Amount") was placed into an escrow account held by U.S. Bank National Association as Escrow Agent. The funds will remain in escrow for one year following the closing of the transaction.

Under the Neova Transition Services Agreement, PHMD will continuewe agreed to provide certain accounting, benefit, payroll, regulatory, IT support and other services to PHARMA for periods ranging from approximately three to up to nine months following the closing. During those periods, PHARMA will arrange to transition the services it receives to its own personnel. PHARMA shall also have the right to continue occupying certain portions of PHMD’s Willow Grove, Pennsylvania facility and the Orangeburg, New York facility of PHMD’s Radiancy, Inc. subsidiary for a period of time. The amounts of compensation to be received by the Company for these services will be reflected in the accompanying consolidated statements of comprehensive loss as a reduction of the related expenses that the Company will incur to provide these services.

Sale of Radiancy Consumer Products line

On October 4, 2016, the Company and its subsidiaries Radiancy, Inc., a Delaware corporation (“Radiancy US”), Photo Therapeutics Ltd., a private limited company incorporated under the laws of England and Wales (“PHMD UK”), and Radiancy (Israel) Limited, an Israel corporation (“Radiancy Israel” and, together with the Company, Radiancy, and PHMD UK, “PHMD”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with ICTV Brands, Inc., a Nevada corporation (“ICTV Parent”), and its subsidiary ICTV Holdings, Inc. a Nevada corporation (the “Purchaser” and together with together with ICTV Parent, “ICTV”) pursuant to which ICTV will acquire PHMD’s consumer products division, including its no!no!® hair and skin products and the Kyrobak back pain management products (all such consumer products, the “Consumer Products”) and the shares of capital stock of Radiancy (HK) Limited, a private limited company incorporated under the laws of Hong Kong (the “Hong Kong Foreign Subsidiary”), and LK Technology Importaçăo E Exportaçăo LTDA, a private Sociedade limitada formed under the laws of Brazil (the “Brazilian Foreign Subsidiary” and together with the Hong Kong Foreign Subsidiary, the “Foreign Subsidiaries”) (collectively, the “Transferred Business”) from PHMD, for a total purchase price of $9.5 million (the “Purchase Price”) including $3 million in cash at closing, $2 million of cash 90 days after closing collateralized by a letter of credit, and a $4.5 million royalty on future sales of the product line

The Purchase Price will be paid as follows:

As part of this Transaction, ICTV will also acquire from PHMD all of the shares of capital stock of the Foreign Subsidiaries.

The Asset Purchase Agreement provides that ICTV will make offers of employment to certain employees of the Transferred Business and that PHMD will not solicit such employees (or any other employees of ICTV) for employment or other services for a period of five years and that PHMD will not compete with ICTV with respect to the Transferred Business for a period of five years.  It also contains customary representations, warranties and covenants by the Company, each of its subsidiaries and ICTV, as well customary indemnification provisions among the parties.

In connection with the sale of the Transferred Business, on October 4, 2016, the parties entered into an Escrow Agreement and a Transition Services Agreement.

Under the Escrow Agreement, ICTV deposited $3,000 of the Purchase Price into an escrow account which will be released to PHMD upon closing.

Under the Transition Services Agreement, PHMD will continue to provide certain accounting, benefit, payroll, regulatory, IT support and other services to ICTV for periods ranging from approximately three to up to nine months following the Closing. During those periods, ICTV will arrange to transition the services it receives to its own personnel.  In consideration for such services, ICTV will pay to PHMD the documented costs and expenses incurred by PHMD in connection with the provision of those services and the documented lease costs including monthly rental and any utility charges incurred under the applicable leases and will reimburse PHMD for the documented costs and expenses incurred for the continued storage of inventory and raw materials at warehouse locations, and for services for fulfilling and shipping orders for such inventory and the payroll, employment-related taxes, benefit costs and out of pocket expenses paid to or on behalf of employees. ICTV shall also have the right to continue occupying certain portions of the Orangeburg, New York facility of PHMD’s Radiancy, Inc. subsidiary for a period of time.

Also on January 23, 2017, (the “Closing Date”), the Company and its subsidiaries completed the disposition of the Transferred Business to ICTV. On that date, pursuant to the terms of the Asset Purchase Agreement as amended, ICTV acquired all of the assets related to and associated with the Transferred Business, including but not limited to intellectual property, product inventory, accounts receivable and payable, and other tangible and intangible assets connected with the conduct of that Transferred Business. In exchange for these assets, the Company received on the Closing Date an initial net payment from ICTV of $3.0 million.

Upon entering into the ICTV asset purchase agreement, the Company recorded an impairment of the consumer segment’s goodwill in the amount of $ 2,257 and intangible asset in the amount of $1,261 for the period ended September 30, 2016. Consequently, the Company is not expected to record significant gain or loss from the transaction contemplated under the Asset Purchase Agreement upon closing in January 2017 (see Note 18 Subsequent Event and Acquisitions and Dispositions).

On January 23, 2017, PhotoMedex, Inc. (the “Company”) (Nasdaq and TASE: PHMD) and its subsidiaries Radiancy, Inc., (“Radiancy”), PhotoTherapeutics Ltd. (“PHMD UK”), and Radiancy (Israel) Limited, (“Radiancy Israel” and, together with the Company, Radiancy, and PHMD UK, the “Sellers” and each, a “Seller”) entered into a First Amendment (the “First APA Amendment”) to the Asset Purchase Agreement (the “Asset Purchase Agreement”) between the Company and its subsidiaries, and ICTV Brands Inc. (“Parent”) and ICTV Holdings, Inc. (“Purchaser” and together with Parent, the Company, Radiancy, PHMD UK and Radiancy Israel, the “Parties” or singularly a “Party”) under which Purchaser agreed to acquire the consumer products division of PhotoMedex and its subsidiaries (the “Acquisition”), which includes, among other products, the no!no!® Hair and Skin and the Kyrobak pain management products (the “Transferred Business”). This transaction was previously reported on a Current Report filed on Form 8-K on October 5, 2016 and in a Definitive Proxy on Schedule 14A on December 16, 2016.

The First APA Amendment revised the definition of Business Assets and Assumed Liabilities in the Asset Purchase Agreement, as set forth in the attached exhibit. It also modified the first sentence of Section 5.5(b) of the Asset Purchase Agreement to provide that the Parent, Purchaser, or an affiliate would take the necessary steps to establish and implement “employee benefit plans” within the meaning of Section 3(3) of ERISA and a 401(k) plan intended to be qualified under Section 401(a) of the Code (collectively, “Applicable Plans”) in which employees of the consumer products division who are hired by Purchaser shall be eligible to participate from and after the date of establishment. These steps are to be taken as soon as reasonably practicable after the Closing Date (defined below) of the Transaction, or a later date agreed to by the Parties or permitted under the Transition Services Agreement (defined below), but no later than 60 days after the Closing Date. The First APA Amendment also replaced the initial Disclosure Letter delivered by the Sellers to Purchaser concurrently with the execution of the Asset Purchase Agreement in its entirety with an amended Disclosure Letter.

Finally, the First APA Amendment modified the Letter of Credit issued in connection with the Asset Purchase Agreement. Under the Asset Purchase Agreement, the Purchaser agreed to pay to the Company $2.0 million on or before the ninetieth (90th) day following the Closing Date. This amount is guaranteed by an original letter of credit for the benefit of the Company made by a third party; however, under its original terms, the Letter of Credit was valid until the earlier of 180 days after the letter of credit was issued, or April 4, 2017, or until full payment upon demand and presentation on or January 3, 2017. Accordingly, the parties agreed to extend the term of the Letter of Credit to 100 days after the Closing Date.

Also on January 23, 2017, the Company and its subsidiaries entered into a First Amendment (the “First TSA Amendment”) to the Transition Services Agreement (the “Transition Services Agreement”) between the Company and its subsidiaries and Parent and Purchaser, pursuant to which the Company and its subsidiaries will provide the Purchaser with certain accounting, benefit, payroll, regulatory, IT support and other services for periods ranging from approximately three months to up to one year following the Closing Date. During thatclosing date, during which time the Purchaser willICTV would arrange to transition the services it receives to its own personnel. The First TSA Amendment revised referencesThis transaction was completed on January 23, 2017.

On July 12, 2017, we entered into a termination and release agreement under which the asset purchase agreement described above was terminated and is of no further force and effect, except for certain surviving rights, obligations and covenants described in the Transition Services Agreementtermination and release agreement. Pursuant to the termination and release agreement, ICTV paid us $2 million in cash and we agreed that ICTV will have no further royalty or other payment obligations under the asset purchase agreement. As partial consideration for the releases provided by ICTV pursuant to the termination and release agreement and in accordance with the terms therein, on July 12, 2017, we entered into a bill of sale and assignment, which provides that we sold, assigned, transferred, conveyed and delivered to ICTV, and ICTV purchase and accept from “Effective Date”us, all of the right, title and interest, legal or equitable, in and to “Closing Date”a deposit in the amount of $0.21 million held by a consumer division vendor, Sigmatron International, Inc., pursuant to an arrangement between us and amendedSigmatron International, Inc.

During the fifth recitalyear ended December 31, 2018, we discontinued our LHE® brand product lines, which were previously sold through our subsidiary, Radiancy, Inc., or Radiancy. Except for an occasional sale of leftover inventory, this business line had basically ceased operations with the NEOVA sale September 23, 2016. We liquidated the remaining legacy inventory and assets of this business line and no longer operate this business. This resulted in its entiretya net expenses of $172, from net revenues of $302, less expenses to clarify specifications regardingadjust for account receivable write offs and changes in tax liabilities related to the lease for certain premises in Israel by and between Radiancy Israel and the landlord for those premises. Furthermore,former product lines.

Organizational Chart

The following chart depicts our organizational structure following the sale of assets to ICTV Brands, Inc. representedour prior business and the sale of substantially all the remaining operational assets of the Company. Consequently, the Company did not present discontinued operations in respect of the sale of the remaining consumer products because the Company had immaterial remaining operations.Contribution Transaction. All subsidiaries are wholly-owned unless otherwise indicated.

TERMINATION OF PENDING TRANSACTION 

On February 19, 2016,*These entities were affiliated with our former medical and consumer business. We are in the Company, Radiancy, Inc.,process of closing and dissolving these entities.

Our Real Estate Business

Our focus is to build our company into a wholly-owned subsidiary of the Company (“Radiancy”), DS Healthcare Group, Inc. (“DSKX”)leading real estate, asset management, and PHMD Consumer Acquisition Corp.,development company, concentrating primarily on investments in high yield income producing assets and other opportunistic commercial properties via direct property ownership and/or asset management. Our objective is to generate long term net asset value growth while adhering to institutional best practices and a wholly-owned subsidiary of DSKX (“Merger Sub A”), entered into an Agreement and Plan of Merger and Reorganization (the “Radiancy Merger Agreement”) pursuantdeep research process for all investments.

Income Producing Properties

For income producing properties, we intend to which Radiancy was to merge with Merger Sub A, with Radiancy as the surviving corporation in such merger (the “Radiancy Merger”). Concurrently, PHMD, PTECH, DSKX, and PHMD Professional Acquisition Corp., a wholly-owned subsidiary of DSKX (“Merger Sub B”), entered into an Agreement and Plan of Merger and Reorganization (the “P-Tech Merger Agreement” and togetheracquire assets that provide recurring income with the Radiancy Merger Agreement,potential for income growth over the “Merger Agreements”) pursuantlong-term. We believe there can be an attractive risk/reward profile to which PTECH was to merge with Merger Sub B, with PTECH as the surviving corporation in such merger (the “P-Tech Merger” and together with the Radiancy Merger, the “Mergers”). As a result of the Mergers, DSKX would become the holding company for Radiancy and PTECH. The Mergers were expected to qualify as tax-free transfers of property to DSKX for federal income tax purposes.

On March 23, 2016, DSKX filed a Current Report on Form 8-K (the “DSKX March 23 Form 8-K”) with the SEC reporting its audit committee, after discussion with its independent registered public accounting firm, concluded that the unaudited condensed consolidated financial statements of DSKX for the two fiscal quarters ended June 30, 2015 and September 30, 2015 should no longer be relied upon because of certain errors in such financial statements. To the knowledge of DSKX’s audit committee, the facts underlying its conclusion include that revenues recognized related to certain customers of DSKX did not meet revenue recognition criteria in the two fiscal quarters ended June 30, 2015 and September 30, 2015. Additionally, certain equity transactions in the two fiscal quarters ended June 30, 2015 and September 30, 2015 were not properly recorded in accordance with United States Generally Accepted Accounting Principles and also were not properly disclosed.

DSKX reported in the DSKX March 23 Form 8-K that, on March 17, 2016, all members of DSKX’s board of directors other than Mr. Khesin, terminated the employment of Mr. Khesin, as its president and as an employee of DSKX, and also terminated Mr. Khesin’s employment agreement, dated December 16, 2013. DSKX reported in the DSKX March 23 Form 8-K that all members of DSKX’s board of directors other than Mr. Khesin terminated both Mr. Khesin’s employment and employment agreement for cause. In addition, DSKX reported in the DSKX March 23 Form 8-K that all members of DSKX’s board of directors other than Mr. Khesin unanimously removed Mr. Khesin as Chairman and a member of DSKX’s board of directors, also for cause. DSKX reported in the DSKX March 23 Form 8-K that DSKX’s board terminated Mr. Khesin for cause from both his employment and board positions because DSKX’s board believes,properties based on the resultslocation and the underlying credit attributes of the investigation astenants. In addition, we may invest in loans that are secured by income producing properties or ground leases on such properties. We believe that owning a diversified portfolio of the dateactively managed properties and other real estate related investments, can produce a consistent stream of the DSKX March 23 Form 8-K, that there is sufficient evidence to conclude that Mr. Khesin violated his fiduciary duty to DSKX and its subsidiaries.income with long-term upside potential from income growth or redevelopment.

The Company was not advised of this investigation during its negotiationsReal Estate Development

We look to invest in land assets that can be developed into income generating commercial, residential, and hospitality properties, for-sale residential properties, or mixed-use development opportunities. Such properties may require extensive planning, and for these investments, we may partner with DSKX or after signinglocal developers, architects, and engineers to maximize the Merger Agreements untilhighest and best use. We focus on development properties where we believe the evening of March 21, 2016. On April 12, 2016, the Company sent a Reservation of Rights letter to DSKX. The Notice states that, based upon the disclosures set forth in DSKX’s Current Report on Form 8-K filed on March 23, 2016 and subsequent press releases and filings by DSKX with the United States Securities and Exchange Commission (collectively, the “DSKX Public Disclosure”), DSKXrisk profile is in material breach of various representations, warranties, covenants and agreements set forth in the Agreements; had failed to provide to the Company the information contained in the DSKX Public Disclosures during the discussions relating to the negotiation and execution of the Agreements; and continues to be in material breach under the Agreements. As a result, the letter further stated, the conditions precedent to the closing of these transactions as set forth in the Agreements may not bemisunderstood thus creating significant opportunity if we are able to occur.

turn the development into a stabilized operating property.

On May 27, 2016, PHMD, Radiancy, and P-Tech, terminated both Agreements and Plans of Merger and Reorganization among PhotoMedex and its affiliates and DS Healthcare Group. Given the material breaches identified in PHMD’s notice to DSKX, PHMD has initiated litigation seeking to recover a termination fee of $3.0 million, an expense reimbursement of up to $750 and its liabilities and damages suffered as a result of DSKX’s failures and breaches in connection with each of the Merger Agreements. On May 27, 2016, PHMD, Radiancy and P-Tech filed a complaint in the U.S. District Court for the Southern District of New York alleging breaches of the Merger Agreements by DSKX and seeking the damages described in the foregoing sentence. See Note 1, Pending Transactions in the Company’s Form 10-K for the year ending December 31, 2015 for additional information.

Competition

Reverse Split and Number of Shares Adjustment

On October 29, 2015 the Company held its Annual Meeting of Stockholders in which, among other matters, Company stockholders authorized the board of directors to amend the Company’s certificate of Incorporation with respect to a reverse split of the Company’s issued and outstanding Common Stock in a ratio to be determined by the Company’s Board of Directors not to exceed a 1 for 5 ratio.

On September 7, 2016 the Company’s Board of Directors approved a reverse split in a ratio of 1-for-five.  The 2016 reverse split was implemented on September 23, 2016 (the “2016 Reverse Split”).  The amount of authorized Common Stock as well as the par value for the Common Stock were not effected.  Any fractional shares resulting from the 2016 Reverse Split were rounded up to the nearest whole share.

All Common Stock, warrants, options and per share amounts set forth herein are presented to give retroactive effect to the 2016 Reverse Split for all periods presented.

On September 23, 2016, the Company’s Common stock and warrants approved for listing on the NASDAQ Capital Market under the symbol PHMD.  Shares were previously listed on the NASDAQ Global Market under the same symbol.

Discontinued Operations

As stated above, on May 12, 2014, the Company acquired LCA.

LCA is a provider of fixed-site laser vision corrections services at its LasikPlus® vision centers. This business, from May 2014 through December 31, 2014, was a fourth business segment for the Company, referred to as the Clinics Segment, through which the Company briefly provided fixed-site laser vision correction services at its LasikPlus^® vision centers.

Effective January 31, 2015, influenced by the Chase Credit Agreement defaults of August 2014 and after preliminary investigations and discussions, the Company, and LCA entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") with Vision Acquisition, LLC ("Vision"), under which Vision acquired LCA and its subsidiaries from PhotoMedex for a total purchase price of $40 million in cash (the "Purchase Price"). After giving effect to working capital and indebtedness adjustments and the payment of professional fees, the Company realized net proceeds of approximately $37.7 million from this sale. The Company used the proceeds from this transaction to pay down portions of its outstanding revolving line of credit and term loan under the Credit Agreement.

Based on the above information, the Company accordingly classified this former segment as held for sale and discontinued operations in accordance with ASC Topic 360. For the statement of operations, the activity related to LCA is captured as discontinued operations through the disposal date of January 31, 2015.

XTRAC® EXCIMER LASERS

XTRAC is an excimer laser technology used to treat psoriasis and other skin diseases for which there are no cures.

Also influenced by the Chase Credit Agreement default occurring in August 2014 and continuing until the debt was repaid in June of 2015, the Company, entered into a Purchase Agreement (the "Purchase Agreement") with MELA Sciences, Inc. ("MELA"), under which MELA acquired the XTRAC business and its India subsidiary from PhotoMedex for a total purchase price of $42.5 million in cash (the "Purchase Price") including an escrow of $750.

Based on the above information, the Company accordingly classified these related assets as held for sale and discontinued operations in accordance with ASC Topic 360. For the statement of operations, the activity related to the XTRAC business is captured as discontinued operations thru the disposal date of June 22, 2015.

Our Key Strategies

Our technologies, products and research efforts have been directed to addressing a worldwide aesthetic industry valued at more than $34 billion annually. In December 2011, PhotoMedex merged with Radiancy Inc. which brought to PhotoMedex the no!no!® line of home-use consumer products for hair removal, acne treatment, skin rejuvenation and lower back pain. Radiancy also markets capital equipment to physicians, salons and med spas for hair removal, acne treatment, skin tightening and rejuvenation and psoriasis care. In addition to a synergistic product line, Radiancy possesses a proprietary consumer marketing engine built upon direct-to-consumer sales and creative marketing programs that drive brand awareness.After a period of significant growth and profitability following the PhotoMedex-Radiancy merger and then concurrent with entering into the Chase Credit Agreement and the merger with LCA-Vision, Inc., the company began to face a number of factors that caused the operating profitability of its consumer business to suffer. These factors included competition from consumer device companies claiming similar product functionality, the inability to purchase cost effective advertising to promote our consumer product portfolio, and the inability to effectively expand operations into foreign markets. Furthermore, after satisfying on June 23, 2015 the bank covenant defaults of our senior credit facility, we continued to face a challenging media environment to purchase cost effective advertisement in the USA, our largest product distribution market. Coupled with our inability to attract sufficient financial resources to quickly increase our advertisement to overcome the market confusion created by competitors and quickly ramp new and innovative product launches in the second half of the 2015, the company entertained a variety of inquiries to sell-off the remainder of its assets culminating in the sale of the Neova and consumer products lines as reported above.See above – Our Company, Acquisitions and Dispositionsfor more information.

Following these product line and asset sales, the Company plans to focus primarily on collecting the remaining payments, if any, from ICTV under the Letter of Credit, as well as any ongoing royalty payments (up to a maximum of $4.5 million in royalty payments from ICTV). We will also continue to defend and prosecute the existing litigation involving the Company (including the claim by the Company against DS Healthcare regarding the failed acquisition earlier in 2016), and will consider other strategic investments or alternatives for the Company including merger opportunities to build shareholder value as well as to determine what can be done to create value out of the remaining LHE assets despite their relatively immaterial value.

Expertise in Global Consumer Marketing

Until the recent sale to ICTV in January 2017, we had developed and owned a highly advanced consumer sales engine accompanied by creative marketing programs, well-tested and successful direct-to-consumer marketing strategies and a global distributor and retail network. That network was used to market the no!no!® products throughout the world and in multiple countries, through infomercials and print, radio other television advertising worldwide, online, on home shopping channels and at stores and kiosks.

Our Global Growth Strategies

The global market for aesthetic devices and procedures continues to expand, driven by an individual desire to improve one’s appearance; a higher disposable income being spent on aesthetic treatments; an aging population in the industrialized world that desires a more youthful look; a younger generation seeking preventive solutions for the inevitable aging process; technological advances making products available to a consumer market that were previously only possible at the physician level; an increasing number of conditions, including acne and wrinkles, that can now be non-invasively treated; and a lower procedural cost, which has expanded the availability and affordability of many procedures to a greater number of individuals.

We had focused our efforts on addressingbelieve the above-mentioned trendsreal estate business is very competitive. Our properties may compete with local sites in all threeattracting skilled labor during construction and in attracting tenants and end-users upon completion. We compete with several types of our core business segmentsreal estate investors for acquisitions of properties, including the consumerreal estate limited partnerships, private equity, REITs, developers, financial institutions, and physician recurring segments, (which the product portfolio underlying eachindividuals that own, manage, finance, or develop properties. Many of these two business segmentsgroups have now been sold to third parties – see Sale of Consumer product linelarger operations and Sale of Neova product line above) and the professional segment. We are now primarily focused on collecting the remaining payments, if any, from sales of business assets. We will consider other strategic investments or alternatives for the Company, including merger opportunities to increase shareholder value as well as determine what can be done to create value out of the remaining LHE assets despite their relatively immaterial value.

In the last two years our three main sources of revenue have been generated from our three business segments: the Consumer segment, the Physician Recurring segment and the Professional segment. The remaining LHE product lines generates revenue as part of the Professional segment. We also operated the XTRAC business through June 22, 2015 which generated Physician Recurring revenues from our USA business and Professional revenues from our International operations.

Consumer Segment

Physician Recurring Segment

NEOVA® PHYSICIAN-DISPENSED SKIN CARE

Until the sale of the product line to Pharma Cosmetics, Inc. in September 2016, our NEOVA skin care line was designed as a therapeutic intervention for preventing premature skin aging due to UV-induced DNA damage. The topical technology seeks to repair photo-damaged skin using a novel combination of two key ingredients: DNA repair enzymes and our Copper Peptide Complex®. Copper has been studied for moregreater financial resources than 20 years for its wound healing applications. Research suggests that copper can be used to improve the elasticity of skin and is complementary to DNA repair enzymes, which repair damage caused by sunlight and other UV rays.

