UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10 - Q

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

For the quarterly period ended September 30, 2014March 31, 2015

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 0-11365
PHOTOMEDEX, INC.
(Exact name of registrant as specified in its charter)

 
Nevada
(State or other jurisdiction
of incorporation or organization)
 
59-2058100
(I.R.S.  Employer
Identification No.)
 

100 Lakeside Drive, Suite 100, Horsham, Pennsylvania 19044
(Address of principal executive offices, including zip code)

(215) 619-3600
(Registrant's telephone number, including area code)

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.
Yes ý  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).
Yes ý  No ☐

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

Large accelerated filer ☐                                                                            Accelerated filer ý

Non-accelerated filer ☐                                                                            Smaller reporting company ☐

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

The number of shares outstanding of the issuer's common stock as of November 10, 2014May 11, 2015 was 19,049,58222,076,718 shares.


PHOTOMEDEX, INC.

INDEX TO FORM 10-Q

Part I. Financial Information:
PAGE
    
 
ITEM 1.  Financial Statements:
 
 a.
Condensed Consolidated Balance Sheets as of September 30, 2014March 31, 2015 (unaudited) and December 31, 20132014
13
    
 b.
Condensed Consolidated Statements of Comprehensive Income (Loss) Income for the three months ended September 30,March 31, 2015 and 2014 and 2013 (unaudited)
24
    
 c.
Condensed Consolidated StatementsStatement of Comprehensive (Loss) IncomeChanges in Equity for the ninethree months ended September 30, 2014 and 2013March 31, 2015 (unaudited)
35
    
 d.
Condensed Consolidated StatementStatements of Changes in EquityCash Flows for the ninethree months ended September 30,March 31, 2015 and 2014 (unaudited)
46
e.
Notes to Unaudited Condensed Consolidated Financial Statements
8
    
 
e. 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)
5
f.
Notes to Condensed Consolidated Financial Statements (unaudited)
6
ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
3229
    
 
ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk
5042
    
 
ITEM 4.  Controls and Procedures
5142
    
Part II. Other Information:Information:
 
    
 
ITEM 1.  Legal Proceedings
5143
    
 
ITEM 1A.  Risk Factors
5345
    
 
ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds
5445
    
 
ITEM 3.  Defaults Upon Senior Securities
5445
    
 
ITEM 4.  Mine Safety Disclosures
5545
    
 
ITEM 5.   Other Information
5545
    
 
ITEM 6. Exhibits
5545
    
  
Signatures
6049
    
  
Certifications
E-31.1


PART I – Financial Information
ITEM 1. Financial Statements
PHOTOMEDEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 September 30, 2014  December 31, 2013   
 (Unaudited)    March 31, 2015  December 31, 2014 
ASSETS     (unaudited)   
Current assets:        
Cash and cash equivalents $15,866  $45,388  $6,199  $10,605 
Short term bank deposit  7   14,113   -   87 
Accounts receivable, net of allowance for doubtful accounts of $13,086 and $10,734, respectively  
22,634
   27,218 
Accounts receivable, net of allowance for doubtful accounts of $13,846 and $13,559, respectively  15,717   21,977 
Inventories, net  24,857   27,547   19