The NEOVA technology represented another opportunity to integrate our marketing platform with our direct sales force for plastic surgeons and dermatologists, which has traditionally been responsible for furthering market adoption of NEOVA products. Through a direct-to-consumer initiative, we sought to drive consumers to medical practices for NEOVA as well as to our website to buy direct.

We held several patents related to the NEOVA technology, as well as the ability to draw upon more than 150 peer-reviewed journal articles that provide scientific support for these ingredients.

Professional Segment

LHE SKINCARE DEVICES

Sales under the professional business segment are mainly generated from capital equipment, namely our LHE® brand products.

Our proprietary LHE® brand technology combines the benefits of direct heat and a full-spectrum light source for a variety of clinical applications, including psoriasis care, acne treatment, skin tightening, skin rejuvenation, wrinkle reduction, collagen renewal, vascular and pigmented lesion treatments and hair removal. This technology was originally used primarily in our professional products, including capital equipment sold to physicians and skin care specialists worldwide. The technology was then adapted to our hand-held consumer line of products like no!no! Skin, a medical device for acne.

LHE capitalizes upon the principles of selective photothermolysis, which is a type of photo (or light-based) therapy in which heat is generated using selective absorption of light within the targeted tissue. Selective photothermolysis entails precisely targeting a pigmented tissue or structure with a specific wavelength of light that is absorbed into and limited to the target area of the skin but does not penetrate into surrounding areas. Heat is also produced and directed to the target with minimal effect on surrounding skin.

There are many phototherapy options available for patients today, including laser and intense pulse light (IPL), although we believe that we have optimized the light/heat relationship in our LHE products, there are many phototherapy options available for patients today including laser and intense pulse light (IPL). These factors together with the relatively immaterial value of the LHE assets and the Professional segment as of December 31, 2016, discontinued operations were not presented to reflect the sale of the consumer products division to ICTV Brands, Inc. that occurred in January 2017.

In contrast, LHE technology was developed with the objective of efficiently using both light and heat energy to provide a greater treatment advantage. In doing so, LHE® brand products can deliver less energy density to the target skin area, which is believed to create a safer, more efficient product. In addition, balancing light and heat enables phototherapy treatments for more sensitive skin types as well as a broader spectrum of hair colors.

As a result of our LHE technology, we have created an LHE® brand professional product line designed for clinical efficacy in a variety of applications, including psoriasis care, acne treatment, skin tightening, skin rejuvenation, wrinkle reduction, collagen renewal, vascular and pigmented lesion treatments and hair removal. The competitive advantages LHE products enjoy over the competition include its excellent performance and safety record, low operational costs, ease of operation, versatility and cost flexibility. We believe we have a market opportunity as physicians and skin care providers are seeking a product which offers an efficient and safe product at a lower price point, which we believe our LHE technology provides. In addition, lasers and IPL Technology carry with them an inherent risk of patient burns, and depending upon the conditions being treated, may require longer and more extensive treatment times to effect a result. The Company will refocus its efforts on its LHE products after the closing of the ICTV transaction.

Although we currently distribute this product line through a network of medical device distributors, the activity of this product line is relatively immaterial and generally reflects only the occasional sale of replacement parts to the installed based on past equipment sales.

Our Products

In the past, we have emphasized the development of physician-endorsed skin related products based on science. Once cleared for use by the required regulatory agencies, like the FDA, these products are commercialized through a systematic, proprietary marketing program that we view as integral to our business success. Some of our products, which are described in more detail below, have generated significant revenue for us. Our primary technology and product platforms contributing to this revenue are described below.

We evaluate four principal criteria in determining where to allocate product development resources:

Specifically, new projects must be able to work effectively, but also have a low enough cost of goods to achieve a favorable price point for consumers and a favorable margin for us to advertise our products effectively. As well, the market should be well defined and large enough to accommodate the new product with room for growth as we ramp up marketing efforts.

These platforms have included:

THERMICON® HEAT TRANSFER TECHNOLOGY

Until the sale of the consumer product portfolio to ICTV, our no!no!® hair removal products were built upon our proprietary heat-based Thermicon® brand technology to address consumer concerns over perceived limitations of existing hair removal products, including safety and pain, and to overcome inherent limitations of light-based hair removal solutions. Unlike other products that use methods that are painful, have side effects, are limited in body areas that can be treated or that emanate from the principle of selective thermolysis, the Thermicon® brand devices are based on heat only and are therefore applicable for all hair colors and skin types, can be used on all body areas, and if used per instructions do not have adverse events, and are virtually painless. Thermicon® brand devices utilize a high-temperature thermodynamic wire filament that is activated when the devices are moved in contact with and across the treatment area. We believe that the no!no!® brand hair removal products have several advantages over existing products for both the consumer and professional hair removal market, including:

no!no!® Product Line: “Professional Technology Made for Consumers”

We have realized favorable market adoption of Thermicon® brand technology, which not only overcomes the challenges of other hair removal methods but also puts control of the hair removal process in consumers’ hands.

We marketed a full line of consumer products based on the patented Thermicon® brand technology. These products are sold globally through infomercials and television shopping channels, retail stores, online shopping websites and worldwide strategic distribution agreements.

Since 2007, we have introduced a series of no!no! devices. Every product evolution—from the no!no! Classic™, the no!no! Hair™, the no!no! Hair for Men™, the no!no! Plus™ to the no!no! PRO 3™ and the no!no! PRO 5™—represents continued innovation and product line extension. Notably, each of the prior brands was still marketed even as we continued to introduce new product extensions like the no!no! Micro and no!no! Ultra launched in 2014.

LIGHT AND HEAT ENERGY (LHE^®)

Our proprietary LHE® brand technology combines the benefits of direct heat and a full-spectrum light source. This technology is used primarily in our professional products, which entail capital equipment sold to physicians and skin care specialists worldwide. This technology had also been adapted to the hand-held consumer line of products like no!no! Skin, a medical device for acne which was included as part of the product portfolio sold to ICTV in January 2017.

LHE capitalizes upon the principles of selective photothermolysis, which is a type of photo (or light-based) therapy in which heat is generated using selective absorption of light within the targeted tissue. Selective photothermolysis entails precisely targeting a pigmented tissue or structure with a specific wavelength of light that is absorbed into and limited to the target area but does not penetrate into the surrounding area. Heat is also produced and directed to the target with minimal effect on surrounding skin.

Although we believe that we have optimized the light/heat relationship in our LHE products, there are many phototherapy options available for patients today, including laser and intense pulse light (IPL). These factors together with the relatively immaterial value of the LHE assets and the Professional segment as of December 31, 2016, discontinued operations were not presented to reflect the sale of the consumer product division to ICTV Brands, Inc. that occurred in January 2017.

In contrast, LHE technology was developed with the objective of efficiently using both light and heat energy to provide a greater treatment advantage. In doing so, LHE® brand products can deliver less energy density (known as “low fluences”) to the target skin area, which is believed to create a safer, more efficient product. We believe that lowering the fluence of our LHE® brand products reduces the need for skin cooling techniques, simplifies the treatment process and decreases the risk of harmful side effects. In addition, balancing light and heat enables phototherapy treatments for more sensitive skin types as well as a broader spectrum of hair colors.

We have incorporated patented internal filters that protect the skin during treatment with LHE technology. We also offer a specialized light unit assembly for use on sensitive skin to further enhance our products’ safety and comfort without compromising results.

As a result of our LHE technology, we have created an LHE® brand professional product line designed for clinical efficacy in a variety of applications, including psoriasis care, acne treatment, skin tightening, skin rejuvenation, wrinkle reduction, collagen renewal, vascular and pigmented lesion treatments and hair removal. (Note that not all applications are cleared in the U.S.)

NEOVA® PHYSICIAN-DISPENSED SKIN CARE

Until the sale of the skin care product line to Pharma Cosmetics, Inc. in September 2015 (see Acquisitions and Dispositions) the NEOVA skin care line was designed as a therapeutic intervention for preventing premature skin aging due to UV-induced DNA damage. The topical technology seeks to repair photo-damaged skin using a novel combination of two key ingredients: DNA repair enzymes and our Copper Peptide Complex®. Copper has been studied for more than 20 years for its wound healing applications. Research suggests that copper can be used to improve the elasticity of skin and is complementary to DNA repair enzymes, which repair damage caused by sunlight and other UV rays.

The DNA repair enzymes contained in the NEOVA formulation have several objectives:

In concert with the repair enzymes, NEOVA’s Copper Peptide Complex serves to promote new blood vessel growth and enhance the expression of growth factors. It stimulates collagen and elastin formation, which accelerate the repair process. Additionally, the Copper Peptide Complex is designed to mitigate damage caused by free radicals by promoting an antioxidant defense. Free radicals are a type of highly reactive oxygen molecule known to cause oxidative stress, which triggers harmful inflammatory responses and cell death as the free radicals attack DNA, lipids, proteins and other cell components. They are also believed to accelerate the progression of cancer, cardiovascular disease and age-related diseases, including cataracts, arthritis, Alzheimer’s disease and diabetes. As typically occurs in normal, healthy cells, an antioxidant defense system comprising vitamins C and E and a variety of enzymes can minimize and repair free radical-induced damage.

We previously held, until the sale to Pharma Cosmetics, several patents related to the NEOVA technology, as well as the ability to draw upon more than 150 peer-reviewed journal articles that provide scientific support for these ingredients.

Competition

The markets in which we have participated are highly competitive. Certain of our competitors are larger than us and have substantially more resources. As it pertains to the aesthetic device market, this arena is complex and highly competitive—both for home use and treatment in a physician’s office. Over the past several decades, the aesthetics technology market has changed considerably due to technological innovation and discoveries. We are exposed to competition from small, closely held, specialized aesthetic device companies, and several public companies, such as Syneron Medical Ltd. (ELOS-NASDAQ), Cynosure Inc. (CYNO-NASDAQ) and Valeant Pharmaceuticals, Inc. (VRX-NYSE).do.

We believe that our size and scale provide an opportunity to take advantage of smaller-tier assets that most traditional investors do not focus on due to size limitations, thus creating unique investment opportunities with attractive risk/reward profiles.

Investment Strategy

Our diversified investment strategy provides us with flexibility to invest across real estate asset classes and submarkets in the United States and globally. We will look to utilize our industry experience and relationships to identify the transactions which generate the most attractive risk/reward opportunities consistent with our strategy. We enforce a significant barrierrigorous and repeatable underwriting process based on deep research and due diligence.

One of our core strategies is that we intend to entry intofind investments in secondary and tertiary markets with assets that require minimal capital expenditures but generate initial unlevered cash flow yields that are higher than those in primary markets. We look to acquire assets in submarkets where the population and employment trends are positive and where the underlying asset serves a key purpose to the local community.

A second component of our investment strategy will revolve around sourcing asset management opportunities for which we would operate as an applicable marketasset manager of real estate properties. We are not currently structured as a REIT, thus we have the ability to retain earnings and to operate in real estate asset management, development, and peripheral real estate activities, activities that may be limited by REIT requirements. We will look to utilize our existing infrastructure to provide efficiencies of scale to owners of real estate assets as we grow our portfolio over time.

Our criteria for evaluating investments includes, but is the cost basisnot limited to, submarket location of the productasset, economic and our products were based upon a proprietary technology that allowed uspopulation growth fundamentals of the location, credit quality of the tenant, terms of the underlying leases, historical cash flow and capital expenditure needs at the property, ability to build products inexpensively. From a marketing standpoint, if competitors are developing a product that may compete with our products they then become taskedacquire financing secured by the property, tax and regulatory risks associated with the challengeinvestment, environmental and structural attributes of building the marketing for that product. We invested roughly $13 million in 2016 in marketingproperty, long-term viability of the asset, and advertising. Furthermore, our intellectual property position has also likely served as a deterrent to companies to compete against our brands.potential redevelopment opportunities of the real estate.

We currently face competitors offering discounted prices in some geographic markets wheredo extensive research on these investment attributes when preparing our investment memorandum. We compare the real estate acquisition we conduct business. It is possible that ourbusiness could be materially adversely affected inare making to other investments with similar risk profiles both inside and outside the future by discounting practicesdirect real estate investment sector to best assess the merits of competitors, including from both a price and volume perspective. In individual markets, our challenge is to leverage the national strengths of our company and enhance local efforts in order to grow market share.opportunity.

Existing Portfolio

In 2017, we acquired under the Contribution Agreement (i) three unoccupied land sites intended for development as gas stations in northern California, (ii) a majority (75%) membership interest in a limited liability company that owns an unoccupied land site located in Northern California, and (iii) a minority (17.9133%) interest in a limited liability company which owns property located in Los Lunas, New Mexico being developed as a single family residential development.

In 2018, our subsidiary, RETPROP I, LLC, completed the acquisition of a 7,738 square foot medical office building in Dayton, Ohio. The building’s former owner, and current tenant, a medical practice, has entered into a lease with us to continue its occupancy through April 2022, with the option to renew that lease for two additional five-year terms.

On January 14, 2019, we acquired, from Gadsden, a preferred interest in Gadsden Roseville, LLC, which is the sole owner of an investment parcel referred to as the Roseville parcel. The Roseville parcel is located on Roseville Road in Sacramento, California and is an approximately 9.6 acres parcel that is entitled for the development of approximately 65 small lot single family detached homes.

These assets constitute our existing asset portfolio.

Our Intellectual Property

We do not have any material intellectual property rights relating to our real estate business. However, we do employ certain proprietary processes related to the real estate business which are protected as trade secrets of our company. We have not, at this time, registered any patents, trademarks, or copyrights associated with our real estate business and do not expect to do so in the near future.

Our legacy global skin health business provided integrated disease management and aesthetic solutions to dermatologists, professional aestheticians and consumers. We protected our proprietary rights relating to our legacy business from unauthorized use by third parties to the extent that our proprietary rights were covered by valid and enforceable patents, trademarks, trade names or copyrights, or were effectively maintained as trade secrets.

In connection with the sales of our legacy medical device and consumer products lines, we transferred the intellectual property associated with those product lines, including trademarks and trade names, to their respective purchasers. Accordingly, after those sales, we had 20 trademarks, either registered or being registered, in markets around the world that we had either intended to maintain in support of our legacy capital equipment products or considered as useful in our developing real estate business. These include 9 trademarks issued in the U.S. and 11 trademarks issued in the rest of the world. After the discontinuation of our LHE business line, we have determined that those remaining trademarks would not be useful in our real estate business and have determined that these marks will not be renewed.

Research and Development

Our research and development expenditures relating to our legacy business operations were approximately $1.2$0.14 million in 2016 and $1.3 million in 2015.2017. As of January 23, 2017, the research and development personnel were transferred to ICTV in connection with the closing of the sale of the consumer product line assets.See ITEM 1. Business-Our Company, Acquisitions and Dispositionsabove for more information.

Our research and development activities were focused on:

Patents and Proprietary TechnologiesGovernment Regulation

We intend to protect our proprietary rights from unauthorized use by third parties to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets.

Our policy is to file patent applications and to protect certain technology, inventions and improvements that are commercially important to the development of our business. As patents expire and expose our inventions to public use, we seek to mitigate the impact of such expirations by seeking protection of improvements. In connection with the sales of our Neova product line and our Consumer Products division to Pharma Cosmetics and ICTV Brands, respectively, we transferred the intellectual property associated with those product lines, including patents, to their respective purchasers. As of December 31, 2016, we had 12 issued patents and 1 patent applications. In the U.S. alone, our business is protected by 3 patents.

We also relied on trade secrets, employee and third-party nondisclosure agreements and other protective measures to protect our intellectual property rights pertaining to our products and technology.

Our products and services are offered under trademarks and service marks, both registered and unregistered. We believe our trademarks encouraged customer loyalty and aided in the differentiation of our products from competitors’ products. . In connection with the sales of our Neova product line and our Consumer Products division to Pharma Cosmetics and ICTV Brands, respectively, we transferred the intellectual property associated with those product lines, including trademarks and trade names, to their respective purchasers. Accordingly, we had 20 trademarks, either registered or being registered, in markets around the world that we intend to maintain in support of our products. These include 9 trademarks issued in the U.S. and 11 trademarks issued in the rest of the world. We periodically review the trademarks in our portfolio for usefulness with our existing and anticipated product lines; as a result, certain trademarks which were no longer in use in our business were not renewed.

Government Regulation

Regulations Relating to Products and ManufacturingReal Estate Business

Our products and research and development activities are regulated by numerous governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies. Any medical device or cosmetic we manufactureFederal, State and/or distribute will be subject to pervasive and continuing regulation by the FDA. The U.S. Food, Drug and Cosmetics Act, or FD&C Act, and other federal and state laws and regulations govern the pre-clinical and clinical testing, design, manufacture, use, labeling and promotion of medical devices, including our, LED devices, and other products currently under development by us and govern the manufacture and labeling of the cosmetic products. Product development and approval for medical devices within this regulatory framework takes a number of years and involves the expenditure of substantial resources.Local Regulatory Compliance

In the U.S., medical devices are classified into three different classes, Class I, II and III, on the basis of controls deemed necessary to provide a reasonable assurance of the safety and effectiveness of the device. Class I devices are subject to general controls, such as facility registration, medical device listing, labeling requirements, premarket notification (unless the medical device has been specifically exempted from this requirement), adherence to the FDA’s Quality System Regulation, and requirements concerning the submission of device-related adverse event reports to the FDA. Class II devices are subject to general and special controls, such as performance standards, pre-market notification (510(k) clearance), post-market surveillance, and FDA Quality System Regulations. Generally, Class III devices are those that must receive premarket approval by the FDA to provide a reasonable assurance of their safety and effectiveness, such as life-sustaining, life-supporting and implantable devices, or new devices that have been found not to be substantially equivalent to existing legally marketed devices.

With limited exceptions, before a new medical device can be distributed in the U.S., marketing authorization typically must be obtained from the FDA through a premarket notification under Section 510(k) of the FDA Act, or through a premarket approval application under Section 515 of the FDA Act. The FDA will typically grant a 510(k) clearance if it can be established that the device is substantially equivalent to a predicate device that is a legally marketed Class I or II device (or to pre-amendments Class III devices for which the FDA has yet to call for premarket approvals). We have received FDA 510(k) clearance to market our LED products for a variety of indications for use. The FDA granted these clearances under Section 510(k) on the basis of substantial equivalence to other devices that had received prior clearances.

For any devices that are cleared through the 510(k) process, modifications or enhancements that could significantly affect the safety or effectiveness of the device, or that constitute a major change in the intended use of the device, will require a new 510(k) submission. To date, we have not been required to secure premarket approval for our devices. A premarket approval application may be required for a Class II device if it is not substantially equivalent to an existing legally marketed Class I or II device (or a pre-amendments Class III device for which the FDA has yet to call for premarket approval) or if the device is a Class III premarket approval device by regulation. A premarket approval application must be supported by valid scientific evidence to demonstrate a reasonable assurance of safety and effectiveness of the device, typically including the results of clinical trials, bench tests and possibly animal studies. In addition, the submission must include, among other things, the proposed labeling. The premarket approval process can be expensive, uncertain and lengthy and a number of devices for which FDA approval has been sought by other companies have never been approved for marketing.

We are subject to routine inspection bya variety of Federal, state, and/or local statutes, ordinances, rules, and regulations covering the FDApurchase, development, construction and operation of real estate assets. These regulatory requirements include zoning and land use, building design, construction, worksite safety, traffic, and other matters, such as noted above, mustlocal rules that may impose restrictive zoning and developmental requirements. We are subject to various licensing, registration, and filing requirements in connection with the development, construction, advertisement, and sale of certain real estate assets. Additionally, state and/or local governmental agencies may impose moratoriums on new construction in an area due to the need for infrastructure development, including road development and utility remediation. Finally, state and/or local governments retain certain rights with respect to eminent domain which could enable them to restrict or alter the use of our property. These requirements may lead to increases in our overall costs. The need to comply with a number of regulatorythese requirements applicablemay significantly delay development and/or construction with regard to firms that manufacture medical devices and other FDA-regulated products for distribution within the U.S., including requirements relatedproperties, or lead us to device labeling (including prohibitions against promoting products for unapproved or off-label uses), facility registration, medical device listing, labeling requirements, adherence to the FDA’s Quality System Regulation, good manufacturing processes and requirements for the submission of reportsalter our plans regarding certain device-related adverse eventsreal estate assets. Some requirements, on a property by property evaluation, may lead to the FDA.a determination that development of a particular property would not be economically feasible, even if any or all necessary governmental approvals were obtained.

Environmental Regulatory Compliance

We have received approval from the European Union to affix the CE Mark to our LHE products. This certification isUnder various Federal, state and/or local laws, ordinances and regulations, a mandatory conformity mark for products placed on the market in the European Economic Area, which is evidence that they meet all European Community,current or EC, quality assurance standards and compliance with applicable European medical device directives for the productionprevious owner or operator of medical devices. This will enable us to market our approved products in all of the member countries that accept the CE Mark. We also willa property may be required to complyinvestigate and/or clean-up hazardous or toxic substances released at that property. That owner or operator also may be held liable to third parties for bodily injury or property damage (investigation and/or clean-up costs) incurred by those parties in connection with additional individual national requirementsthe contamination at that are insite. These laws often impose liability without regard to whether the owner or operator knew of or otherwise caused the release of the hazardous or toxic substances. In addition, to those requiredpersons who arrange for the disposal or treatment of hazardous substances or other regulated materials also may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by these nations. Our products have also met the requirements for marketing in various other countries.such persons.

Failure to comply with applicable regulatory requirementsThe costs of remediation or removal of hazardous or toxic substances can result in fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspensions of production, refusals by the U.S and foreign governments to permit product sales and criminal prosecution.

As to our cosmetic products, the FD&C Actbe substantial, and the regulations promulgated there and under other federal and state statutes governpresence of contamination, or the testing, manufacture, safety, labeling, storage, record-keeping, advertising and promotion of cosmetic products. Our cosmetic products and product candidatesfailure to remediate contamination discovered, at a property we own or operate may be regulated by any of the various FDA Centers. Routinely, however, cosmetics are regulated by the FDA’s Center for Food Safety and Applied Nutrition. In other countries, cosmetic products may also be regulated by similar health and regulatory authorities. The skin care business also has two devices (e.g. wound care dressings) subject to 510(k) clearance, four products (e.g. sunscreen products) that contain drugs approved for use in over-the-counter products, and one prescription drug. Currently, the skincare products that are classified as drugs are not required to obtain pre-marketing regulatory approval. The process of obtaining and maintaining regulatory approvals in the U.S. and abroad for the manufacturing or marketing of our existing and potential skincare products is potentially costly and time-consuming and is subject to unanticipated delays. Regulatory requirements ultimately imposed could also adversely affect our ability to clinically test, manufacturedevelop, construct on, sell, lease, or market products.

Failure to obtain regulatory approvals where appropriate for our cosmetic, device or drug product candidates or to attain or maintain compliance with quality system regulations or other manufacturing requirements, couldborrow upon that property. Current and former tenants at a property we own may have, a material adverse effect on our business, financial condition and results of operations.

We are or may become subject to various other federal, state, local and foreign laws, regulations and policies relating to, among other things, safe working conditions, good laboratory practices andhave involved, the use and disposal of hazardous materials or potentiallygenerated hazardous substances usedwastes, and those situations could result in connection with research and development.

Fraud and Abuse Laws

Because ofour incurring liabilities to remediate any resulting contamination if the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws whose purposeresponsible party is unable or unwilling to eliminate fraud and abuse in federal health care programs. Our business is subject to compliance with these laws.

Anti-Kickback Lawsdo so.

In addition, our properties may be exposed to a risk of contamination originating from other sources. While a property owner generally is not responsible for remediating contamination that has migrated on-site from an off-site source, the U.S., there are federal and state anti-kickback laws that generally prohibit the payment or receipt of kickbacks, bribes or other remuneration in exchange for the referral of patients or other health-related business. The U.S. federal healthcare programs’ Anti-Kickback Statute makes it unlawful for individuals or entities knowingly and willfullycontaminant’s presence could have adverse effects on our ability to solicit, offer, receive or pay any kickback, bribe or other remuneration, directly or indirectly, in exchange for or to induce the purchase,develop, construct on, operate, sell, lease, or order, or arranging for or recommending purchasing, leasing, or ordering, any good, facility, service, or item for which paymentborrow upon that property. Certain environmental laws may be madecreate a lien on a contaminated site in whole or in part under a federal healthcare program such as Medicare or Medicaid. The Anti-Kickback Statute covers “any remuneration,” which has been broadly interpreted to include anything of value, including for example gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payments of cash and waivers of payments. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the arrangement can be found to violate the statute. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. In addition, several courts have permitted kickback cases brought under the Federal False Claims Act to proceed, as discussed in more detail below.

Because the Anti-Kickback Statute is broadly written and encompasses many harmless or efficient arrangements, Congress authorized the Office of Inspector Generalfavor of the U.S. Department of Healthgovernment for damages and Human Services, or OIG, to issue a series of regulations, known as “safe harbors.” For example, there are regulatory safe harbors for payments to bona fide employees, properly reported discounts and rebates, and for certain investment interests. Although an arrangement that fits into one or more of these exceptions or safe harbors is immune from prosecution, arrangements that do not fit squarely within an exception or safe harbor do not necessarily violate the statute. The failure of a transaction or arrangement to fit precisely within one or more of the exceptions or safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that arguably implicate the Anti-Kickback Statute but do not fully satisfy all the elements of an exception or safe harbor may be subject to increased scrutiny by government enforcement authorities such as the OIG.

Many states have laws that implicate anti-kickback restrictions similar to the Anti-Kickback Statute. Some of these state prohibitions apply, regardless of whether federal health care program business is involved, to arrangements such as for self-pay or private-pay patients.

Government officials have focused their enforcement efforts on marketing of healthcare services and products, among other activities, and recently have brought cases against companies, and certain sales, marketing and executive personnel, for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business.

Federal Civil False Claims Act and State False Claims Laws

The federal civil False Claims Act imposes liability on any person or entity who, among other things, knowingly and willfully presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program, including Medicare and Medicaid. The “qui tam,” or “whistleblower” provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought against healthcare providers by private individuals has increased dramatically. Medical device companies, like us, can be held liable under false claims laws, even if they do not submit claims tocosts the government when they are deemedmay incur to have caused submission of false claims by, among other things, providing incorrect coding or billing advice about their products to customersremediate that file claims, or by engaging in kickback arrangements with customers that file claims.

The False Claims Act also has been used to assert liabilitycontamination. Moreover, if contamination is discovered on the basis of misrepresentations with respect to the services rendered and in connection with alleged off-label promotion of products. Our future activities relating toa property, environmental laws may impose restrictions on the manner in which we sell our products and document our prices, such as the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products, and the sale and marketing of our products,that property may be subject to scrutiny under these laws.

When an entity is determined to have violated the False Claims Act, itused, or how businesses may be requiredoperated on that property, thus reducing our ability to pay upmaximize our investment in that property. Our properties have been subjected to three timesvarying degrees of environmental assessment at various times; however, the actual damages sustained byidentification of new areas of contamination, a change in the government, plus civil penaltiesextent or known scope of five to eleven thousand dollars for each separate false claim. There are many potential bases for liability under the False Claims Act. A number of states have enacted false claim laws analogous to the federal civil False Claims Act and many of these state laws apply where a claim is submitted to any statecontamination, or private third-party payor. In this environment, our engagement of physician consultantschanges in product development and product training and educationenvironmental regulatory standards and/or cleanup requirements could subject us to similar scrutiny. We are unable to predict whether we would be subject to actions under the False Claims Act or a similar state law, or the impact of such actions. However, the costs of defending such claims, as well as any sanctions imposed, could significantly affect our financial performance.

HIPAA Fraud and Other Regulations

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created a class of federal crimes known as the “federal health care offenses,” including healthcare fraud and false statements relating to healthcare matters. The HIPAA health care fraud statute prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme or artifice to defraud any healthcare benefit program, or to obtain by means of false of fraudulent pretenses, any money under the control of any health care benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment and/or exclusion from government-sponsored programs. The HIPAA false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines and/or imprisonment. Entities that are found to have aided or abetted in a violation of the HIPAA federal health care offenses are deemed by statute to have committed the offense and are punishable as a principal.

We are also subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws applicable in non-U.S. jurisdictions that generally prohibit companies and their intermediaries from making improper payments to non-U.S. government officials for the purpose of obtaining or retaining business. Because of the predominance of government-sponsored healthcare systems around the world, most of our customer relationships outside of the U.S. will be with governmental entities and therefore subject to such anti-bribery laws.

HIPAA and Other Privacy Regulations

The regulations that implement HIPAA also establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the security and privacy of individually identifiable health information maintained or transmitted by healthcare providers, health plans and healthcare clearinghouses, which are referred to as “covered entities.” Several regulations have been promulgated under HIPAA’s regulations including: the Standards for Privacy of Individually Identifiable Health Information, or the Privacy Rule, which restricts the use and disclosure of certain individually identifiable health information; the Standards for Electronic Transactions, or the Transactions Rule, which establishes standards for common healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures; and the Security Standards for the Protection of Electronic Protected Health Information, or the Security Rule, which requires covered entities to implement and maintain certain security measures to safeguard certain electronic health information. Although we do not believe we are a covered entity and therefore are not currently directly subject to these standards, we expect that our customers generally will be covered entities and may ask us to contractually comply with certain aspects of these standards by entering into requisite business associate agreements. While the government intended this legislation to reduce administrative expenses and burdens for the healthcare industry, our compliance with certain provisions of these standards entails significant costs forto us.

The Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, which was enacted in February 2009, strengthens and expands the HIPAA Privacy and Security Rules and the restrictions on use and disclosure of patient identifiable health information. HITECH also fundamentally changed a business associate’s obligations by imposing a number of Privacy Rule requirements and a majority of Security Rule provisions directly on business associates that were previously only directly applicable to covered entities. HITECH includes, but is not limited to, prohibitions on exchanging patient identifiable health information for remuneration, restrictions on marketing to individuals, and obligations to agree to provide individuals an accounting of virtually all disclosures of their health information. Moreover, HITECH requires covered entities to report any unauthorized use or disclosure of patient identifiable health information, known as a breach, to the affected individuals, the United States Department of Health and Human Services, or HHS, and, depending on the size of any such breach, the media for the affected market. Business associates are similarly required to notify covered entities of a breach. Most of the HITECH provisions became effective in February 2010. HHS has already issued regulations governing breach notification which were effective in September 2009.

HITECH has increased civil penalty amounts for violations of HIPAA by either covered entities or business associates up to an annual maximum of $1.5 million for uncorrected violations based on willful neglect. Imposition of these penalties is more likely now because HITECH significantly strengthens enforcement. It requires HHS to conduct periodic audits to confirm compliance beginning in February 2010 and to investigate any violation that involves willful neglect which carries mandatory penalties beginning in February 2011. Additionally, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations of HIPAA Privacy and Security Rules that threaten the privacy of state residents.

In addition to federal regulations issued under HIPAA, some states have enacted privacy and security statutes or regulations that, in some cases, are more stringent than those issued under HIPAA. In those cases, it may be necessary to modify our planned operations and procedures to comply with the more stringent state laws. If we fail to comply with applicable state laws and regulations, we could be subject to additional sanctions.

Federal and state consumer protection laws are being applied increasingly by the United States Federal Trade Commission, or FTC, and state attorneys general to regulate the collection, use, storage and disclosure of personal or patient information, through websites or otherwise, and to regulate the presentation of web site content. Courts may also adopt the standards for fair information practices promulgated by the FTC, which concern consumer notice, choice, security and access. Numerous other countries have or are developing laws governing the collection, use, disclosure and transmission of personal or patient information.

HIPAA as well as other federal and state laws apply to our receipt of patient identifiable health information in connection with research and clinical trials. We collaborate with other individuals and entities in conducting research and all involved parties must comply with applicable laws. Therefore, the compliance of the physicians, hospitals or other providers or entities with whom we collaborate also impacts our business.

Employees

As of March 30, 2017,28, 2019, we had 62 full-time employees devoted to the ongoing business of the Company,our company, which consisted of two1 executive officersofficer and 4 finance,1 legal and administration staff. We do however, still technically employ personnel on behalf of ICTV in connection with the sale of the consumer business in January 2017 in connection with assisting the transition of that business to ICTV and will continue to employ these people at the direction of ICTV until such time that ICTV has its systems in place to seamlessly affect such transition. ICTV contractually reimburses the Company for the full cost of providing such transition services.

Our employees are not represented by a labor union nor covered by a collective bargaining agreement. We believe that we have good relations with our employees.

Financial Information about Geographic Areas

See Note 15 to the consolidated financial statements included elsewhere in this filing.

Available Information

PhotoMedex’sOur website is www.photomedex.com.www.fcglobalrealty.com. Our annual reports on Form 10-K, quarterly reports on 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our website at www.photomedex.comwww.fcglobalrealty.com as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC. The information on the Company’sour website is not a part of this Annual Report on Form 10-K.

In addition to the other information contained in this Annual Reportreport and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, cash flows, or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business, financial condition, cash flows, or results of operations. The following discussion of risk factors contains forward-looking statements as discussed on page 1.above. Our business routinely encounters and addresses risks, some of which may cause our future results to be different – sometimes materially different – than we presently anticipate.

Risks Relating to Our Business Generally

Risk factors relating

Our financial condition as of December 31, 2018 raises substantial doubt about our ability to acquisitioncontinue as a going-concern.

As of First Capital Real Estate Development BusinessDecember 31, 2018, we had an accumulated deficit of approximately $139.7 million and had incurred an operating loss for the year ended December 31, 2018 of approximately $5.6 million. Subsequent to the sale of our last significant business unit, the consumer products division, we have dedicated most of our financial resources to general and administrative expenses associated with its ongoing business of real estate development and asset management.

Cash and cash equivalents as of December 31, 2018 were approximately $1.8 million. We have historically financed our activities with cash from operations, the private placement of equity and debt securities, borrowings under lines of credit and, in the most recent periods, with the sale of certain assets and business units. We will be required to obtain additional liquidity resources in order to support our ongoing operations.

At this time, there is no guarantee that we will be able to obtain an adequate level of financial resources required for the short and long-term support of our operations or that we will be able to obtain additional financing as needed, or meet the conditions of such financing, or that the costs of such financing may not be prohibitive.

These conditions raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of liabilities that may result from the outcome of this uncertainty.

Failure to complete the acquisitionGadsden Transaction could negatively impact theour stock price and the future business and financial results of the Company.results.

As noted in Item 1.Liquidity and Going Concern, the Company has issued a going concern notice to its shareholders.  The Company anticipates that the acquisition of this new line of business will bring renewed liquidity and growth to the Company; however, as the latter stages of this acquisition require approval by the Company’s shareholders at a to-be-called special meeting, there is no assurance that the proposals relating to the acquisition to be presented at the special meeting will be approved, and there is no assurance that the Company or First Capital Real Estate Operating Partnership, L.P., and First Capital Real Estate Trust Incorporated (together, “First Capital”) will receive any necessary regulatory approvals or satisfy the other conditions to the completion of the acquisition. If the acquisitionGadsden Transaction is not completed for any reason, the Company willour ongoing business may be subject to several risks, including the possible payment of a termination feematerially and related costs, the loss of other business ventures as a result of the restriction on the Company’s investigation of other avenues of revenue under the Contribution Agreement,adversely affected and, having had the focus of management of the Company directed toward the acquisition and integration planning and diverted from the Company’s other business and other opportunities that could have been beneficial to the Company.  In addition, if the acquisition is not completed, the Company will not realizewithout realizing any of the expected benefits of having completed the acquisition and will continueGadsden Transaction, we could be subject to facea number of risks, including the non-acquisition related risks outlined in this Form 10-K, Annual Report for the calendar year ending December 31, 2016. following:

If the acquisition is not completed, the price of the Company’s common and preferred stock may decline (i) to the extent that the current market price of that stock reflects a market assumption that the acquisition will be completed and that the related benefits and synergies will be realized, or (ii) as a result of the market’s perceptions that the acquisition was not consummated due to an adverse change in the Company’s or First Capital’s business or financial positions. Further, if the acquisition is not completed, the price of the Company’s stock could decline as a result of employees, customers, suppliers, and others remaining uncertain about the Company’s future prospects in the absence of the acquisition.

In addition, if the acquisition contemplated with First Capital is not completed and the Company’s board of directors determines to seek another merger or business combination, thereThere can be no assurance that such a transaction, if consummated, would create Company stockholder value comparable to the value that might have been created had the acquisition been completed. risks described above will not materialize. If any of those risks materialize, they may materially and adversely affect our business, financial condition, financial results and/or stock price.

Litigation against the Company or First Capital could result in an injunction preventingThe completion of the acquisition,Gadsden Transaction is subject to a number of conditions, and if these conditions are not satisfied or waived, the paymentGadsden Transaction will not be completed.

The obligations of damages inour company and Gadsden to complete the eventGadsden Transaction are subject to satisfaction or waiver of a number of conditions, including, among other conditions:(i) approval by the acquisition is completed. Such outcomes could adversely affect the Company’s business, financial condition or resultsvote of operations.

OneGadsden’s stockholders holding two-thirds of the conditionsoutstanding shares of Gadsden’s common stock, Gadsden’s 7% Series A Cumulative Convertible Perpetual Preferred Stock entitled to the closingvote thereon (on an as-converted basis) and Gadsden’s 10% Series C Cumulative Convertible Perpetual Preferred Stock entitled to vote thereon (on an as-converted basis); (ii) absence of the acquisition is that no order issuedinjunction by a governmental authorityany court or other tribunal of competent jurisdiction and absence of law that prevents, enjoins, prohibits or law or other legal restraint or prohibition making the acquisitionmakes illegal or permanently restraining, enjoining, or otherwise prohibiting or preventing the consummation of the acquisition orGadsden Transaction; (iii) receipt of all consents, approvals and authorizations legally required to be obtained to consummate the Gadsden Transaction; and (iv) receipt of customary legal opinions from counsel to us and Gadsden. The obligation of each party to consummate the Gadsden Transaction is also conditioned upon the other transactions contemplated byparty’s representations and warranties being true and correct (subject to certain materiality exceptions), the Contributionother party having performed in all material respects its obligations under the Gadsden Purchase Agreement, and the absence of a material adverse effect on each party. In addition, we are required have, on a consolidated basis, not less than $800,000 of unrestricted cash and we must receive a letter of resignation from each member of our Board of Directors, other than the directors who are to be in effect. Consequently, if any plaintiffs in a litigation againstmembers of the Company or First Capital, or any of their respective directors, secures injunctive or other relief prohibiting, delaying, or otherwise adversely affectingBoard after the Company’s abilityGadsden Transaction.

There can be no assurance that the conditions to complete the acquisition, such injunctive or other relief may prevent the acquisition from becoming effective within the expected time frame or at all. If completion of the acquisition is prevented or delayed, substantial costs to the Company could result. In addition, the Company could incur significant costs in connection with lawsuits, including costs associated with the indemnification of the Company’s directors and officers.

If all stages of the acquisition are completed, the Company may not be able to successfully integrate the acquired real estate business or realize the anticipated benefits of the acquisition.

Realization of the anticipated benefits in the acquisition will depend on the Company’s ability to successfully integrate the operations of the real estate development business into the Company. A successful integration will require that the Company devote significant management attention and resources to integrating its business practices, operations, and support functions into a public company structure. The challenges the Company may encounter include preserving customer, supplier, and other important relationships and resolving potential conflicts that may arise as a result of the acquisition, addressing differences in business cultures, preserving employee morale, and retaining key employees while maintaining focus on meeting the operational and financial goals of the Company and the real estate development business, and adequately addressing other business integration issues.  The process of integrating a real estate development business, the diversion of management’s attention from other business efforts, and any subsequent delays in the integration process, could adversely affect the Company’s business and financial performance and the market price of the Company’s stock. 

Following the acquisition, the Company may be unable to retain key employees.

The success of the Company after the acquisition will depend in part upon its ability to retain key employees who may depart either before or after the acquisition because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the Company following the acquisition. Accordingly, no assurance can be given that the CompanyGadsden Transaction will be able to retain key employees to the same extent as in the past.satisfied or waived or that it will be completed. 

The ContributionGadsden Purchase Agreement limits the Company’sour ability to pursue an alternative acquisition proposal and requires that the Companywe pay a termination fee if it does.we do.

The ContributionGadsden Purchase Agreement prohibits the Companyus from soliciting, initiating, encouraging, or facilitating certain acquisition proposals with any third party, subject to exceptions set forth in the ContributionGadsden Purchase Agreement. The ContributionGadsden Purchase Agreement also provides for the payment by either party of a termination fee of the cost incurred by the non-terminating party in negotiating the transaction, if the other party terminates the ContributionGadsden Purchase Agreement. These provisions limit the Company’sour ability to pursue offers from third parties that could result in greater value to the Company’sour stockholders. The obligation to make the termination fee payment also may discourage a third party from pursuing an acquisition proposal with our company.

If the Company.Gadsden Transaction is completed, we may not be able to successfully integrate the acquired real estate business or realize the anticipated benefits of Gadsden Transaction.

Realization of the anticipated benefits in the Gadsden Transaction will depend on our ability to successfully integrate the real estate assets into our company. A successful integration will require that we devote significant management attention and resources to integrating business practices, operations, and support functions. The shares of Company commonchallenges we may encounter include preserving customer, supplier, and preferred stock to be received by First Capital stockholdersother important relationships and resolving potential conflicts that may arise as a result of the acquisition may have different rightsGadsden Transaction, addressing differences in business cultures, preserving employee morale, and retaining key employees while maintaining focus on meeting the operational and financial goals of our company, and adequately addressing other business integration issues. The process of integration, the diversion of management’s attention from other shares of the Company’s commonbusiness efforts, and preferred stock.

Following completion of each stage of the acquisition, the First Capital stockholders will receive shares of common and/or preferred stockany subsequent delays in the Company.  Those shares may be subject to different rights than those held by earlier shareholders of the Company. This disparityintegration process, could adversely affect our business and financial performance and the market price of our stock.

We are dependent upon dividends from our subsidiaries to meet our financial obligations.

We are a holding company and our principal assets are the equity interests we hold in our subsidiaries, which own, either directly or indirectly through their subsidiaries, our real estate assets. As a result, we depend on dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations. Our existing Company shareholders. subsidiaries are legally distinct from us and may be significantly restricted from paying dividends or otherwise making funds available to us pursuant to the agreements governing their financing arrangements. In addition, their ability to make payments to us will also depend on their earnings, business, tax considerations, and legal restrictions, including applicable state corporate laws. We cannot assure you that the agreements governing our current and future indebtedness of our subsidiaries, applicable laws, or state regulation will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund payments to meet our financial obligations.

We have outstanding litigation which we may not be able to settle, or which we may not be able to settle on terms favorable to us.

We are involved in certain litigation relating to our former businesses, including one product liability complaint brought by a consumer regarding the no!no! product. We intend to vigorously defend claims brought against us, and to prosecute such suits to recoup sums owed to us. However, we may seek to settle such matters in order to avoid excessive legal fees and costs and the lengthy time such litigation may require in order to reach a resolution. However, there is no guarantee that we may be able to reach a settlement or resolution of such litigation, or that such a settlement or resolution will be reached in a manner that is advantageous to us, and in such cases we will need to proceed with litigation. Regardless of its outcome, litigation may result in substantial costs and expenses, and significantly divert the attention of management. There can be no assurance that we will be able to prevail in, or achieve a favorable settlement of, pending matters. In addition to the pending matters, future litigation, government proceedings, labor disputes, or environmental matters could lead to increased costs or interruption of our normal business operations, which could involve a costly and lengthy draw upon our resources and could result in a resolution to the litigation which may be detrimental to us.

The Company’sWe are the subject of certain tax audits which may not be resolved without impacting our operations.

We have in the past, and are currently, the subject of certain audits by state agencies and international authorities for various tax matters including, but not limited to, sales and use and corporate income, taxes, and unclaimed property reporting. While past audits have been resolved without significant impact upon us or our operations, there is no guarantee that future audits will be resolved in a manner that is satisfactory to us or that has no material impact upon our operations. Such results could include the payment of assessments which could impact our remaining resources and affect our ability to continue our operations in the existing manner.

Our ability to use itsour net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited as a result of “ownership changes” of the Companyour company caused by the transaction.Contribution Transaction. In addition, the amount of such NOL carryforwards could be subject to adjustment in the event of an IRS examination.examination by the Internal Revenue Service.

If a corporation undergoes an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, as a result of the acquisition, the amount of itsour pre-change net operating losses, or “NOLs”,NOLs, that may be utilized to offset future taxable income will be subject to an annual limitation. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the applicable testing period (generally three years). The annual limitation generally is determined by multiplying the value of the corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may under certain circumstances be increased by recognized built-in gains or reduced by recognized built-in losses in the assets held by the corporation at the time of the ownership change. Similar rules and limitations may apply for state income tax purposes.

The Company’sOur NOLs, which for federal income tax purposes expire over the next 20 years, may be subject to an annual limitation under Section 382 of the Code as a result of the completion of one or more stages of the acquisition.Contribution Transaction. Consequently, the Company’sour ability to utilize itsour pre-change NOLs may be subject to an additional layer of limitations imposed by Section 382 of the Code. The amount of the NOL carryforwards is subject to review and audit by the Internal Revenue Service (the “IRS”), and there can be no assurance that the benefit of such NOL carryforwards will be fully realized.

The acquisitionWe are analyzing the tax implications of the ownership of our inactive subsidiaries in Israel and Europe, including the tax implications of dissolving or otherwise disposing of such subsidiaries. As a result of the application of Israeli and/or European tax laws, the dissolution or other disposition of these subsidiaries may result in a significant tax in such foreign jurisdictions and/or a significant tax in the United States which may not qualify for specialbe covered by our NOLs or result in the loss of our NOLs.

Certain of our subsidiaries, both in the United States and in foreign jurisdictions, are participants in intercompany loans which originated at one of the foreign jurisdiction subsidiaries. The foreign subsidiaries could incur a tax treatment, for example, as a tax-free reorganization for U.S. federal income tax purposes, resulting in certain shareholders’ recognition of taxable gain or loss in respect of their stock.

There is currently no opinion as to whether the acquisition will qualify for special tax treatment, as, for example, a tax-free reorganization for U.S. federal income tax purposes. Moreover, there is no requirement that the Company take all actions to ensure that the acquisition so qualifies and, therefore, no assurance can be given that the acquisition will qualify for any certain tax treatment, including as a tax-free reorganization, or that the Internal Revenue Service or the courts will not assert that the acquisition fails to qualify as such. If the acquisition does not qualify as a tax-free reorganization, some holders of stock may be required to recognize gain or loss or incur other taxable consequencesliability as a result of this transaction. holding those open loans. The subsidiary companies are not in a position to repay those loans in full. We and our subsidiaries’ boards are examining how best to proceed, but to either repay a loan, or to default and have the loan forgiven, could result in income being imputed to that subsidiary in the United States. While we and various subsidiaries hold large amounts of NOLs on a Federal level, the use of certain of those losses is restricted under Section 382 of the Code as a result of past changes of control of our company, and the transactions which occurred during 2017 may impose further restrictions on the use of these NOLs should those transactions have resulted in a change of control during 2017. Accordingly, we may be subject to significant and unexpected tax liability in Israel, Europe and/or the United States and such liability would have a material and adverse effect on our financial condition and prospects.

Factors involvingIf we fail to manage and protect our network security and underlying data effectively, our businesses could be exposed to a cyber-attack or other disruption which could harm our operating results.

Like other corporations, we rely upon a variety of information technology systems to transmit, process and store information in an electronic format for use in daily operations. In particular, as a result of our prior business lines, we possess certain personal information about customers of those lines, including credit card, insurance and banking information, as well as information regarding our current vendors. The size, inter-relationship and complexity of these systems, and the real estate investmentpossession of such information, makes us vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, theft or loss of data privacy, or other significant interference with the use and possession of such information, that could harm our business. Unauthorized disclosure or manipulation of such data, whether through breach of network security or other interception of this information, could expose us to costly litigation, damage its reputation and result in greater expenses.

Our information systems require a constant and ongoing dedication of significant resources to maintain, protect, and enhance our existing systems as well as keep pace with changes in information processing technology and regulatory standards. In particular, maintaining our network security is of critical importance because the systems may store proprietary and confidential customer and vendor data such as names, addresses, other personal information, bank account and credit card numbers. We use commercially available encryption technology to transmit personal information when taking orders. However, third parties may be able to circumvent these security and business measures by developing and deploying viruses, worms and other malicious software programs that are designed to attack or attempt to infiltrate its systems and networks. Employee error, malfeasance or other mistakes in the storage, use or transmission of personal information could result in a breach of customer or employee privacy. We employ contractors who may have access to these systems and thus to the personal information of customers, vendors and employees. It is possible such individuals could circumvent our data security controls, which could result in a breach of privacy. In addition, third parties may attempt to hack into our systems to obtain data relating to our business plans, products or proprietary technology. Any failure to maintain or protect these information technology systems and data integrity, including from cyber-attacks, intrusions or other breaches, could result in the unauthorized access to data, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations.

We are subject to the provisions of the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.

The following risk factorsForeign Corrupt Practices Act, as well as similar anti-corruption laws in foreign jurisdictions around the world, generally prohibit companies, their subsidiaries, affiliates, contractors and/or intermediaries, from offering and/or making improper payments, or providing anything of value, to non-U.S. government officials for the purpose of obtaining or retaining business or securing an unfair advantage in business matters. Certain parts of the world have experienced, or are continuing to experience, some measure of governmental corruption; while in other parts of the world, strict compliance with anti-bribery laws may conflict with local business customs and practices. Our business is subject to particular scrutiny in such matters, due to the requirements of numerous governmental approvals for real estate development. We have established formal policies and procedures that prohibit, and monitor for, conduct which may violate these laws, but we cannot guarantee that employees, affiliates, representatives and/or agents of our company will not engage in conduct that violates these laws and for which we may be held responsible.

We have identified material weaknesses in our internal control over financial reporting. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential stockholders could lose confidence in our financial statements, which would harm the trading price of our common stock.

Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Exchange Act to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial reporting. Non-accelerated filers and smaller reporting companies, like us, are not required to include an attestation report of their auditors in annual reports.

A report of our management is included under “Item 9A. Controls and Procedures.” We are a smaller reporting company and, consequently, are not required to include an attestation report of our auditor in our annual report. However, if and when we become subject to the auditor attestation requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors. 

During our re-evaluation of the effectiveness of internal control over financial reporting as of December 31, 2018 management identified a material weakness. This material weakness was associated with a proposed transaction involvinglack of sufficient internal controls (including IT and general controls) that encompass our company as a whole with respect to entity and transactions level controls in order to ensure complete documentation of complex and non-routine transactions and adequate financial reporting. We are undertaking remedial measures, which will take time to implement and test, to address this material weakness. There can be no assurance that such measures will be sufficient to remedy the material weakness identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our stock price.

Risks Relating to Our Existing Real Estate Business

Litigation against us, FCOP or FCREIT regarding the acquisition from FCOP could result in the payment of certain real estate investments from First Capital Real Estate Operating Partnership, L.P. and First Capital Trust Inc. (together First Capital).  Should the transaction be completed, as more fully described in Note18 Subsequent Events, then these risks will become applicable to the Company and itsdamages which could adversely affect our business, and financial condition or results of operations.

If any plaintiffs in a litigation against us, FCOP or FCREIT, or any of their respective directors, officers, parent or associated companies, secures relief adversely affecting our acquisition under the Contribution Agreement, such relief may result in our company becoming liable for damages related to one or more of the properties acquired from FCOP. In addition, we could incur significant costs in connection with lawsuits, including costs associated with the indemnification of our directors and officers. While one suit, JFURTI, LLC, et al v. Suneet Singal, et al, has been dismissed, there is no guarantee that the plaintiffs in that suit, or another party or parties, will not bring an action against us with regard to this transaction.

The Company is enteringWe have entered into a new business line and, therefore, there is only a limited history upon which investors can evaluate the Company’sour performance and itsour future business prospects.

The Company has entered into aIn May 2017, we completed the Contribution AgreementTransaction with First Capital on March 31, 2017,FCOP and FCREIT, pursuant to which it is planned that First Capital will contributeFCOP has contributed real estate assets to the Company on a staggered schedule, beginning with the contribution of $10 million in assets at the close of the initial transaction, currently scheduled to occur on or before May 17, 2017.  Thisour company. The Contribution Agreement representsrepresented a new business line for the Company,our company, which hashad no experience in the real estate sector. The Company will be relyingWe rely on the experience of the principals of First Capitalour management team for the operation and development of this business line. As a result, the Company’sour business will beis subject to the substantial risks which are found in the early stages of a new business venture operating in the competitive real estate industry. The Company’sOur future growth and development prospects must be evaluated in light of the risks, expenses and difficulties encountered by all companies in such situations, and in particular those companies which operate a business, such as real estate investment, in competitive environments that can be greatly affected by changes in economic conditions.

The Company will beWe are subject to demand fluctuations in the real estate industry. Any reduction in demand could adversely affect the Company’sour business, results of operations, and financial condition.

Upon consummation of the transactions contemplated by the Contribution Agreement, the Company will be entering the real estate industry, where demandDemand for properties similar to those owned by us and expected to be owned by the Companyus is subject to fluctuations that are often due to factors outside the Company’sour control. Neither the Company, nor the personnel of First Capital joining the Company,We are not able to predict the course of the real estate markets or whether the current favorable trends in those markets can, or will, continue. In the event of an economic downturn, the Company’sour results of operations may be adversely affected, and the Companywe may incur significant inventory impairments and other write-offs, a major decline in itsour gross margins from past levels, and substantial losses from operations of this business.

Adverse changes in economic conditions in markets where the Company’sour real estate investments are or may be made and where prospective purchasers and utilizers of these properties live could reduce the demand for and utilization of these properties and, therefore, adversely affect the Company’sour operations and financial condition.

TheOur real estate investment business is conducted in which the Company has become involved as a result of its signing of the Contribution Agreement willUnited States and may also be conductconducted in various global locales, including the United States, Mexico, the Caribbean and South America.locales. Adverse changes in economic conditions in these markets, and in the markets where prospective purchasers and utilizers of the Company’sour to-be-acquired properties live, could negatively impact those properties and their profitability. Unfavorable changes in job growth, employment levels, consumer income and spending patterns, a decline in consumer confidence, increases in interest rates, and an oversupply of similar properties, could reduce the demand, and depress the prices we may ask, for these properties, resulting in lower sales and income from these properties and a negative impact on the Company’sour results of operations and financial condition.

Adverse weather conditions, natural disasters, and other unforeseen and/or unplanned conditions could disrupt the Company’sour real estate developments.

Adverse weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, floods, droughts, and fires, could have serious impacts on the Company’sour ability to develop and market individual real estate offerings. Properties that the Company lookswe look to acquire may also be affected by unforeseen planning, engineering, environmental, or geological conditions or problems, including conditions or problems which arise on third party properties adjacent to or in the vicinity of properties which the Company expectswe expect to own and which may result in unfavorable impacts on the Company’sour prospective properties. As the Company’sour proposed real estate investments aremay be located in multiple countries, with differing climates and geological characteristics, each property will face different known and unknown risks. Any adverse event or circumstance could cause a delay in, prevent the completion of, or increase the cost of, one or more of these properties expected to be developed and brought to market by the Company,us, thereby resulting in a negative impact on the Company’sour operations and financial results.

If the market value of the Company’s futureour real estate investments decreases, the Company’sour results of operations will also likely decrease.

The market value of each prospective real estate investment will depend on market conditions both locally and globally. The Company expectsWe expect to acquire land for each expansion into a new market at a cost based upon then-current economic conditions. If local and/or global economic conditions deteriorate, or if the demand for such properties decreases below the levels anticipated at the time of acquisition of a property, the Companywe may not be able to make a profit on such property comparable to those profits made by First Capital in the past.those owning or managing such assets. As a result of declining economic conditions, the Companywe may experience lower than anticipated or forecast results or profits, and/or may not be able to recover the Company’sour costs of a project when a property is brought to market.

The Company will be relying on subcontractors to construct each property, and on building supply companies to provide components for each property’s construction. The failure of one or more of these subcontractors to properly construct these facilities, or any defects in the components obtained from building supply companies, could adversely affect these properties, and thus the Company’s operations. 

The Company plans to engage and rely on subcontractors to perform the actual construction of the buildings upon each property it expects to purchase.  Also, the Company plans to purchase the components used in its construction projects from third party independent building supply companies.  The Company will utilize industry standard quality control programs, but despite these programs, the Company may find that subcontractors are utilizing improper construction practices or the components purchased from building supply companies do not perform as specified in the project’s plans.  The Company may also find that its subcontractors are inadequately capitalized or have insufficient staffing to undertake the required work.  In such events, the Company may incur substantial additional costs to repair substandard construction at its properties, to comply with the plans and local legal requirements. The cost of satisfying local legal building code obligations may be significant, and the Company may not be able to recover these costs from its subcontractors, suppliers and/or their respective insurers.

Legal challenges or governmental regulations may delay the start or completion of construction on the Company’s projected real estate ventures, increase the Company’s expenses, or limit the Company’s construction activities, which could have a negative impact on operations.

Each of the Company’s future real estate development may experience a delay and/or increased expenses in construction, marketing and/or operation due to legal challenges to the development.  These challenges may be brought by private parties or by governmental authorities, resulting in delays in the start or completion of each project’s construction or requiring changes to the design or construction of each development.  Any delay or change in a development’s construction would result in increased expenses to the Company in the development of the property, which could in turn negatively impact the Company’s financial results with respect to that development and with respect to its overall operations.

Numerous governmental authorities are typically involved in each new development project, and such authorities have broad discretion in exercising their approval authority.  Various local, state, and federal statutes, ordinances, rules, and regulations concerning building, zoning, sales, and similar matters apply to and/or affect the real estate development industry and govern matters including construction, marketing, sales, operation, lending, and other activities concerning each development.  In the United States, there have been numerous changes in regulations that limit the availability or use of land, including regulations which limit growth in certain communities, the use of utilities including water and sewer outlets, road construction and utilization, and other related matters.  Each jurisdiction in which the Company expects to invest in real estate development will have different and varying levels of regulation which must be taken into account when planning and implementing such developments.  For example, the Company may be required to change or modify its plans due to alterations in local planning or laws.  As a result, the Company could incur substantial costs related to compliance with legal and regulatory requirements with regard to each real estate development, negatively impacting the Company’s business by causing delays, increasing costs, or limiting the Company’s ability to operate in those locations.

If a development project experiences increased costs or shortages of labor or components, or other circumstances beyond the Company’s control, there could be delays or increased costs in developing such project, which could negatively impact the Company’s finances and operating results.

The Company will have real estate development projects in a number of countries and regions, including the United States, Mexico, the Caribbean and South America.  Each project may be negatively impacted by local circumstances beyond the Company’s control, including labor shortages, disputes and work stoppages, union organizing activities, price changes and delays in availability of building materials and components, and a lack of adequate utility and road infrastructure and services. Any change in these circumstances could delay the start or completion of, or increase the cost of, one or more developments.  The Company may not be able to recover any additional such costs through an increase in the prices for its properties, and therefore the Company’s operating results may be negatively affected. 

Changes in tax laws, taxes or fees may increase the cost of each development, and such changes could adversely impact the Company’sour finances and operational results.

Each development project will be subject to different tax laws, tax levies and governmental fees, depending upon its geographic location. Any increase or change in such laws, taxes, or fees, including real estate property taxes, and fees to fund schools, open space, utility and road improvements, could increase the cost of a development and thus have an adverse effect on the Company’sour operations. Such changes could also negatively impact potential and/or actual users and purchasers of a development because potential buyers may factor such changes into their decisions to utilize or purchase a property.

The Company will incur significant advance costs in each real estate development before that development begins to generate revenue from sales and/or public usage, and as a result, the Company may not recover its costs in whole or in part, may recover those costs slower than originally anticipated, or may incur higher costs as a result of any delays in completion of a project, resulting in an adverse impact to the Company’s operating results.  

The Company expects to make a number of significant cash outlays for each real estate development before that construction on that development begins, and considerably before any development begins to generate revenue. Such cash outlays will include expenditures to buy, rent, lease or otherwise acquire land, to plan, design and develop a property, to conduct site studies as necessary for development, to provide basic utility and infrastructure access to a property, to obtain permits, licenses, and other required regulatory approvals, to post surety bonds and such other construction guarantees as required by law, and to actually construct the project building(s) and to fully develop a property.  These processes can take up to several years before a development is completed and ready to generate any revenue for the Company.  The time to complete each development will vary, based on local geographic conditions, legal requirements, regulatory and community concerns, the ability to obtain required construction materials and labor, and other factors that may be unique to each project.  The Company will face the risk that, during construction, demand for a project may change, alter or decline, and the Company may be forced to take steps to adjust to these changes in demand, including altering a project and its scope, and selling the property at lower than anticipated or planned prices or at prices that generate lower profit margins or losses.  Inflation, economic changes or downturns, asset carrying costs (including interest on funds that are used to acquire land and/or construct a building) may also be generated and may be significant.  As a result of these factors, the Company may experience adverse impacts on its operating results, and if a development experiences a significant decline in value, the Company may also be required to recognize material write-downs of the book value of a project building in accordance with U.S. generally accepted accounting principles.

The real estate industry is highly competitive;competitive and if other property developers are more successful or offer better value to customers, the Company’sour business could suffer.

The real estate industry is highly competitive, regardless of locale, and the Companywe will face competitors in each location where it expects towe develop, construct, market, sell and/or operate real estate ventures. Competitors will range from small local companies to large international conglomerates with financial resources much greater than those of the Company.  The Company willour company. We have to compete in each market for land, raw materials, construction components, financing, environmental resources, utilities, infrastructure, labor, skilled management, governmental permits and licensing and other factors critical to the successful development of each project. The Company willWe compete against both new and existing developments and developers. Any increase in or change to any competitive factor could result in the Company’sour inability to begin or complete development of a project in a timely manner, increased costs for the design, development and completion of a project, and/or higher costs and/or lower revenues from the marketing, sales and/or operation of a development. As a result, the Companywe may experience lower revenue and decreased profits due to these factors, impacting the Company’sour operations and itsour overall financial results.

Future terrorist activity and/or international instability could adverse impact the Company’sour real estate developments and financial operations.

The Company expects to operate real estate developments in a variety of locales, including the United States, Mexico, the Caribbean and South America.  A terrorist attack against the United States, or other foreign country, an increase in terroristic threats or suspected activity, and/or an increase in domestic or international instability, whether or not located in a country in which the Company has real estate assets,United States, could significantly affect the Company’sour business by slowing, delaying or halting construction of real estate developments, increasing the cost of such developments, and/or reducing the sales and/or usages of such properties, thereby adversely affect the Company’sour business.

The CompanyWe may incur environmental liabilities with respect to itsour development projects.

The properties the Companywe will target for investment will be subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. The particular environmental laws that apply to any given community vary greatly according to the community site, the site’s environmental conditions and the present and former use of the site. Environmental laws may result in delays, may cause the Companyus to incur substantial compliance and other costs and may prohibit or severely restrict development in certain environmentally sensitive regions or areas. Furthermore, under various federal, state, and local laws, ordinances and regulations, an owner of real property may be liable for the costs or removal or remediation of certain hazardous or toxic substances on or in such property. Such laws often impose such liability without regard to whether the Companywe knew of, or waswere responsible for, the presence of such hazardous or toxic substances. The cost of any required remediation and the Company’sour liability therefor as to any property are generally not limited under such laws and could exceed the value of the property and/or the aggregate assets of the Company.our company. The presence of such substances, or the failure to properly remediate contamination from such substances, may adversely affect the Company’sour ability to sell the real estate or to borrow using such property as collateral.

If the Company failswe fail to diversify itsour real estate investment portfolio, downturns relating to certain geographic regions, types of assets, industries or business sectors may have a more significant adverse impact on the Company’sour income and assets than if itwe had a diversified development property portfolio.

The Company isWe are not required to observe specific diversification criteria. Therefore, itsour target portfolio may at times be concentrated in certain asset types that are subject to higher risk of foreclosure or secured by assets concentrated in a limited number of geographic locations. To the extent that the Company’sour real estate portfolio will be concentrated in limited geographic regions, types of assets, industries or business sectors, downturns relating generally to such region, type of asset, industry or business sector may result, for example, in tenants defaulting on their lease obligations at a number of properties within a short time period, which may reduce future projected net income and the value of the Company’sour publicly traded securities and, accordingly, adversely affect the Company’sour business and prospects.

The Company’sOur co-venture partners, co-tenants or other partners in co-ownership arrangements could take actions that decrease the value of an investment to the Companyus and lower the Company’sour valuation.

Certain of the development properties that we may acquire could involve joint ventures, tenant-in-common investments, or other co-ownership arrangements with third parties having investment objectives that are may or may not be similar to those of the Companyour company for the acquisition, development, or improvement of properties, as well as the acquisition of real estate-related investments. The CompanyWe also may purchase and develop properties in joint ventures or in partnerships, co-tenancies, or other co-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers, or other persons. Such investments may involve risks not otherwise present with other forms of real estate investment, including, for example:

Any of the above might subject a property to liabilities in excess of those contemplated and thus reduce the Company’sour returns on that investment.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage may adversely affect the value of your Company stock.

The nature of the activities at certain properties we may acquire or develop willcould expose us and our operators to potential liability for personal injuries and, in certain instances, property damage claims. For instance, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, pollution, environmental matters, or extreme weather conditions such as hurricanes, floods, and snow storms that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. We may not carry all the usual and customary insurance policies which would be carried by a similarly-positioned company, and we may not be carrying those insurance policies in amounts and types sufficient to cover every risk which may be encountered by our company. Insurance risks associated with potential terrorist acts could sharply increase the premiums the Companywe will pay for coverage against property and casualty claims. Mortgage lenders generally insist that specific coverage against terrorism be purchased by commercial property owners as a condition for providing mortgage, bridge, or mezzanine loans. It is uncertain whether such insurance policies will be available, or available at reasonable cost, which could inhibit the Company’sour ability to finance or refinance itsour planned to-be-acquired properties. In such instances, the Companywe may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. The CompanyWe cannot assure you that itwe will have adequate coverage for such losses. If any of the Company’s futureour properties incursincur a casualty loss that is not fully covered by insurance, the value of the Company’sour assets will be reduced by the amount of any such uninsured loss. In addition, other than the capital reserve or other reserves the Companywe may establish, the Company doeswe do not expect to have any contingent sources of funding in place to repair or reconstruct any uninsured damaged property, and the Companywe cannot assure you that any such sources of funding will be available to the Companyus for such purposes in the future. Also, to the extent the Companywe must pay unexpectedly large amounts for insurance, the Companywe could suffer reduced earnings that would result in a decreased value attributed to the Company’sour publicly traded stock.

The CompanyWe could face losses with respect to abandoned predevelopment costs.

The development process inherently requires that a large number of opportunities be pursued with only a few being developed and constructed. The CompanyWe may incur significant costs for predevelopment activity for projects that are abandoned that would directly affect the Company’sour results of operations. The Company expectsWe expect to institute procedures and controls that are intended to minimize this risk, but it is likely that there will be predevelopment costs charged to expense on an ongoing basis.

The CompanyWe may not have adequate financing to fund itsour future property acquisitions and project developments, and such capital resources may not be available to the Companyus on commercially reasonable terms, or at all.

The implementation of the Company’s newour business plan including the prospective acquisition of development properties and the completion of construction projects on such properties will involve considerable sums of capital. The CompanyWe currently doesdo not have any such capital and will be required to raise acquisition, construction, and related funds in the future on a project by project basis. The CompanyWe may not be successful in itsour efforts to raise such funds, or capital that itwe can acquire may not be reasonably priced. In such a case, the Companywe may not be able to successfully effect its newour business plan.plans. Such a failure would have a material adverse effect on the Company’sour financial results, itsour future business prospects, and itsour public market stock valuation.

The Company’s financial condition as of December 31, 2016 raises substantial doubt about the Company’s abilityRisks Relating to continue as a going-concern.Terminated Legacy LHE Business

As of December 31, 2016, the Company had an accumulated deficit of $115,635 and shareholders deficit of $1,408. To date, the Company has dedicated most of its financial resources to sales and marketing, general and administrative expenses and research and development.We may be adversely affected by product liability claims, unfavorable court decisions or legal settlements.

Cash and cash equivalents as of December 31, 2016 were $2,677, including restricted cash of $342. The Company has historically financed its activities with cash from operations, the private placement of equity and debt securities, borrowings under lines of credit and, in the most recent periods with sale of certain assets and business units. The Company will be required to obtain additional liquidity resources in order to support its operations. The Company is addressing its liquidity needs by seeking additional funding from lenders as well as selling certain of its product lines to a third party. There are no assurances, however, that the Company will be able to obtain an adequate level of financial resources required for the short and long-term support of its operations. In light of the Company’s recent operating losses and negative cash flows, the termination of a pending merger agreement (see Acquisitions and Dispositions below) and the uncertainty of completing further sales of its product lines, there is no assurance that the Company will be able to continue as a going concern.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of liabilities that may result from the outcome of this uncertainty.

On January 6, 2016, PhotoMedex, Inc. received an advance of $4 million, less a $40 financing fee (the “January 2016 Advance”), from CC Funding, a division of Credit Cash NJ, LLC, (the "Lender"), pursuant to a Credit Card Receivables Advance Agreement (the "Advance Agreement"), dated December 21, 2015. The Company’s domestic subsidiaries, Radiancy, Inc.; PTECH; and Lumiere, Inc., were also parties to the Advance Agreement (collectively with the Company, the “Borrowers”). Each Advance was secured by security interest in defined collateral representing substantially all the assets of the Company. Concurrent with the funding of the loan agreement, the Company established a $500 cash reserve account in favor of the lender to be used to make loan payments in the event that weekly remittances, net of sales return credits and other bank charges or offsets, were insufficient to cover the weekly repayment amount due the lender.

Subject to the terms and conditions of the Advance Agreement, the Lender was to make periodic advances to the Company (collectively with the January 2016 Advance and the April 2016 Advance described below, the “Advances”). The proceeds were used for general corporate purposes.

All outstanding Advances were repaid through the Company’s existing and future credit card receivables and other rights to payment arising out of our acceptance or other use of any credit or charge card (collectively, “Credit Card Receivables”) generated by activities based in the United States.

On April 29, 2016, the Company received an advance of $1 million, less a $10 financing fee (the “April 2016 Advance”), from the Lender pursuant to the Advance Agreement.

On June 17, 2016, the Company received an advance of $550, less a $50 financing fee (the “June 2016 Advance”), from the Lender pursuant to the Advance Agreement.

The above described advances were paid in full on July 29, 2016 and the security interest in the defined collateral was released from lien.

The restricted cash account includes $253 from the Neova Escrow Agreement (see Acquisitions and Dispositions below). Restricted cash also includes $89 reflecting certain commitments connected to our leased office facilities in Israel. Additionally the Company gained access to previously restricted cash amounts of $724 that were held in escrow as of the one year anniversary of the sale of the XTRAC and VTRAC business on June 22, 2015, from which $125 was paid to MELA Science, the purchaser of that business which amount was reflected within the loss from discontinued operations.

On August 30, 2016, the Company entered into an Asset Purchase Agreement for the sale of its Neova product line. The sale was completed on September 15, 2016 resulting immediate proceeds to the company of $1.5 million and the Company recorded a loss of $1,731 from the transaction during the three months ended September 30, 2016. (See Acquisitions and Dispositions below)

On October 4, 2016, the Company entered into an Asset Purchase Agreement for the sale of its Consumer Division for $9.5 million, including $5 million in cash payable in two tranches ($3 million at closing and $2 million 90 days after closing) plus a $4.5 million royalty agreement. (See Note 18 Subsequent Event and Acquisitions and Dispositions below). On January 23, 2017, the Company entered into a First Amendment (the “First APA Amendment”) to the Asset Purchase Agreement. This transaction was completed on January 23, 2017.

All references to the Neova, the Consumer or Radiancy business and/or XTRAC product divisions within this Form 10-K are intended for historical purposes only and for the interpretation of past revenue and business results, and do not form a part of the Company’s future business and revenue plans.

Risk Factors Relating to the Sale of the Consumer Products Division

Because the Consumer Products division represented approximately 89% of the Company’s total revenues for fiscal year 2016, its business following the Asset Sale will be substantially different.

The Consumer Products division represented approximately 89% of the Company’s total revenues for the fiscal year 2016. Following the consummation of the sale of this business, the Company’s results of operations and financial condition may be materially adversely affected if it fails to effectively reduce its overhead costs to reflect that the sale of the consumer business represented sale of substantially all of the operational assets of the Company.

If the sale of the Consumer Products division disrupts the Company’s business operations and prevents the Company from realizing intended benefits, our business may be harmed.

The sale of the Consumer Products division may disrupt the operation of the Company’s business and prevent it from realizing the intended benefits of the Asset Sale as a result of a number of obstacles, such as the loss of key employees, customers or business partners, the failure to adjust or implement its business strategies, additional expenditures required to facilitate the Asset Sale transaction, and the diversion of management's attention from day-to-day operations.

There is no assurance that the $2.0 million portion of the purchase price for the consumer products group will be paid.

The consideration for the sale of the Consumer Products division was $9.5 million in cash, with three million dollars ($3,000) paid upon closing on January 23, 2017; two million dollars ($2,000) to be paid on or before the ninetieth (90th) day following the closing date of the transaction; and the remaining four million five hundred thousand dollars ($4,500) will be paid by Purchaser to the Company under a continuing royalty on net cash (invoiced amount less sales refunds, returns, rebates, allowances and similar items) actually received by Purchaser or its affiliates fromPast sales of the Consumer Products commencing with net cash actually received by the Purchaser or its affiliates from and after the closing date of this transaction and continuing until the total royalty paidLHE products may lead to the Company reaches that amount.

A letter of credit for the payment of the two million dollars ($2,000) was issued for the Company’s benefit on the date that the Asset Purchase Agreement was executed to guarantee the payment by the Purchaser of that amount. The letter of credit was issued by a third party for our benefit and is not secured by any assets of the Purchaser or the third party issuer. However, the letter of credit is only valid until the earlier of 180 days after the letter of credit was issued or full payment upon demand and presentation on or before January 3, 2017. If the letter of credit is no longer valid, we may be unable to collect the $2.0 million payment for the Asset Sale and the Asset Sale may therefore terminate. If we are unable to consummate the Asset Sale we could be forced into bankruptcy or liquidation.

There is no assurance that the final $4.5 million of the purchase price for the consumer products group will be paid to the Company in the near term or that the payment will be made in full or at all.

The remaining four million five hundred thousand dollar ($4,500) payment for the consumer products division will be paid by the Purchaser to the Company under a continuing royalty on net cash (invoiced amount less sales refunds, returns, rebates, allowances and similar items) actually received by Purchaser or its affiliates from sales of the Consumer Products commencing with net cash actually received by the Purchaser or its affiliates from and after the closing date of this transaction and continuing until the total royalty paid to the Company reaches that amount. Royalty payments will be made on a monthly basis in arrears within thirty days of each month end. The Company will receive thirty five percent (35%) of net cash actually received by Purchaser through Consumer Products sold through live television promotions less certain deductions and six percent (6%) of all other sales of Consumer Products.

The final $4.5 million payment will be paid solely on the basis of future royalty payments. Further, the final $4.5 million payment is not secured by the consumer products business or any other assets of the Purchaser. Accordingly, the Company’s receipt of the final payment will be contingent upon the Purchaser’s ability to sell the consumer products.

If the Purchaser is unable to successfully sell the consumer products, the Company may not receive the proceedspotential product liability claims arising from the royalty until a time in the distant future, or may only receive a portion of the royalties or none of the $4.5 million at all, if the Purchaser:

There is no assurance that the funds received from the sale of the Consumer Products division will be sufficient to repay all the Company’s debts, or provide sufficient financing to the Company to grow its future operations.

As of December 31, 2016, the Companydesign, manufacture and its subsidiaries had a combined total of $6,648 in outstanding accounts payable to third parties and its corporate officers and directors. As stated above, the Company will collect $9.5 million from the sale of its Consumer Products division, and will have limited, if any, ongoing revenue from the sales of products in its LHE line, particularly since the value of the LHE assets as of December 31, 2016, were relatively immaterial. Moreover, there is no guarantee that the Company will collect approximately $6.5 million of the payments for the sale of its Consumer Products division. Because of the uncertainty of the collection of those monies, there is no assurance that the Company will have sufficient funds to pay the outstanding accounts payable to its third parties, corporate officers and directors, and also have sufficient funds to devote to the growth of its LHE product line. Should the Company not be able to pay the amounts due to its creditors, those creditors may seek to take action to enforce the payment of their debts, including the instigation of litigation to collect funds from the Company and the possibility of filing a bankruptcy action against the Company. In the event of such steps, the Company’s assets could be liquidated, and there would be no sums remaining for the payment of any dividends to the Company’s stockholders, while the value of the stock of the Company would be reduced or eliminated as a resultmarketing of these actions.

The Company is required to provide certain transition services to the purchaser of the Consumer Products division.

Under a Transition Services Agreement entered into with ICTV Brands, the purchaser of the Consumer Products division, the Company is required to provide certain services to ICTV, including the provision of certain sales, marketing, legal, accounting and payroll services. The period of time to provide those services ranges from a few months post-closing of the transaction, to up to a year following the close of the transaction. In order to provide these contractually-mandated services, the Company must devote certain resources to those services which would otherwise be devoted to the payment of the Company’s outstanding debts, the growth of its LHE product line, and other strategic alliances for the Company. Moreover, these services require the presence of certain key personnel of the Company. Should the Company lose a key employee, or be otherwise unable to provide one or more of these services, the Companyproducts. Such claims may be subject to action by ICTV to force the provision of these services or otherwise provide recompense to ICTV for the lack of these services.

The Company maymany uncertainties and outcomes which are not be able to unwind the business affairs, and terminate the existence, of certain of the Company’s international subsidiaries in a timely and efficient manner. .

The Company has certain international subsidiaries, including companies located in the United Kingdom and Israel. Those companies were involved in the operation of the Company’s Neova and Consumer Products businesses; now that those businesses have been sold, those companies are no longer required for the operations of the corporate group. The Company anticipates unwinding the business affairs of those corporations over the next six to twelve months, and then deciding whether or not to terminate those corporations or seek an alternate purchaser for these companies. There is no guarantee that the Company will be able to conclude these matters in a timely and efficient manner. The unwinding of these subsidiaries will require the use of certain Company personnel and resources which might otherwise be devoted to other operations of the Company, including personnel who are now, or will shortly be, employed by the purchasers of the Neova and Consumer Products divisions.

The Company may not have sufficient access to certain international personnel while unwinding its operations in those countries.

The Company utilized the services of certain personnel at its international subsidiaries to provide accounting, legal, marketing and sales and other services to the Company and its United States subsidiaries, including the accounting and record-keeping services for those international subsidiaries. Those personnel have been assigned to ICTV Brands, the purchaser of the Company’s Consumer Products division, and will become employees of ICTV brands at the end of a transition period. The Company may not be able to utilize the services of those employees after this time. Until the Company closes those international subsidiaries, the Company will need such services in order to conduct the business of the subsidiaries, and therefore the Company may need to seek third party replacements at a much higher cost to the Company, placing a burden upon the Company’s remaining resources.

The sale of the Company’s Consumer Products division may adversely affect the Company’s business and results of operations.

The sale of the Company’s Consumer Products division may adversely affect the trading price of the Company’s common stock, its remaining business or its relationships with customers and suppliers of that business and the Company’s remaining employees. This may affect the Company’s ability to collect amounts when due from the sale of its business assets.

Risk Factors Relating to the Company’s Business

Economic downturns and disruption in the financial markets could adversely affect the Company’s financial condition and results of operations.

Financial markets in the United States, Europe and Asia have experienced prolonged periods of significant disruption, particularly in the periods following 2008 financial market tightening. These periods included volatility in securities prices and diminished liquidity and credit availability. Furthermore, an economic slowdown in the United States and other countries can weaken consumer confidence and lead to significant reductions in the amounts persons and businesses will spend on consumer products and other expenditures. In part, as a result, certain of the Company’s operations and revenues can be negatively impacted.

If adverse general economic conditions exist and continue for prolonged periods of time, the Company’s future revenue, profitability and cash flow from operations could decrease and its liquidity and financial condition could be adversely impacted.

The Company is exposed to credit risk of some of its customers.

The Company has experienced demands for customer financing and facilitation of leasing arrangements, which it typically refers to leasing companies unrelated to the Company.

The Company’s exposure to the credit risks may increase during an economic slowdown. Although the Company has programs in place that are designed to monitor and mitigate the associated risk, there can be no assurance that such programs will be effective in reducing its credit risks. Future credit losses, if incurred, could harm its business and have a material adverse effect on its operating results and financial condition. The Company maintains estimated accruals and allowances for its business terms. However, distributors tend to have more limited financial resources than other resellers and end-user customers and therefore represent potential sources of increased credit risk because they may be more likely to lack the reserve resources to meet payment obligations.

If the Company may need to raise additional funds to pursue its growth strategy or continue its operations, we may be unable to raise capital when needed.

From time to time, the Company may seek additional equity or debt financing to provide for capital expenditures, finance working capital requirements, continue its expansion, increase liquidity, develop new products and services or make acquisitions or other investments. In addition, if its business plans change, general economic, financial or political conditions in its markets change, or other circumstances arise that have a material negative effect on its cash flow, the anticipated cash needs of its business as well as its conclusions as to the adequacy of its available sources of capital could change significantly.

Any of these events or circumstances could result in significant additional funding needs, requiring the Company to raise additional capital, and we cannot predict the timing or amount of any such capital requirements at this time. If financing is not available on satisfactory terms, or at all, the Company may be unable to expand its business or to develop new business at the rate desired and its results of operations may suffer.

If the Company does not continue to develop and commercialize new products and identify new markets for its products and technologies, the Company may not remain competitive, and its revenues and operating results could suffer.

The medical and cosmetic industry is subject to continuous technological development and product innovation. If the Company does not continue to innovate in developing new products and applications, its competitive position will likely deteriorate as other companies successfully design and commercialize new products and applications. Accordingly, its success depends in part on developing innovative applications of its technology and identifying new markets for, and applications of, existing products and technology. The Company is primarily focused on collecting the remaining payments, if any, from the sale of substantially all of its assets and has relatively immaterial remaining assets from which to develop innovative products for sale.

The markets for the Company’s products are intensely competitivepredictable, and we may notincur significant legal expenses in defending these claims regardless of whether we are found to be able to compete effectively against the larger, more well-established companies that dominate this market or emerging, and small, innovative companies that may seek to obtain or increase their share of the market.

The marketsliable for the Company’s products are intensely competitive and many of our competitors are much larger and have substantially more financial and human resources thanclaims. While we do. Many have long histories and strong reputations within the industry and a relatively small number of companies dominate these markets.

We face direct competition from large pharmaceutical companies, including, for example, Biogen, Inc., Centocor, Inc., and Abbott Laboratories, which are engagedcarry certain product liability insurance coverages, in the research, development and commercialization of treatments for psoriasis, atopic dermatitis, and leukoderma. In some cases, those companies have already received FDA approval or commenced clinical trials forpast, which cover our current product liability claim(s), we no longer carry such treatments. Many of these companies have significantly greater financial resources and expertise in research and development, manufacturing, conducting pre-clinical studies and clinical trials and marketing than we do.

Other competitors include well-established pharmaceutical, cosmetic and healthcare companies such as Allergan, Inc., Valeant Pharmaceuticals International, Inc. and Estee Lauder Inc. These companies may enjoy significant competitive advantages over us, including:

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity will be reduced or eliminated if we are unsuccessful in convincing physician and patient customers and consumers to use our products or if our competitors develop and commercialize products that are safer and more effective than any products that we may develop.

The Company’s LHE products and any of the Company’s future products or services may fail to gain market acceptance, which could adversely affect the Company’s competitive position.

The Company has generated limited commercial distribution for certain of its other products. The Company may be unsuccessful in continuing its existing or developing new, strategic selling affiliates and alternate channels in order to maintain or expand the markets for the existing or future products of the LHE business.

Even if adequate financing is available and such products are ready for market, the Company cannot assure you that its products and services will find sufficient acceptance in the marketplace under its sales strategies.

The Company also faces a risk that other companies in the market for dermatological products and services may be able to provide dermatologists a higher overall yield on investment and therefore compromise the Company’s ability to increase its base of users and ensure they engage in optimal usage of its products. If, for example, such other companies have products (such as Botox or topical creams for disease management) that require less time commitment from the dermatologist and yield an attractive return on a dermatologist’s time and investment, we may find that our efforts to increase our base of users are hindered.

The Company therefore cannot assure you that the marketplace will be receptive to its skincare products over competing products, services and therapies. Failure of the Company’s products to achieve market acceptance could have a material adverse effect on the Company’s business, financial condition and results of operations.

Many of the Company’s expenses are fixed and many are based, in significant part, on its expectations of its future revenue and are incurred prior to the sale of its products and services. Therefore, any significant decline in revenue for any period could have an immediate negative impact on its margins, net income and financial results for the period.

The Company’s expense levels are based, in significant part, on its estimates of future revenue and many of these expenses are fixed in the short term. As a result, the Company may be unable to adjust its spending in a timely manner if its revenue falls short of its expectations. Accordingly, any significant shortfall of revenue in relation to its estimates could have an immediate negative effect on its profitability. In addition, as its business grows, the Company anticipates increasing its operating expenses to expand its product development, technical support, sales and marketing and administrative organizations. Any such expansion could cause material losses to the extent the Company does not generate additional revenue sufficient to cover the additional expenses.

The Company’s failure to maintain its relationships with its key distributors (none of which have an ongoing obligation to sell our products) on acceptable terms would have a material adverse effect on its results of operations and financial condition, or if the Company fails to effectively manage or, retain its distribution network, its business, prospects and brand may be materially and adversely affected.

Sales made through distributors have represented a significant part of the Company’s sales revenue from the LHE product line. The Company’s LHE remaining assets are relatively immaterial and since these distributors are not obligated to sell our products, and they likely may choose to end their relationship with us. Even if we maintain a business relationship with such distributors, they may sell competing products or may not be able to sell our products.

Furthermore, the Company has a limited ability to manage the activities of its independent third-party distributors. The Company’s distributors could take one or more of the following actions, any of which could have a material adverse effect on its business, prospects and brand:

Failure to adequately manage the Company’s distribution network, or the non-compliance of this network with its obligations under agreements with us, could harm the Company’s corporate image among end users of its products and disrupt its sales, or result in fines or other legal action against the Company.

The Company has a new distributor in the Japanese market,coverages, and the delay or failureactual cost to re-implement sales in this market may have an adverse effect on its business.

On April 7, 2015 the Company announced the signing of an exclusive distribution agreement by its Radiancy Inc. subsidiary with Synergy Trading Corporation for certain no!no!™ products in Japan. Synergy Trading Corporation, based in Osaka, has been a leading Japanese importer of consumer products for more than a decade, managing multinational brands from the U.S. and Europe. This agreement includes Radiancy’s no!no! 8800 and no!no! PRO. In addition, Synergy will launch two new no!no! models during 2016 and has a right of first refusal to market additional Radiancy consumer products. The agreement runs through December 31, 2016 and is renewable thereafter. Synergy placed an initial stocking order of $1.2 million. Synergy is best known for bringing SodaStream to Japanese consumers.

On November 21, 2013 the Company’s majority-owned subsidiary, Radiancy, Inc., had terminated the exclusive distribution agreement between itself and Ya-Man Ltd., Radiancy’s independent distributor for the no!no!® brand products in the Japanese market. Sales in Japan represented approximately 5% of the revenues related to the sale of the no!no! products for the year ended December 31, 2013; those sales were largely generated in the first six months of the year. Ya-Man failed to meet its minimum purchasing commitments under the distribution agreement in the third and fourth quarters of 2013, due to a restructuring of its methods of business operations. Radiancy and Ya-Man also disputed the responsibility for the payment of marketing expenses for that country of approximately $1 million.

Other factors that could impact the Company’s results in the market include:

The Company’s operating results could be negatively impacted by economic, political or other developments in foreign countries in which it or its subsidiaries do business.

The Company transports some of its goods across international borders, primarily those of the U.S., Canada, Europe, Japan and Israel. Since September 11, 2001, there has been more intense scrutiny of goods that are transported across international borders. As a result, some of our and our subsidiaries’ products may face delays, and increase in costs due to such delays in delivering goods to its customers. Any events that interfere with, or increase the costs of the transfer of goods across international borders, could have a material adverse effect on its business.

Further, global economic conditions continue to be challenging. Although the economy appears to be recovering in some countries, it is not possible for us to predict the extent and timing of any improvement in global economic conditions. Even with continued growth in many of our and our subsidiaries’ markets during this period, the economic downturn could adversely impact its business in the future by causing a decline in demand for our and our subsidiaries’ products, particularly if the economic conditions are prolonged or worsen.

The international nature of the Company’s business exposes us to certain business risks that could limit the effectiveness of the Company’s growth strategy and cause our results of operations to suffer.

Continued expansion into international markets is an element of the Company’s growth strategy. Introducing and marketing the Company’s services internationally, developing direct and indirect international sales and support channels and managing foreign personnel and operations will require significant management attention and financial resources. The Company faces a number of risks associated with expanding the Company’s business internationally that could negatively impact the Company’s results of operations, including:

The Company may not succeed in its efforts to expand its international presence as a result of the factors described above or other factors that may have an adverse impact on the Company’s overall financial condition and results of operations

Conditions in Israel may affect our ability to collect royalty stream related to the consumer products division.

The Company sold its consumer products division to ICTV Brands, Inc. on January 23, 2017, for which it is to receive up to a $4.5 million in royalty over the next several years from the sale of those products by ICTV. All of that division’s research and development activities, a portion of the manufacturing operations and other critical business activities are located in Israel, a country that has experienced terrorist attacks. Political, economic and military conditions in Israel could adversely affect its operations, including a disruption of such operations due to terrorist attacks or other hostilities. Although the current hostilities in Israel have had no immediate and direct impact on the consumer products division to date, the interruption or curtailment of trade between Israel and its trading partners, or a significant downturn in the economic or financial condition of Israel, may adversely affect the flow of vital components to ICTV for sale to consumers. We cannot assure you that ongoing hostilities related to Israel will not have a material adverse effect on ICTV’s business, and thus our royalty stream or our share price.

The Company’s Israeli-based facilities and/or manufacturing subcontractors could also be subject to catastrophic loss such as fire, flood, or earthquake. Any such loss at any of these facilities could disrupt operations, delay production, shipments and revenue and result in significant expense to repair and replace those facilities.

The Israeli operations may be disrupted by the obligation of its personnel to perform military service.

Many of the employees of ICTV that are located in Israel are legally obligated to perform annual military reserve duty in the Israeli Defense Forces and may be called to active duty under emergency circumstances at any time without substantial notice to their employer. If a military conflict or war arises, these individuals could be required to serve in the military for extended periods of time. As a result, the Israeli-based operations could be disrupted by the absence, for a significant period of time, of one or more of its executive officers or a significant number of its other employees due to such reserve duty.

If the Company fails to manage its distribution partners or to market and distribute its products effectively, the Company may experience diminished revenues and profits.

There are significant risks involved in building and managing the Company’s sales and marketing distribution network and marketing its products, including the Company’s ability:

The Company cannot predict how successful it may be in marketing its LHE skin health products in the U.S., nor can the Company predict the success of any new skin health products that it may introduce. Despite an increased focus on developing alternate channels for many of the Company’s skin health products, the Company may find that channels that are attractive to the Company are unavailable because they already carry competitive products. No assurance can be given that the Company will be successful in marketing and selling its skin health products.

The Company may encounter difficulties in quality testing and the manufacturing of its products in commercial quantities, which could adversely impact the rate at which the Company grows.

There can be no guarantee that the Company’s quality assurance testing programs will be adequate to detect all defects, either ones in individual products or ones that could affect numerous shipments, which might interfere with customer satisfaction, reduce sales opportunities, or affect gross margins. In the future, the Company may need to replace certain product components and provide remediation in response to the discovery of defects or bugs in such products that it has shipped. There can be no assurance that such a remediation, depending on the product involved, would not have a material impact. An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to its reputation, inventory costs or product reengineering expenses, any of which could have a material impact on the Company’s revenue, margins and net income.

Further, the Company may encounter difficulties manufacturing its line of products because it has limited experience manufacturing such products in significant commercial quantities. As a result, the Company will, in order to increase its manufacturing output significantly, have to attract and retain qualified employees for such assembly and testing operations.

Some of the components necessary for the assembly of the Company’s products are currently provided to the Company by third-party suppliers. While alternative suppliers exist and could be identified, the disruption or termination of the supply of components could cause a significant increase in the costs of these components, which could affect our operating results. The Company’s dependence on a limited number of third-party suppliers and the challenges the Company may face in obtaining adequate supplies involve several risks, including limited control over pricing, availability, quality and delivery schedules. A disruption or termination in the supply of components could also result in the Company’s inability to meet demand for its products, which could harm its ability to generate revenues, lead to customer dissatisfaction and damage its reputation. Furthermore, if the Company is required to change the manufacturer of a key component of its products, the Company may be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines including Quality Systems Regulations, or QSR requirements and performance standards. Failure to do so could result in the FDA taking legal or regulatory enforcement action against the Company and/or its products (e.g. recalls, fines, penalties, injunctions, seizures, prosecution or other adverse actions). The delays associated with the verification of a new manufacturer could delay the Company’s ability to manufacture its products in a timely manner or within budget. The Company faces the risk that there will be supply chain problems if the volumes do not match to the margins, as certain of the Company’s consumer market products are intended to be high-volume, lower-margined products.

Although the Company believes that its current manufacturing facilities are adequate to support its commercial manufacturing activities for the foreseeable future, the Company may be required to expand or restructure its manufacturing facilities to increase capacity substantially. In addition, if the Company is unable to provide customers with high-quality products in a timely manner, the Company may not be able to achieve market acceptance and growth for its consumer, skincare and other products. The Company’s inability to manufacture or commercialize its devices successfully could have a material adverse effect on its revenue.

If the Company fails to manage and protect its and its subsidiaries’ network security and underlying data effectively, its businesses could be exposed to a cyber-attack or other disruption which could harm its operating results.

Like other large corporations, the Company relies upon a variety of information technology systems to transmit, process and store information in an electronic format for use in daily operations. In particular, the Company possesses and uses both personal health information and personal identification information in the conduct of its business, including credit card, insurance and banking information of our customers. The size, inter-relationship and complexity of these systems, and the possession of such information, makes us vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, theft or loss of data privacy or other significant interference with the use and possession of such information, that could harm our business. Unauthorized disclosure or manipulation of such data, whether through breach of network security or other interception of this information, could expose the Company to costly litigation, damage its reputation and result in a lower revenue stream and the loss of some of its customers.

Our information systems require a constant and ongoing dedication of significant resources to maintain, protect, and enhance our existing systems as well as keep pace with changes in information processing technology and regulatory standards. In particular, maintaining the Company’s network security is of critical importance because the online e-commerce systems used by our consumer product lines store proprietary and confidential customer data such as names, addresses, other personal information and credit card numbers. The Company uses commercially available encryption technology to transmit personal information when taking orders. However, third parties may be able to circumvent these security and business measures by developing and deploying viruses, worms and other malicious software programs that are designed to attack or attempt to infiltrate its systems and networks. Employee error, malfeasance or other mistakes in the storage, use or transmission of personal information could result in a breach of customer or employee privacy. The Company employs contractors who may have access to the personal information of customers and employees. It is possible such individuals could circumvent the Company’s data security controls, which could result in a breach of customer privacy. In addition, third parties may attempt to hack into our systems to obtain data relating to our products or our proprietary technology. Any failure to maintain or protect these information technology systems and data integrity, including from cyber-attacks, intrusions or other breaches, could result in the unauthorized access to patient data and personally identifiable information, theft of intellectual property or other misappropriation of assets, or otherwise compromise our confidential or proprietary information and disrupt our operations.

The possession and use of personal information in conducting its business subject the Company to legislative and regulatory burdens regarding the safeguarding of this information and the processes to be followed in the event of a data breach. Any interference with or unauthorized access to this information may cause us to lose existing customers; have difficulty preventing, detecting, and controlling fraud; cause disputes with customers, physicians, and other health care professionals; render us subject to legal claims and liability; result in regulatory sanctions or penalties; increase our operating expenses and cause us to incur additional significant expenses or lose revenues; render us unable to accept and process credit card transactions in our consumer businesses; or suffer other adverse consequences, any of whichliability claim could have a material adverse effect on our business, financial condition or results of operations.

If the Company fails to manage its and its subsidiaries’ growth effectively, its businesses could be disrupted which could harm its operating results.

The Company has experienced, and may in the future experience, growth in its business, both organically and through the acquisition of businesses and product lines. The Company expects to make significant investments to enable its future growth through, among other things, new product innovation and clinical trials for new applications and products.

Such growth may place a strain on the Company’s management and operations. The Company’s ability to manage this growth will depend upon, among other factors, its ability to broaden its management team; its ability to attract, hire, train, motivate and retain skilled employees; and the ability of its officers and key employees to continue to implement and improve its operational, financial and other systems, to manage multiple, concurrent customer relationships and different products and to respond to increasing compliance requirements. The Company’s future success is heavily dependent upon achieving such growth and acceptance of its products. Any failure to effectively manage future growth could have a material adverse effect on the Company’s business,position, results of operations and financial condition.

The Company is exposed to risks associated with credit card and payment fraud and with credit card processing, which could cause the Company to lose revenue.cash flows.

A significant part ofRisks Relating to the paymentsMarket for its products and services are processed by the Company through credit cards or automated payment systems. The Company has suffered losses, and may continue to suffer losses, as a result of orders placed with fraudulent credit cards or other fraudulent payment data. For example, under current credit card practices, the Company may be liable for fraudulent credit card transactions if it does not obtain a cardholder’s signature, a frequent and accepted practice in internet sales. In addition, charges under these payment methods may be challenged as fraudulent or unauthorized for a significant period of time after the purchase of the goods and services, often up to 18 months after the transactions. While the Company employs technology solutions to help it detect fraudulent transactions, those solutions are not guaranteed to uncover all fraudulent transactions. Therefore, the failure to detect or control payment fraud could cause the Company to lose sales and revenue and incur additional costs in managing fraud-control processes.Our Common Stock Generally

The Company’s failure to respond to rapid changes in technology and its applications inOur common stock is quoted on the medical devices industry or the development of a cure for skin conditions treated by its products could make its treatment system obsolete.

The medical device industry is subject to rapid and substantial technological development and product innovations. To be successful, the Company must respond to new developments in technology, new applications of existing technology and new treatment methods. The Company may also encounter greater pressure for innovation in order to satisfy a demand for novelty in the consumer market. The Company’s financial condition and operating results could be adversely affected if the Company fails to be responsive on a timely and effective basis to competitors’ new devices, applications, treatments or price strategies.

As the Company develops new products or improves its existing products, the Company may accelerate the economic obsolescence of the existing, unimproved products and their components. The obsolete products and related componentsOTC Pink market, which may have little to no resale value, leading to an increase in the reserves the Company has against its inventory. Likewise, there is a risk that the new products or improved existing products may not achieve market acceptanceunfavorable impact on our stock price and therefore may also lead to an increase in the reserves against the Company’s inventory.

The Company’s marketing campaigns and advertising may be attacked as false and misleading, and our media spending might not result in increased net sales or generate the levels of product and brand name awareness that the Company desires. The Company might not be able to increase its net sales at the same rate as it increases its advertising and marketing expenditures.

The Company’s future growth and profitability will depend in part on the effectiveness and efficiency of its marketing campaigns and media spending, including its ability to:

The Company’s former no!no!® Hair and other consumer product’s portfolio of infomercials advertising, and other forms of media may not result in increased sales or generate desired levels of product and brand name awareness, and may be attacked as false and misleading. The Company may be required to defend against inaccurate claims of false advertising. The Company is currently the subject of certain legal proceedings relating to its advertising claims in the U.S. The Company has voluntarily made changes to its advertising as part of its usual process for reviewing and updating its advertising through the various media and sales channels we rely upon, and which address certain of the claims made in these matters. These changes have not adversely affected the Company’s sales of the no!no!® Hair products in the U.S. to date; however the Company may be required to make other changes in the future in response to existing or potential legal proceedings that could materially and adversely affect such sales.

A higher than anticipated level of product returns may adversely affect the Company’s business and its customers, or physicians and technicians, as the case may be, may misuse certain of its products, and product and other damages imposed on the Company may exceed its insurance coverage, or the Company may be subject to claims that are not covered by insurance.

The Company offers consumers who purchase its consumer products, including its no!no!^®brands directly from the Company a money-back guarantee, subject to time and certain other limitations. Retailers and home shopping channels are also permitted to return the consumer products, subject to certain limitations. The Company establishes revenue reserves for product returns based on historical experience, estimated channel inventory levels and other factors. If product returns exceed estimates, the excess would offset reported revenue, which could negatively affect the Company’s financial results. Product returns and the potential need to remedy defects or provide replacement products or parts for items shipped in volume could result in substantial costs, the requirement to conduct an FDA recall and/or submit an FDA-required report of a correction/removal and have a material adverse effect on the Company’s business and results of operations.

The Company may be subject to product liability claims from time to time. A number of the Company’s products are highly complex and some are used to treat delicate skin conditions on and near a patient’s face. In addition, the clinical testing, manufacturing, marketing and use of certain of the Company’s products and procedures may also expose the Company to product liability, FDA regulatory and/or legal actions, or other claims. Certain indications for use for the Company’s PTL light-based devices, though approved outside the U.S., are not approved in the U.S. If a physician elects to apply an off-label use and the use leads to injury, the Company may be involved in costly litigation. The Company presently maintains liability insurance with coverage limits of at least $10 million per occurrence and overall aggregate, which the Company believes is an adequate level of product liability insurance, but product liability insurance is expensive and the Company might not be able to obtain product liability insurance in the future on acceptable terms or in sufficient amounts to protect the Company, if at all. A successful claim brought against the Company in excess of its insurance coverage could have a material adverse effect on its business, results of operations and financial condition. In addition, continuing insurance coverage may also not be available at an acceptable cost, if at all. Therefore, the Companyliquidity. Our common stock may not be able to obtain insurance coverage that will be adequate to satisfyeligible for listing on a liability that may arise. Regardlessnational securities exchange.

Our common stock is quoted on the OTC Pink market. The quotation of merit or eventual outcome, product liability claimsour shares on the OTC Pink market may result in decreased demanda less liquid market available for a product, injuryexisting and potential stockholders to its reputation, withdrawaltrade shares of clinical trial volunteers and lossour common stock, could depress the trading price of revenues. As a result, regardless of whether the Company is insured, a product liability claim or product recall may result in losses that could result in the FDA taking legal or regulatory enforcement action against the Company and or its products including recall,our common stock, and could have a materiallong-term adverse effect uponimpact on its ability to raise capital in the Company’s business, financial condition and results of operations.

The Company’s costs could substantially increase if it experiences a significant number of warranty claims.

The Company provided 12-month embedded product warranties, and offers longer warranties available for separate purchase, against technical defects of its former consumer products division. Its product warranty requires the Company to repair defective parts of its products, and if necessary, replace defective components; the Company is still responsible for such claims under the Asset Purchase Agreement by which this division was sold to ICTV Brands, Inc. on January 23, 2017. Historically, the Company has received a limited number of warranty claims for these products and the costs associated with such warranty claims have also historically been relatively low. Thus, the Company generally does not accrue a significant liability contingency for potential warranty claims.

If the Company experiences an increase in warranty claims for products sold to consumers before the sale of that division, or if its repair and replacement costs associated with such warranty claims increase significantly, we will begin to incur liabilities for potential warranty claims after the sale of its products at levels that the Company has not previously incurred or anticipated.future. In addition, an increase in the frequencywe cannot assure you that any listing application that we file will ultimately be approved by Nasdaq or NYSE or that your shares of our warranty claims or amount of warranty costs may harm our reputation and could have a material adverse effect on its financial condition and results of operations.

The Company may be subject to litigation that will be costly to defend or pursue and uncertain in its outcome.

The Company’s business may bring it into conflict with its licensees, licensors, or others with whom the Company have contractual or other business relationships, or with its competitors or others whose interests differ from it. If the Company is unable to resolve those conflicts on terms that are satisfactory to all parties, the Company may become involved in arbitration and/or litigation brought by or against it. Such actions are likely to be expensive and may require a significant amount of management’s time and attention, at the expense of other aspects of our business. The outcome of arbitration or litigation is always uncertain, and in some cases could include judgments against the Company that require it to pay damages, enjoin it from certain activities, or otherwise affect its legal or contractual rights, which could have a significant adverse effect on its business. In addition, while the Company maintains insurance for certain risks, the amount of its insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. It also is not possible to obtain insurance against all potential risks and liabilities. The Company cannot predict what the outcome will be in any ongoing or threatened arbitrations and/or litigations, and any adverse results in any such actions may also materially and negatively impact its business, the market price of its common stock cash flow, prospects, revenues, profitability or capital expenditures, or have other material adverse effects on its business, reputation, results of operations, financial condition or liquidity.

From time to time, the Company may be threatened with material litigation.

From time to time, the Company is threatened with individual and class action litigations involving its business, products, advertisements, packaging, labeling, consumer claims, contracts, agreements, intellectual property, SEC or FDA matters, licenses and other areas involving it and its business. The outcome or effect on its business, the market price of the Company’s common stock, cash flows, prospects, revenues, profitability, capital expenditures, reputation, demand for its products, results of operations, financial condition or liquidity of any future litigation cannot be predicted by the Company. Except as disclosed in Item. 3. Legal Proceedings, no such current pending matters, if any, are believed to be significant.

Litigation is inherently unpredictable and may:

While the Company maintains insurance for certain risks, the amount of its insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. It also is not possible to obtain insurance against all potential risks and liabilities. If any litigation were to have a material adverse result, there could be a material impact on the Company’s results of operations, cash flows or financial position.

The Company has outstanding litigation which it may not be able to settle, or which it may not be able to settle on terms favorable to the Company.

The Company is involved in certain litigation, including suits brought by the Company against DS Healthcare, and suits brought against the Company and/or its one or more of its subsidiaries including suits brought by Mouzon and April Cantley, and a suit brought by a consumer regarding the no!no! product, as further described in Item 3. Legal Proceedings. The Company intends to vigorously defend itself and its subsidiaries against claims brought against it, and to prosecute such suits to recoup sums owed to the Company. However, the Company may seek to settle such matters in order to avoid excessive legal fees and costs and the lengthy time such litigation may require in order to reach a resolution. However, there is no guarantee that the Company may be able to reach a settlement or resolution of such litigation, or that such a settlement or resolution will be reached in a manner that is advantageous to the Company, and in such cases the Company will need to proceed with litigation. Regardless of its outcome, litigation may result in substantial costs and expenses, and significantly divert the attention of management. There can be no assurance that the Company will be able to prevail in,trade on the Nasdaq or achieve a favorable settlement of, pending matters. In addition to the pending matters, future litigation, government proceedings, labor disputes, or environmental matters could lead to increased costs or interruption of the Company’s normal business operations, which could involve a costly and lengthy draw upon the Company’s resources and could result in a resolution to the litigation which may be detrimental to the Company.

The Company is the subject of certain tax audits which may not be resolved without impacting the Company’s operations.

The Company has in the past, and is currently, the subject of certain audits by state agencies for various tax matters including sales and use and corporate income taxes, and unclaimed property reporting. While past audits have been resolved without significant impact upon the Company or its operations, there is no guarantee that future audits will be resolved in a manner that is satisfactory to the Company or that has no material impact upon the Company’s operations. Such results could include the payment of assessments which could impact the Company’s remaining resources and affect the Company’s ability to continue its operations in the existing manner.

The Company depends on its executive officers and key personnel to implement its business strategy and could be harmed by the loss of their services and the inability to attract personnel for these positions.

The Company believes that its growth and future success will depend in large part upon the skills of its key management, technical and scientific personnel. Certain members of the Company’s management staff as well as other key employees may voluntarily terminate their employment with the CompanyNYSE at any time, with or without notice. There is substantial competition for personnel in the industries in whichtime. Even if we operate, and we may face increased competition forobtain such employees, resulting in the need to compensate these personnel at a higher-than-anticipated rate, a delay in replacing such personnel and integrating them into the Company’s operations, and the possibility that we may be unable to attract and retain these personnel. The loss of the services of key personnel, or the inability to attract and retain additional qualified personnel, could result in delays to product development or approval, loss of sales and diversion of management resources, and may have an adverse effect on our business and our ability to grow that business.

In particular, the Company’s success depends in part upon the continued service and performance of Dr. Dolev Rafaeli and Dennis M. McGrath. The Company has fixed-term employment agreements with Dr. Rafaeli and Mr. McGrath; however, there are no assurances that the services of these individuals will be available to the Company for any specified period of time. The loss of the services of one or both of these officers could adversely affect the Company’s ability to develop and introduce its new products.

Additionally, the Company does not currently maintain “key person” life insurancelisting on the lives of Dr. Rafaeli, Mr. McGrath, its other executivesNasdaq or any of its employees. The Company’s lack of insurance means that it may not have adequate compensation for the loss of the services of its key employees, which could affect the Company’s ability to maintain the level of services formerly provided by those persons.

In our industry, there is substantial competition for key personnel in the regions in which we operate and we may face increased competition for such employees, particularly in emerging markets as the trend toward globalization continues. If we are unable to attract key personnel in a timely manner, including key sales and other personnel who have critical industry experience and relationships in the regions in which we operate, including in emerging markets, it may have an adverse effect on our business and our ability to drive growth, including through execution of our strategic initiatives. Furthermore, some of the key personnel for whom we compete have post-employment arrangements with their current or former employer that may impact our ability to hire them or expose us and them to claims. In addition, if we are unable to retain and focus our existing key personnel it may have an adverse effect on our business, financial condition and results from operations. Changes in our senior management structure could lead to inefficiencies in our ability to execute our strategic, cost-reduction and efficiency initiatives, which may have an adverse effect on our business and results of operations.

It may be difficult for any of the Company’s stockholders to effect service of process and enforce their rights against the Company or its officers and directors in foreign courts.

Certain of the Company’s operating subsidiaries’ assets are located outside the United States, including locations in Israel and the United Kingdom. As a result, the Company’s stockholders may find it difficult to enforce their legal rights in the courts of these countries based on the civil liability provisions of the United States federal securities laws as applied in the courts of the United States or these countries, even if civil judgments are obtained in courts of the United States. In addition, it is unclear if extradition treaties in effect between the United States and these countries would permit effective enforcement against any of the Company’s officers and directors that reside outside the United States of criminal penalties, whether sought under the United States federal securities laws or other applicable laws.

Currency exchange rate fluctuations could adversely affect the Company’s operating results.

Some of the Company’s operating expenses are denominated in New Israeli Shekel (“NIS”). Any significant fluctuation in the value of the NIS may materially and adversely affect its cash flows, earnings and financial position. For example, an appreciation of NIS against the U.S. dollar would make any new NIS denominated investments or expenditures more costly to the Company, to the extent that it needs to convert U.S. dollars into NIS for such purposes. Furthermore, because certain parts of our business include international business transactions, costs and prices of its products or components in overseas countries, such transactions are affected by foreign exchange rate changes.

The majority of sales invoicing for the Company’s PTL business is done in Pounds Sterling, Euros or U.S. dollars, while product costs and the overhead of the offices in the United Kingdom are denominated in Pounds Sterling. The sales invoicing for the LK Technology business is done in Brazilian Real. The Company’s U.S. operations, with U.S. dollar operating costs, serve to reduce the exposure to fluctuations in the value of the Pound Sterling, the Euro, or the Brazilian Real. To the extent that the Company adjusts its invoicing practices for its PTL and LK Technology businesses, or if the remainder of its business (or any portion thereof) ceases to be conducted primarily in U.S. dollars, the Company’s exposure to the market’s currency conditions could present a greater risk to it.

As a result, foreign exchange rate fluctuations may adversely affect the Company’s business, operating results and financial condition.

The Company’s ability to use its net operating loss carryforwards to offset future taxable income for U.S. federal income and U.K. business tax purposes may be limited as a result of “ownership changes” of PhotoMedex caused by the merger. In addition, the amount of such NOL carryforwards could be subject to adjustment in the event of an IRS examination.

If a corporation undergoes an “ownership change” under Section 382 of the U.S. Internal Revenue Code, the amount of its pre-change net operating losses, which we refer to in this report as “NOLs”, that may be utilized to offset future taxable income is subject to an annual limitation. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the applicable testing period (generally three years).

The annual limitation generally is determined by multiplying the value of the corporation’s stock immediately before the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may, subject to certain limits, be carried over to later years, and the limitation may under certain circumstances be increased by recognized built-in gains or reduced by recognized built-in losses in the assets held by the corporation at the time of the ownership change. Similar rules and limitations may apply for state income tax purposes.

The reverse merger, effected on December 13, 2011, did result in an ownership change of PhotoMedex. At the time, the Company estimated that it would have approximately $56.8 million of U.S. net operating loss carryforwards that could be utilized through the annual limitations and also through the realization of its built-in gains through amortization in the first 5 years following December 13, 2011. The balance of the net operating loss carryforwards of pre-merged PhotoMedex amounts was estimated to be approximately $53.5 million. This balance could only be utilized through realization of the built-in gains other than by means of amortization. Therefore, on December 27, 2012, PhotoMedex made an internal realignment of its operations by selling its operating businesses to a wholly-owned, non-consolidated U.S. subsidiary, and thereby realized sufficient gain to offset approximately $45 million of the $53.5 million remaining balance of net operating losses.

In addition, the amount of the NOL carryforwards is subject to review and audit by the Internal Revenue Service (the “IRS”). There can therefore be no assurance that the benefit of such NOL carryforwards will be fully realized.

Likewise, if a corporation undergoes an “ownership change” and/or a “change in trade or business” under various standards of Her Majesty’s Revenue and Customs (HMRC, U.K.), the amount of a company’s pre-change NOLs that may be utilized to offset future taxable income in the U.K. may be limited or not available for offset against that income. After evaluating the effects of the reverse merger and integration of Radiancy’s business on its U.K. NOLs; management determined that the NOLs remain usable against future income of the UK subsidiary. However, the amount of the NOL carryforwards remains subject to review and audit by the HMRC. There can therefore be no assurance that the benefit of such NOL carryforwards will be fully realized.

Risks Related to the Company’s Intellectual Property Matters

If the Company is unable to adequately protect or enforce its rights to intellectual property or secure patents right to technologies that it develops, the Company may, experience reduced market share, assuming any, or incur costly litigation to enforce, maintain or protect such rights.

The Company’s success depends in part on its ability to maintain and defend patent protection for its products, to preserve its trade secrets and to operate without infringing the proprietary rights of third parties. However, the Company cannot guarantee that the patents covering certain of its technologies and processes will not be contested, found to be invalid, unenforceable or owned by another or circumventable. There can be no assurance that its pending patent applications will result in patents being issued, or that its competitors will not circumvent, or challenge the validity of, any patents issued to the Company. Any such objections and rejections may adversely affect the Company’s other patents and patent applications. There can be no assurance that measures taken by the Company to protect its proprietary information will prevent the unauthorized disclosure or use of this information or that others will not be able to independently develop such information. In addition, in the event that another party infringes its patent rights or other proprietary rights, the enforcement of such rights can be a lengthy and costly process, with no guarantee of success. Moreover,NYSE, there can be no assurance that claims alleging infringement by the Company of the proprietary rights of otherswe will not be brought against the Companyable to maintain such listing in the futurefuture. As a result, investors may find it difficult to buy or that any such claimssell or obtain accurate quotations for our common stock, and the liquidity of our common stock may remain limited. These factors may have an adverse impact on the trading and price of our common stock.

We cannot predict the extent to which an active public trading market for our common stock will not be successful. If the Company is unable to maintain the proprietary nature of its technologies, its ability to marketdevelop or be competitive with respect to somesustained. If an active public trading market does not develop or all of its products maycannot be affected, which could reduce its sales and affect its profitability. Also, as the Company’s patents expire, competitors may utilize the technology found in such patents to commercialize their own products. Moreover, while the Company seeks to secure additional patents on commercially desirable improvements, there can be no assurance that the Company will be successful in securing such patents, or that such additional patents will adequately offset the effect of expiring patents. Further, pending patent applications are not enforceable.

The Company’s policy is to file patent applications and to protect certain technology, inventions and improvements that are commercially important to the development of the Company’s business. The Company’s strategy has been to apply for and maintain patent protection for inventions and their applications which it believes has potential commercial value in countries that offer significant market potential. Because of the high costs of applying for, procuring and maintaining patents, the Company is unable to file patent applications covering all of its products in every country and as a result its patents are limited in scope and geographic coverage and may not protect the Company from competing products in those markets.

The Company’s success may depend, in part, on its ability to continue to use certain software in its products and in its business. This software may have been created by contractors to the Company or may include third-party software such as open source software. There is a possibility that claims will be made that this software infringes the copyright and/or trade secret rights of one or more third parties and that such claims may affect the Company’s right to use the software.

From an international perspective, protection of intellectual property outside of the U.S. is uncertain to the Company. The laws of some countries may not protect the Company’s intellectual property rights to the same extent as laws in the U.S. The intellectual property rights the Company enjoys in one country or jurisdiction may be rejected in other countries or jurisdictions, or, if recognized there, the rights may be significantly diluted. This may affect the Company’s ability to commercialize its products, grow its product sales and maintain market share in countries outside the U.S. It may be necessary or useful for the Company to participate in proceedings to determine the validity of its foreign intellectual property rights, or those of its competitors, which could result in substantial cost and divert its resources, efforts and attention from other aspects of its business.

The Company’s trademarks on its consumer products lines were limited in scope and geographic coverage and therefore may not significantly distinguish these products from their competition. These products’ trade secrets were also limited in scope and geographic coverage and therefore may not adequately protect these products from products offered by competitors.

The Company owned several key federal and international trademark registrations, and has federal trademark applications pending in the United States and abroad for additional trademarks, that cover its consumer products, including the no!no! Hair products. That product line has been sold to a third-party buyer; a substantial amount of the purchase price for the consumer products division which is due to be paid to the Company depends upon the purchaser’s ability to sell those products to consumers. Even though those federal registrations were granted to the Company, those trademark rights may still be challenged by other parties. Furthermore, as registration is usually a requirement for protection in most foreign countries, if those marks were not registered in certain countries, the purchaser may not have any enforceable rights against competitors in those countries. It is also possible that competitors to these products will adopt and register trademarks similar to the marks already registered by the Company for these product lines, thus impeding the ability of the purchasers to build brand identity and possibly leading to customer confusion between the consumer products and the products of competitors.

The requirement to protect and enforce these registrations could result in the purchaser incurring substantial costs in prosecuting or defending trademark infringement suits. It can be difficult and costly to defend trademarks from encroachment, especially on the Internet, or misappropriation overseas; the consumer products’ customers may become confused and direct their purchases to competitors. If the purchaser of this product line fails to effectively enforce these trademark rights, its competitive position and brand recognition may be diminished.

Additionally, third parties may independently discover trade secrets and proprietary information that allow them to develop technologies and products that are substantially equivalent or superior to those in the Company’s former consumer products line. The Company attempted to protect its trade secrets by, among other steps, entering into confidentiality agreements with third parties, employees and consultants. However, those steps may prove to be ineffective and may be found to be invalid by the laws of a particular state or country. Moreover, these agreements can be breached and, if they are and even if the purchaser is able to prove the breach or that the technology has been misappropriated under applicable state law, there may not be an adequate remedy available to the purchaser. Without the protection afforded by patent, trade secret and proprietary information rights, the purchaser of this line may face direct competition from others commercializing their products using the Company’s technology, which may have a material adverse effect on the purchaser’s business and its prospects and thus on its ability to pay the royalty on sales of these products which is due to the Company.

The Company must monitor and protect its internet domain names to preserve their value. The Companysustained, you may be unable to prevent third parties from acquiring domain names that are similar to, infringe on or otherwise decrease the value of its trademarks.liquidate your investment in our common stock.

Third parties may acquire substantially similar domain namesAt present, there is minimal public trading in our common stock. We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that decrease the value of the Company’s domain nameswe are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and trademarks and other proprietary rights which may hurt its business. Moreover, the regulation of domain namesothers in the United Statesinvestment community that generate or influence sales volume, and foreign countries is subject to change. Governing bodies could appoint additional domain name registrars or modify the requirements for holding domain names. Governing bodies could also establish additional “top-level” domains, which are the portion of the Web address that appearseven if we came to the rightattention of the “dot,”such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as “com,” “gov”us or “org.”purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable. As a result, the Company may not maintain exclusive rights to all potentially relevant domain names in the United States or in other countries in which the Company conducts business, which could harm its business or reputation.

Claims that the Company misuses the intellectual property of others could subject the Company to significant liability and disrupt its business.

The Company may become subject to material legal proceedings and claims relating to intellectual property matters, including claims of infringement by competitors and other third parties with respect to current or future products, e-commerce and other web-related technologies, online business methods, trademarks, copyrights or other proprietary rights. Its competitors, some of which may have substantially greater resources than the Company has and may have made significant investments in competing products and technologies, may have, or seek to apply for and obtain, patents, copyrights or trademarks that will prevent, limit or interfere with the Company’s ability to make, use and sell its current and future products and technologies. The Company may not be successful in defending allegations of infringement of these patents, copyrights or trademarks. Further, the Company may not be aware of all of the patents and other intellectual property rights owned by third parties that may be potentially adverse to its interests. The Company may need to resort to costly and time-consuming litigation to protect and/or enforce its proprietary rights or to determine the scope and validity of a third party’s patents or other proprietary rights, including whether any of its products, technologies or processes infringe the patents or other proprietary rights of third parties. Any failure to enforce or protect its rights could cause the Company to lose the ability to exclude others from using its technologies to develop or sell competing products. The Company may incur substantial expenses in defending against third-party infringement claims regardless of the merit of such claims. In addition, while the Company maintains insurance for certain risks, the amount of its insurance coverage may not be adequate to cover the total amount of all insured claims and liabilities. It also is not possible to obtain insurance against all potential risks and liabilities. The outcome of any such proceedings is uncertain and, if unfavorable, could force the Company to discontinue sales of the affected products or impose significant penalties or restrictions on its business. The Company does not conduct comprehensive patent searches to determine whether the technologies used in its products infringe upon patents held by others. In addition, product development is inherently uncertain in a rapidly evolving technological environment in whichconsequence, there may be numerous patent applications pending, manyperiods of which are confidentialseveral days or more when filed, with regard to similar technologies.

If the Companytrading activity in our shares is unable to defend its intellectual property rights internationally, it may face increased competition outside the U.S., which could materially and adversely affect its future business, prospects, operating results and financial results and financial condition.

Risks Related to the Company’s Regulatory Matters

The Company’s failure to obtain and maintain FDA clearancesminimal or approvals on a timely basis, or at all, would prevent the Company from commercially distributing and marketing current or upgraded products in the United States, which could severely harm our business.

The Company’s products, including its LHE product line and the products marketed through the now-sold skincare and consumer products divisions, were and are subject to rigorous regulation by the FDA and numerous other federal, state and foreign governmental authorities. The process of obtaining regulatory clearances or approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all. In particular, the FDA permits commercial distribution of a new medical device only after the device has received clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act or is the subject of an approved premarket approval application, or PMA, unless the device is specifically exempt from those requirements. Should the FDA require, or a change in current regulations occur, that our products be FDA-cleared for marketing and sale in the U.S. we may be required to incur significant expense and engage in a time consuming process seeking such approvals. If we were unable to obtain the required FDA approvals for these products ornon-existent, as necessary to make certain claims about the efficacy of the products, our sales of these products in the U.S. could be materially adversely affected.

The FDA clears marketing of lower-risk medical devices through the 510(k) process if the manufacturer demonstrates that the new product is substantially equivalent to other 510(k)-cleared products. High risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or implantable devices, or devices not deemed substantially equivalentcompared to a previously cleared device, require the pre-market approval (PMA). The PMA process is more costly,seasoned issuer which has a large and much longer, than the 510(k) clearance process. A PMA application must be supported by extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the FDA’s satisfaction the safety and efficacysteady volume of the device for its intended use.

The Company does not currently have any products approved for market through the PMA process. Several products are cleared for market through the 510(k) pathway or are class I products which have been designated as exempt from premarket 510(k) notification requirements. The marketing and sale of the no!no!® family of consumer products in the United States (excluding no!no! Skin and no!no! Glow which have FDA clearance), a markettrading activity that accounted for approximately 89% of the totalwill generally support continuous sales of this line of products for the year ended December 31, 2016, does not currently require FDA marketing clearance. Accordingly, the no!no!® line of products does not currently have any FDA-cleared indications as to their efficacy in terms of long-term or permanent hair removal or reduction in hair re-growth. Accordingly, the sale of these products is subject to limitations on the advertising claims allowed to be made regarding the hair removal and hair reduction effects of these products. This product line was sold to ICTV Brands on January 23, 2017; $4.5 million of the purchase price is in the form of a continuing royalty to be paid by the purchaser post-closing. The ability of ICTV Brands to effectively market the no!no! family of consumer products, and thus to pay the royalty to the Company, may be affected by the limitations on advertising inherent to these products and on any changes to the regulation of these products by the FDA.

The Company’s failure to comply with U.S. federal, state and foreign governmental regulations could lead to the issuance of warning letters or untitled letters, the imposition of injunctions, suspensions or loss of regulatory clearance or approvals, product recalls, or corrective action, termination of distribution, product seizures or civil penalties. In the most extreme cases, criminal sanctions or closure of the manufacturing facility are possible.

If required, clinical trials necessary to support a 510(k) notice or PMA application will be expensive and will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Delays or failures in our clinical trials will prevent us from commercializing any modified or new products and will adversely affect our business, operating results and prospects.

Initiating and completing clinical trials necessary to support a 510(k) notice or a PMA application will be time-consuming and expensive and the outcome uncertain. Moreover, the results of early clinical trials are not necessarily predictive of future results, and any product the Company advances into clinical trials may not have favorable results in early or later clinical trials.

Conducting successful clinical studies will require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Patient enrollment in clinical trials and completion of patient participation and follow-up depend on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by patients enrolled as subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and ability to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our products or if they determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts. Patients may also not participate in our clinical trials if they choose to participate in contemporaneous clinical trials of competitive products. In addition, patients participating in clinical trials may die before completion of the trial or suffer adverse medical events unrelated to investigational products.

Development of sufficient and appropriate clinical protocols to demonstrate safety and efficacy may be required and the Company may not adequately develop such protocols to support clearance and approval. Further, the FDA may require the Company to submit data on a greater number of patients than it originally anticipated and/or for a longer follow-up period or change the data collection requirements or data analysis for any clinical trials. Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of our products or result in the failure of the clinical trial. The FDA may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.

The Company’s medical device operations are subject to pervasive and continuing FDA regulatory requirements.

Medical devices regulated by the FDA are subject to “general controls” which include: registration with the FDA; listing commercially distributed products with the FDA; complying with good manufacturing practices under the quality system regulations; filing reports with the FDA of and keeping records relative to certain types of adverse events associated with devices under the medical device reporting regulation; assuring that device labeling complies with device labeling requirements; reporting certain device field removals and corrections to the FDA; and obtaining premarket notification 510(k) clearance for devices prior to marketing. Some devices known as “510(k)-exempt” can be marketed without prior marketing clearance or approval from the FDA. In addition to the “general controls,” some Class II medical devices are also subject to “special controls,” including adherence to a particular guidance document and compliance with the performance standard. Instead of obtaining 510(k) clearance, some Class III devices are subject to premarket approval (PMA). In general, obtaining premarket approval to achieve marketing authorization from the FDA is a more onerous process than seeking 510(k) clearance.

Many medical devices are also regulated by the FDA as “electronic products.” In general, manufacturers and marketers of “electronic products” are subject to certain FDA regulatory requirements intended to ensure the radiological safety of the products. These requirements include, but are not limited to, filing certain reports with the FDA about the products and defects/safety issues related to the products as well as complying with radiological performance standards.

The medical device industry is now experiencing greater scrutiny and regulation by Federal, state and foreign governmental authorities. Companies in our industry are subject to more frequent and more intensive reviews and investigations, often involving the marketing, business practices, and product quality management including standards for device recalls and product labeling. Such reviews and investigations may result in the civil and criminal proceedings; the imposition of substantial fines and penalties; the receipt of Warning Letters, untitled letters, demands for recalls or the seizure of our products; the requirement to enter into corporate integrity agreements, stipulated judgments or other administrative remedies, and result in our incurring substantial unanticipated costs and the diversion of key personnel and management’s attention from their regular duties, any of which may have an adverse effect on our financial condition, results of operations and liquidity, and may result in greater and continuing governmental scrutiny of our business in the future.

The Company must also have the appropriate FDA clearances and/or approvals from other governmental entities in order to lawfully market devices and or/drugs. The FDA, federal, state or foreign governments and agencies may disagree that the Company has such clearance and/or approvals for all of its products and may take action to prevent the marketing and sale of such devices until such disagreements have been resolved.

Additionally, Federal, state and foreign governments and entities have enacted laws and issued regulations and other standards requiring increased visibility and transparency of our Company’s interactions with healthcare providers. For example, the U.S. Physician Payment Sunshine Act requires us to disclose payments and other transfers of value to all U.S. physicians and U.S. teaching hospitals at the U.S. federal level made after August 1, 2013. Failure to comply with these legal and regulatory requirements could impact our business, and we have had and will continue to spend substantial time and financial resources to develop and implement enhanced structures, policies, systems and processes to comply with these legal and regulatory requirements, which may also impact our business.

Healthcare policy changes may have a material adverse effect on the Company.

Healthcare costs have risen significantly over the past decade. As a result, there have been and continue to be proposals Federal, state and foreign governments and regulators as well as third-party insurance providers to limit the growth of these costs. Among these proposals are regulations that could impose limitations on the prices the Company will be able to charge for its products, the amounts of reimbursement available for its products from governmental agencies or third-party payors, requirements regarding the usage of comparative studies, technology assessments and healthcare delivery structure reforms to determine the effectiveness and select the products and therapies used for treatment of patients. While we believe our products provide favorable clinical outcomes, value and cost efficiency, the resources necessary to demonstrate this value to our customers, patients, payors, and regulators is significant and may require longer periods of time and effort in which to obtain acceptance of our products. There is noshare price. We cannot give you any assurance that an active public trading market for our effortscommon stock will develop or be successful, and these limitations could have a material adverse effect on the Company’s financial position and results of operations.

These changes and additional proposed changes in the future could adversely affect the demand for the Company’s products as well as the way in which the Company conducts its business. For example, the Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act of 2010 were enacted into law in the U.S. in March 2010. The law imposed on medical device manufacturers a 2.3 percent excise tax on U.S. sales of Class I, II and III medical devices beginning in January 2013, which includes certain products marketed and sold by the Company, as well as requiring research into the effectiveness of treatment modalities and instituting changes to the reimbursement and payment systems for patient treatments. In addition, governments and regulatory agencies continue to study and propose changes to the laws governing the clearance or approval, manufacture and marketing of medical devices, which could adversely affect our business and results of operations.

FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. The FDA is currently exploring ways to modify its 510(k) clearance process. In addition, due to changes at the FDA in general, it has become increasingly more difficult to obtain 510(k) clearance as data requirements have increased. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be. However, any changes could make it more difficult for the Company to maintain or attain clearance or approval to develop and commercialize our products and technologies.

Various healthcare reform proposals have also emerged at the state level. The Company cannot predict what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or regulation will have on the Company. However, an expansion in government’s role in the U.S. healthcare industry may lower reimbursements for the Company’s products, reduce medical procedure volumes and adversely affect the Company’s business, possibly materially. In addition, if the excise taxes contained in the House or Senate health reform bills are enacted into law, the Company’s operating expenses resulting from such an excise tax and results of operations would be materially and adversely affected.

sustained. If the effectiveness and safety of the Company’s devices are not supported by long-term data, the Company’s revenues could decline.

The Company’s products may not be accepted in the market if the Company does not produce clinical data supported by the independent efforts of clinicians, and if that data indicates that treatment with the Company’s products does not provide patients with sustained benefits or that treatment with the Company’s products is less effective or less safe than the Company’s current data suggests, the Company’s revenues could decline. In addition, the FDA could then bring legal or regulatory enforcement actions against the Company and/or its products including, but not limited to, recalls or requirements for pre-market 510(k) authorizations. The Company can give no assurance that its data will be substantiated in studies involving more patients. In such a case, the Company may never achieve significant revenues or profitability, and with regard to its consumer products line, which was sold to ICTV Brands on January 23, 2017, the Company may not collect the $4.5 million of the purchase price which is in the form of a continuing royalty from the sale of these products by ICTV Brands, due to the inability of ICTV Brands to effectively market the no!no! family of consumer products.

If the Company is found tocannot be promoting the use of its devices for unapproved or “off-label” uses or engaging in other noncompliant activities, the Companysustained, you may be subject to recalls, seizures, fines, penalties, injunctions, adverse publicity, prosecution, or other adverse actions, resulting in damage to its reputation and business.

The Company’s labeling, advertising, promotional materials and user training materials must comply with the FDA and other applicable laws and regulations, including the prohibition of the promotion of a medical device for a use that has not been cleared or approved by the FDA. Obtaining 510(k) clearance or PMA approval only permits the Company to promote its products for the uses specifically cleared by the FDA. Use of a device outside its cleared or approved indications is known as “off-label” use. Physicians and consumers may use the Company’s products off-label because the FDA does not restrict or regulate a physician’s choice of treatment within the practice of medicine nor is there oversight on patient use of over-the-counter devices. Although the Company may request additional cleared indications for our current products, the FDA may deny those requests, require additional expensive clinical data to support any additional indications or impose limitations on the intended use of any cleared product as a condition of clearance. Even if regulatory clearance or approval of a product is granted, such clearance or approval may be subject to limitations on the intended uses for which the product may be marketed and reduce our potential to successfully commercialize the product and generate revenue from the product.

If the FDA determines that the Company’s labeling, advertising, promotional materials, or user training materials, or representations made by Company personnel, include the promotion of an off-label use for the device, or that the Company has made false or misleading or inadequately substantiated promotional claims, or claims that could potentially change the regulatory status of the product, the agency could take the position that these materials have misbranded the Company’s devices and request that the Company modifies its labeling, advertising, or user training or promotional materials and/or subject the Company to regulatory or legal enforcement actions, including the issuance of an Untitled Letter or a Warning Letter, injunction, seizure, recall, adverse publicity, civil penalties, criminal penalties, or other adverse actions. It is also possible that other federal, state, or foreign enforcement authorities might take action if they consider the Company’s labeling, advertising, promotional, or user training materials to constitute promotion of an unapproved use, which could result in significant fines, penalties, or other adverse actions under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, we would be subject to extensive fines and penalties and the Company’s reputation could be damaged and adoption of the products would be impaired. Although the Company intends to refrain from statements that could be considered off-label promotion of its products, the FDA or another regulatory agency could disagree and conclude that the Company has engaged in off-label promotion. For example, the Company has made statements regarding some of its devices that the FDA may view as off-label promotion. In addition, any such off-label use of the Company’s products may increase the risk of injury to patients, and, in turn, the risk of product liability claims, and such claims are expensive to defend and could divert the Company’s management’s attention and result in substantial damage awards against the Company.

The Company currently markets the no!no!® product for hair removal. Based on previous feedback received from the FDA, this product is not considered a medical device so long as the Company does not promote the product for medical claims. Promotion of this product for claims beyond those agreed upon by the FDA may subject the product to regulation by the FDA, and may require clearance of a 510(k) notice to continue marketing the product.

The Company may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and regulations and could face substantial penalties if the Company is unable to fully comply with such laws.

While the Company does not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, many healthcare laws and regulations apply to the Company’s business. For example, the Company could be subject to healthcare fraud and abuse and patient privacy regulation and enforcement by both the federal government and the statesliquidate your investment in which the Company conducts its business. The healthcare laws and regulations that may affect the Company’s ability to operate include:

Recently, the medical device industry has been under heightened scrutiny as the subject of government investigations and regulatory or legal enforcement actions involving manufacturers who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business, including arrangements with physician consultants. If the Company’s operations or arrangements are found to be in violation of any of the laws described above or any other governmental regulations that apply to the Company, the Company may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or restructuring of its operations. Any penalties, damages, fines, exclusions, curtailment or restructuring of the Company’s operations could adversely affect its ability to operate its business and its financial results. The risk of the Company being found in violation of these laws is increased by the fact that many of these laws are broad and their provisions are open to a variety of interpretations. Any action against the Company for violation of these laws, even if the Company successfully defends against that action and the underlying alleged violations, could cause the Company to incur significant legal expenses and divert its management’s attention from the operation of its business. If the physicians or other providers or entities with whom the Company does business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on the Company’s business.

The Company or its subsidiaries’ failure to obtain or maintain necessary FDA clearances or approvals, or equivalents thereof in the U.S. and relevant foreign markets, could hurt our ability to distribute and market our products.

In both the Company’s and its subsidiaries’ United States and foreign markets, the Company and its subsidiaries are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the United States and at analogous levels of government in foreign jurisdictions.

For example, certain of the Company’s skincare products and product candidates may fall under the regulatory purview of various centers at the FDA and in other countries by similar health and regulatory authorities.

In addition, the formulation, manufacturing, packaging, labeling, distribution, importation, sale and storage of the Company’s and its subsidiaries’ products are subject to extensive regulation by various federal agencies, including, but not limited to, the FDA, the FTC, State Attorneys General in the United States, the Ministry of Health, Labor and Welfare in Japan, as well as by various other federal, state, local and international regulatory authorities in the countries in which its products are manufactured, distributed or sold. If the Company or its manufacturers fail to comply with those regulations, the Company and its subsidiaries could become subject to significant penalties or claims, which could harm its results of operations or its ability to conduct its business. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketing of its products, resulting in significant loss of net sales. The Company’s failure to comply with federal or state regulations, or with regulations in foreign markets that cover its product claims and advertising, including direct claims and advertising by the Company or its subsidiaries, may result in enforcement actions and imposition of penalties or otherwise harm the distribution and sale of its products. Further, the Company and its subsidiaries’ businesses are subject to laws governing our accounting, tax and import and export activities. Failure to comply with these requirements could result in legal and/or financial consequences that might adversely affect its sales and profitability. Each medical device that the Company wishes to market in the U.S. must first receive either 510(k) clearance or premarket approval from the FDA unless an exemption applies. Either process can be lengthy and expensive. The FDA’s 510(k) clearance process may take from three to twelve months, or longer, and may or may not require human clinical data. The premarket approval process is much more costly and lengthy. It may take from eleven months to three years, or even longer, and will likely require significant supporting human clinical data. Delays in obtaining regulatory clearance or approval could adversely affect the Company’s revenues and profitability. Although the Company has obtained 510(k) clearances for its LHE devices as these clearances may be subject to revocation if post-marketing data demonstrates safety issues or lack of effectiveness. Similar clearance processes may apply in foreign countries. Further, more stringent regulatory requirements or safety and quality standards may be issued in the future with an adverse effect on the Company’s business.common stock.

Although cosmetic products such as those contained in the Company’s former Neova product division are not subject to any FDA premarket approval or clearance process, they must, nonetheless, comply with the FDA’s formulation, manufacturing and labeling requirements or such products may be considered adulterated or misbranded by the agency which could subject the Company to potential regulatory or legal enforcement actions. Similar, or more stringent, requirements may apply in foreign jurisdictions as well. The Company may also find that if its cosmetic products compete with a third-party’s drug product, competitive and regulatory pressure may be applied against the cosmetic products. Some cosmetic products may be viewed by the FDA or international regulatory agencies as drugs or devices to a large extent based upon the promotional claims or ingredients. Because there is a degree of subjectivity in determining whether marketing materials or statements constitute product claims and whether they involve drug claims, the Company’s claims and interpretation of applicable regulations may be challenged, which could harm its business.

Sunscreen products such as those contained in the Company’s former Neova product division that contain ingredients or make claims beyond those identified by the FDA in its sunscreen monograph and corresponding guidance documents are considered over-the-counter drugs. The cosmetics containing sunscreen ingredients are required to conform with the FDA’s sunscreen monograph as well as other international regulatory requirements for sunscreen products. The FDA may view some of the Company’s sunscreen products as new drugs if the FDA determines that its formula and/or claims are not in compliance with the monograph or applicable guidance. In addition, certain countries may impose additional regulatory requirements upon these products in order for these products to be marketed and sold in those countries.

The Company has modified some of its products and sold them under prior 510(k) clearances. The FDA could decide the modifications required new 510(k) clearances and require the Company to cease marketing and/or recall the modified products.

Any modification to one of the Company’s 510(k) cleared devices that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance or a pre-market approval. The Company may be required to submit pre-clinical and clinical data depending on the nature of the changes and the product. The Company may not be able to obtain additional 510(k) clearances or pre-market approvals for modifications to, or additional indications for, its existing products in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect its ability to introduce new or enhanced products into the market in a timely manner, which in turn would harm its revenue and operating results. The Company has modified some of its marketed devices, but the Company has determined, and may make such additional determinations in the future, that new 510(k) clearances or pre-market approvals are not required. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review the manufacturer’s decision. The Company cannot be certain that the FDA would agree with any of its prior or future decisions not to seek new 510(k) clearances or pre-market approvals. If the FDA requires the Company to seek new 510(k) clearance or a pre-market approval for any modification, the Company also may be required to cease marketing, distributions and/or recall the modified device until the Company obtains such 510(k) clearance or pre-market approval, and may be subject to significant regulatory fines or penalties. The FDA could also bring legal or regulatory enforcement action against the Company or its products.

Any recall or FDA requirement that the Company seek additional approvals or clearances could result in significant delays, fines, increased costs associated with modification of a product, loss of revenue and potential operating restrictions imposed by the FDA. New submissions to obtain 510(k) clearance or PMA approval could require additional pre-clinical and/or clinical testing which could be expensive and time consuming.

There is no guarantee that the FDA will grant 510(k) clearance or PMA approval of our future products and failure to obtain necessary clearances or approvals for our future products would adversely affect our ability to grow our business.

Some of the Company’s new or modified products may require the FDA clearance of a 510(k) notice. In addition some of the products may require clinical trials to support regulatory approval and we may not successfully complete these clinical trials. The FDA may not approve or clear these products for the indications that are necessary or desirable for successful commercialization. Indeed, the FDA may refuse requests for 510(k) clearance or premarket approval of new products. Failure to receive clearance or approval for new products would have an adverse effect on the Company’s ability to expand our business.

The results of the Company’s clinical trials may not support our product candidate claims or may result in the discovery of adverse side effects.

Even if any of the Company’s clinical trials are completed as planned, it cannot be certain that study results will support product candidate claims or that the FDA or foreign regulatory authorities will agree with our conclusions regarding them. Success in pre-clinical evaluation and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

The Company’s market acceptance in international markets requires regulatory approvals from foreign governments and may depend on third party reimbursement of participants’ cost.

Even if the Company obtains and maintains the necessary foreign regulatory registrations or approvals, market acceptance of the Company’s products in international markets may be dependent, in part, upon the availability of reimbursement within applicable healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance. The Company may seek international reimbursement approvals for its products, but the Company cannot assure you that any such approvals will be obtained in a timely manner, if at all. Failure to receive international reimbursement approvals in any given market could have a material adverse effect on the acceptance or growth of the Company’s products in that market or others.

If the Company or its third-party manufacturers or suppliers fail to comply with the FDA’s Quality System Regulation or any applicable state equivalent, the Company’s manufacturing operations could be interrupted and the Company’s potential product sales and operating results could suffer.

The Company and some of its third-party manufacturers and suppliers are required to comply with some or all of the FDA’s drug Good Manufacturing Practices or its QSR, which delineates the design controls, document controls, purchasing controls, identification and traceability, production and process controls, acceptance activities, nonconforming product requirements, corrective and preventive action requirements, labeling and packaging controls, handling, storage, distribution and installation requirements, records requirements, servicing requirements, and statistical techniques potentially applicable to the production of the Company’s medical devices. The Company and its manufacturers and suppliers are also subject to the regulations of foreign jurisdictions regarding the manufacturing process if the Company markets its products overseas. The FDA enforces the QSR through periodic and announced or unannounced inspections of manufacturing facilities. The Company’s facilities have been inspected by the FDA and other regulatory authorities, and the Company anticipates that it and certain of its third-party manufacturers and suppliers will be subject to additional future inspections. If the Company’s facilities or those of its manufacturers or suppliers are found to be in non-compliance or fail to take satisfactory corrective action in response to adverse QSR inspectional findings, FDA could take legal or regulatory enforcement actions against the Company and/or its products, including but not limited to the cessation of sales or the recall of distributed products, which could impair the Company’s ability to produce its products in a cost-effective and timely manner in order to meet its customers’ demands. The Company may also be required to bear other costs or take other actions that may have a negative impact on its future sales and its ability to generate profits.

Current regulations depend heavily on administrative interpretation. If the FDA does not believe that the Company is in substantial compliance with applicable FDA regulations, the agency could take legal or regulatory enforcement actions against the Company and/or its products. The Company is also subject to periodic inspections by the FDA, other governmental regulatory agencies, as well as certain third-party regulatory groups. Future interpretations made by the FDA or other regulatory bodies made during the course of these inspections may vary from current interpretations and may adversely affect the Company’s business and prospects. The FDA’s and foreign regulatory agencies’ statutes, regulations, or policies may change, and additional government regulation or statutes may be enacted, which could increase post-approval regulatory requirements, or delay, suspend, prevent marketing of any cleared / approved products or necessitate the recall of distributed products. The Company cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the U.S. or abroad.

Recently, the medical device industry has been under heightened FDA scrutiny as the subject of government investigations and enforcement actions. If the Company’s operations and activities are found to be in violation of any FDA laws or any other governmental regulations that apply to the Company, the Company may be subject to penalties, including civil and criminal penalties, damages, fines and other legal and/or agency enforcement actions. Any penalties, damages, fines, or curtailment or restructuring of the Company’s operations or activities could adversely affect its ability to operate its business and its financial results. The risk of the Company being found in violation of FDA laws is increased by the fact that many of these laws are broad and their provisions are open to a variety of interpretations. Any action against the Company for violation of these laws, even if the Company successfully defends against that action and its underlying allegations, could cause the Company to incur significant legal expenses and divert its management’s attention from the operation of its business. Where there is a dispute with a federal or state governmental agency that cannot be resolved to the mutual satisfaction of all relevant parties, the Company may determine that the costs, both real and contingent, are not justified by the commercial returns to the Company from maintaining the dispute or the product.

Various claims, design features or performance characteristics of Company drugs, medical devices and cosmetic products, that the Company regarded as permitted by the FDA without marketing clearance or approval, may be challenged by the FDA or state regulators. The FDA or state regulatory authorities may find that certain claims, design features or performance characteristics, in order to be made or included in the products, may have to be supported by further studies and marketing clearances or approvals, which could be lengthy, costly and possibly unobtainable.

The Company has no outstanding Warning Letters from the FDA.

If the Company fails to comply with ongoing regulatory requirements, or if it experiences unanticipated problems with products, these products could be subject to restrictions or withdrawal from the market.

The Company is also subject to similar state requirements and licenses. Failure by the Company to comply with statutes and regulations administered by the FDA and other regulatory bodies, discovery of previously unknown problems with its products (including unanticipated adverse events or adverse events of unanticipated severity or frequency), manufacturing problems, or failure to comply with regulatory requirements, or failure to adequately respond to any FDA observations concerning these issues, could result in, among other things, any of the following actions:

If any of these actions were to occur, it would harm the Company’s reputation and adversely affect its business, financial condition and results of operations.

The Company’s medical products may in the future be subject to product recalls that could harm its reputation, business and financial results.

The FDA has the authority to require the recall of commercialized medical device products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by the Company or one of its distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of the Company’s products would divert managerial and financial resources and have an adverse effect on its financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to the FDA within ten (10) working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. The Company may initiate voluntary recalls involving its products in the future that the Company determines do not require notification of the FDA. If the FDA disagrees with the Company’s determinations, they could require the Company to report those actions as recalls. A future recall announcement could harm the Company’s reputation with customers and negatively affect its sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted. No recalls of the Company’s medical products have been reported to the FDA.

If the Company’s medical products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device or one of our similar devices were to recur. If the Company fails to report these events to the FDA within the required timeframes, or at all, the FDA could take enforcement action against the Company. Any such adverse event involving its products also could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of the Company’s time and capital, distract management from operating our business, and may harm its reputation and financial results.

Risk Factors Relating to an Investment in our Securities

Potential fluctuations in the Company’s operating results could lead to fluctuations in the market price for the Company’s common stock.

The Company’s results of operations are expected to fluctuate significantly from quarter to quarter, depending upon numerous factors, including:

Variations in the above operating factors could lead to significant fluctuations in the market price of the Company’s stock.

The Company’sOur stock price has been and continues to be volatile.

The market price for the Company’sour common stock could fluctuate due to various factors. In addition to other factors described in this section, these factors may include, among others:

In addition, the stock markets have, in recent years, experienced significant volume and price fluctuations. These fluctuations often have been unrelated to the operating performance of the specific companies whose stock is traded. Market prices and the trading volume of our stock may continue to experience significant fluctuations due to the matters described in this Item 1A,above, as well as economic and political conditions in the United States and worldwide, investors’ attitudes towards our business prospects, and products, and changes in the interests of the investing community. As a result, the market price of the Company’sour common stock has been and may continue to be adversely affected and our shareholdersstockholders may not be able to sell their shares or to sell them at desired prices.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

 On September 29, 2015, the Company received written notification from The NASDAQ Stock Market LLC that the closing bid price of its common stock had been below the minimum $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance with the requirements for continued listing on the NASDAQ Global Select Market under NASDAQ Marketplace Rule 5450(a)(1). The Notice provides the Company with an initial period of 180 calendar days, or until March 28, 2016, to regain compliance with the listing rules. The Company would regain compliance if the closing bid price of its common stock is $1.00 per share or higher for a minimum period of ten consecutive business days during this compliance period, as confirmed by written notification from NASDAQ. If the Company does not achieve compliance by March 28, 2016, NASDAQ would provide notice that its securities were subject to delisting from the NASDAQ Global Select Market. As of March 28, 2016, the Company’s bid price remained under $1.00 per share.

On March 10, 2016, trade in the Company’s common stock transferred to the NASDAQ Capital Market. This move to the Capital Market will not affect the trading of the Company's common stock. The NASDAQ Capital Market is a continuous trading market that operates in substantially the same manner as the NASDAQ Global Select Market, but with less stringent listing requirements. The Company's common shares will continue to trade on NASDAQ under the symbol "PHMD."

On March 30, 2016, the Company was notified by NASDAQ that its request for a six month extension of time in which to comply with the bid price requirement had been granted. The transfer of its stock from the NASDAQ Global Select Market to the NASDAQ Capital Market was part of the process to request and receive such an extension. PhotoMedex considered a range of available options to regain compliance with this continued listing standard, and had provided written notice to NASDAQ of its intention to cure the minimum bid price deficiency during a second grace period by carrying out a reverse stock split, if necessary. At its 2015 annual meeting, PhotoMedex shareholders granted authority to the board of directors to implement, as needed, a reverse split in a ratio up to one common share for each five shares outstanding.

On September 7, 2016 the Company’s Board of Directors approved a reverse split in a ratio of 1-for-five.  The 2016 reverse split was implemented on September 23, 2016 (the “2016 Reverse Split”).  The amount of authorized Common Stock as well as the par value for the Common Stock were not effected.  Any fractional shares resulting from the 2016 Reverse Split were rounded up to the nearest whole share.

All Common Stock, warrants, options and per share amounts set forth herein are presented to give retroactive effect to the 2016 Reverse Split for all periods presented.

On September 23, 2016, the Company’s Common stock and warrants approved for listing on the NASDAQ Capital Market under the symbol PHMD.  Shares were previously listed on the NASDAQ Global Market under the same symbol.

On November 18, 2016, the Company received written notification (the “Notice”) from NASDAQ that the Company’s stockholder equity reported on its Form 10-Q for the period ended September 30, 2016 had fallen below the minimum requirement of $2.5 million, and that the Company is therefore not in compliance with the requirements for continued listing on the NASDAQ Capital Market under NASDAQ Marketplace Rule 5550(b)(1). The Notice provided the Company with a period of 45 calendar days, or until January 2, 2017, to submit a plan to regain compliance with the listing rules; that plan was filed with NASDAQ on January 10, 2017 under a one-week extension due to the holiday period.

NASDAQ has granted the Company an extension of time to comply with the Rule until March 10, 2017, by which time the Company must complete its review and reconciliation of the post-Asset Sale financials and file with the Securities and Exchange Commission and NASDAQ a report on Form 8-K evidencing compliance with the Rule by disclosing:

(i)        the original deficiency letter from NASDAQ dated November 17, 2004;

(ii)        a description of the completed transaction or event that enabled the Company to satisfy the stockholders’ equity requirement for continued listing;

(iii)        either an affirmative statement that, as of the date of the report the Company believed that it had regained compliance with the stockholders’ equity requirement based upon the completed transaction or event OR a balance sheet no older than 60 days with pro forma adjustments for any significant transactions or event occurring on or before the report date that evidences compliance with the stockholders' equity requirement, as well as a disclosure that the Company believes it also satisfies the stockholders’ equity requirement as of the report date; and

(iv)        a disclosure stating that NASDAQ will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of the Company’s next periodic report the Company does not evidence compliance, the CompanyWe may be subject to delisting.penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

On March 15, 2017, the Company received notice from NASDAQThe SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that it had granted the Companyhas a market price less than $5.00 per share or an additional extensionexercise price of time to comply with the Rule until March 31, 2017, at which time it was expected to enter into an agreement regarding a transaction with First Capital Real Estate Operating Partnership, L.P. and its affiliates. NASDAQ may grant a further extension to May 17, 2017, by which time the Company must complete its review and reconciliation of the post-Asset Sale financials, complete the pending transaction with First Capital, and file with the Securities and Exchange Commission and NASDAQ a report on Form 8-K evidencing compliance with the Rule, as set forth above.

If the Company fails to evidence compliance with the Rule upon filing its periodic report for the period ended March 31, 2017 with the United States Securities and Exchange Commission and NASDAQ, the Company may beless than $5.00 per share, subject to delisting. In the event the Company does not satisfy the terms, NASDAQ will provide written notification to the Company that its securities will be delisted. At that time, the Company may appeal the delisting notice to a Listing Qualifications Panel.

Because our business will be smaller following the sale of the Consumer Products Division, therecertain exemptions. Our common stock is a possibility that our common stock may be delisted from The NASDAQ Capital Market if we fail“penny stock” and is subject to satisfy the continued listing standards of that market.

As noted above, the Company received notice from NASDAQ that the Company no longer satisfied the $2.5 million stockholders’ equity requirement for continued listing on The NASDAQ Capital Market. Following the sale of the Radiancy Business the Company’s business will be smaller and, therefore, it may fail to satisfy or regain the continued listing standards of The NASDAQ Capital Market. In the event that the Company is unable to satisfy the continued listing standards of The NASDAQ Capital Market, its common stock may be delisted from that market. Any delisting of its common stock from the NASDAQ Capital Market could adversely affect the Company’s ability to attract new investors, decrease the liquidity of its outstanding shares of common stock, reduce the Company’s flexibility to raise additional capital, reduce the price at which the common stock trades and increase the transaction costs inherent in trading such shares with overall negative effects for the Company’s shareholders. In addition, delisting of the Company’s common stock could deter broker-dealers from making a market in or otherwise seeking or generating interest in the common stock, and might deter certain institutions and persons from investing in those securities at all. For these reasons and others, delisting could adversely affect the price of the Company’s common stock and its business, financial condition and results of operations.

We will continue to incur the expenses of complying with public company reporting requirements following the sale of the Neova and Consumer Products divisions.

After the sale of the Neova products and Consumer Products divisions, the Company will continue to be required to comply with the applicable reporting requirements ofRule 15g-9 under the Securities Exchange Act of 1934, as amended, (the “or the Exchange Act ”), even though complianceAct. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with such reporting requirements is economically burdensome.

Shares eligiblea net worth in excess of $1 million or annual incomes exceeding $200,000 or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for future sale by the Company’s current or future stockholderspurchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may causeaffect the Company’s stock priceability of broker-dealers to decline.sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

IfFor any transaction involving a penny stock, unless exempt, the Company’s stockholders or holdersrules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from this rule. In any event, even if our common stock were exempt from this rule, we would remain subject to Section 15(b)(6) of the Company’s other securities sell substantial amountsExchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the Company’s common stockSEC finds that such a restriction would be in the public market, including shares issuedinterest.

Our future capital needs could result in completed acquisitions or upondilution of your investment.

The Gadsden Transaction will involve the exerciseissuance of outstanding options and warrants, then the market price of the Company’s common stock could fall.

Issuancea significant number of shares of our Common stock. In addition, our Board of Directors may determine from time to time that there is a need to obtain additional capital through the Company’sissuance of additional shares of our common stock upon the exercise of options or warrants willother securities. These issuances would likely dilute the ownership interestinterests of our current investors and may dilute the Company’s existing stockholders and could adversely affect the market pricenet tangible book value per share of the Company’sour common stock. Investors in subsequent offerings may also have rights, preferences and privileges senior to our current stockholders which may adversely impact our current stockholders.

As of March 30, 2017, the Company had outstanding stock options to purchase an aggregate of 134,150 shares of common stock and warrants to purchase an aggregate of 64,500 shares of common stock. The exercise of the stock options and warrants and the sales of stock issuable pursuant to them would further reduce a stockholder’s percentage voting and ownership interest. Further, the stock options and warrants are likely to be exercised when the Company’s common stock is trading at a price that is higher than the exercise price of these options and warrants and the Company would be able to obtain a higher price for the Company’s common stock than the Company would receive under such options and warrants. The exercise, or potential exercise, of these options and warrants could adversely affect the market price of the Company’s common stock and the terms on which the Company could obtain additional financing. The ownership interest of the Company’s existing stockholders may be further diluted through adjustments to certain outstanding warrants under the terms of their anti-dilution provisions.

Securities analysts may not initiate coverage for the Company’s common stock or may issue negative reports and this mayWe have a negative impact on the market price of the Company’s common stock.

The trading market for the Company’s common stock may be affected in part by the research and reports that industry or financial analysts publish about the Company or the Company’s business. It may be difficult for companies such as the Company, with smaller market capitalizations, to attract a sufficient number of securities analysts that will cover the Company’s common stock. If one or more of the analysts who elect to cover the Company downgrades the Company’s stock, the Company’s stock price would likely decline rapidly. If one or more of these analysts ceases coverage of the Company, the Company could lose visibility in the market, which in turn could cause its stock price to decline. This could have a negative effect on the market price of the Company’s stock.

Our management will have broad discretion over the use of the proceeds from the future sale of the securities.

In connection with the future sale of our securities, our management will have broad discretion to use the net proceeds from such sale, and investors will be relying on the judgment of our management regarding the application of such proceeds. Our management might not be able to yield a significant return, if any, on any investment of the net proceeds.

The Company has not paid dividends in the past and doesdo not expect to pay dividends in the foreseeable future.

The Company hasWe have never declared or paid cash dividends on itsour capital stock. The CompanyWe currently intendsintend to retain all future earnings for the operation and expansion of itsour business and, therefore, doesdo not anticipate declaring or paying cash dividends in the foreseeable future.

The payment of dividends will be at the discretion of the Company’s boardour Board of directorsDirectors and will depend on the Company’sour results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payments of dividends present in any of the Company’sour future debt agreements and other factors the Company’s boardour Board of directorsDirectors may deem relevant. If the Company doeswe do not pay dividends, a return on your investment will only occur if the Company’sour stock price appreciates.

The Company’s future capital needs could result in dilution of your investment.

The Company’s board of directorsSecurities analysts may determine from time to time that there is a need to obtain additional capital through the issuance of additional shares of the Company’snot initiate coverage for our common stock or other securities. These issuances would likely dilute the ownership interests of the Company’s current investorsmay issue negative reports and this may dilute the net tangible book value per share of the Company’s common stock. Investors in subsequent offerings may also have rights, preferences and privileges senior to the Company’s current stockholders which may adverselya negative impact the Company’s current stockholders.

Our directors, executive officers and principal stockholders currently have substantial control over us and could delay or prevent a change in corporate control.

As of March 30, 2017, our directors, executive officers and holders of more than 5% of our common stock, together with their affiliates, beneficially own, in the aggregate, approximately 22.4% of our outstanding common stock. As a result, these stockholders, if they were to act together, could have significant influence over the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, if they were to act together, could have significant influence over the management and affairs of our company. Accordingly, this concentration of ownership might harmon the market price of our common stock by:stock.

The trading market for our common stock may be affected in part by the research and reports that industry or financial analysts publish about us or our business. It may be difficult for companies such as us, with smaller market capitalizations, to attract a sufficient number of securities analysts that will cover our common stock. If one or more of the analysts who elect to cover our company downgrades our stock, our stock price would likely decline rapidly. If one or more of these analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline. This could have a negative effect on the market price of our stock. 

Nevada law and the Company’sour charter documents contain provisions that could delay or prevent actual and potential changes in control, even if they would benefit stockholders.

As of December 30, 2010, the Company became a corporation chartered in the State of Nevada. The Company is subject to provisions of the Nevada corporate statutes which prohibit a business combination between a corporation and an interested stockholder, which is generally a stockholder holding 10% or more of a company’s stock.

The Company’sOur articles of incorporation authorize the issuance of preferred shares which may be issued with dividend, liquidation, voting and redemption rights senior to our common stock without prior approval by the stockholders. The preferred stock may be issued for such consideration as may be fixed from time to time by theour Board of Directors. TheOur Board of Directors may issue such shares of preferred stock in one or more series, with such designations, preferences and rights or qualifications, limitations or restrictions thereof as shall be stated in the resolution of resolutions.

The issuance of preferred stock could adversely affect the voting power and other rights of the holders of common stock. Preferred stock may be issued quickly with terms calculated to discourage, make more difficult, delay or prevent a change in control of the Companyour company or make removal of management more difficult. As a result, theour Board of Directors’ ability to issue preferred stock may discourage the potential hostile acquirer, possibly resulting in beneficial negotiations. Negotiating with an unfriendly acquirer may result in, among other things, terms more favorable to the Companyus and itsour stockholders. Conversely, the issuance of preferred stock may adversely affect any market price of, and the voting and other rights of the holders of the common stock. The Company presently has no plans to issue any preferred stock.

These and other provisions in the Nevada corporate statutes and our charter documents could delay or prevent actual and potential changes in control, even if they would benefit the Company’sour stockholders.

There are no unresolved comments from the staff of the Securities and Exchange Commission.Not Applicable.

We lease a 5,581 sq. ft. facility in New York that houses parts of sales and operations. The term of the lease runs until December 31, 2017.

We lease office space at a facility in Willow Grove, Pennsylvania that currently houses part of our finance and legal departments.employee. The term of the lease runs untilexpired on April 30, 2017.2017 and we are now on a month-to-month lease. Monthly payments under this lease are approximately $1 thousand.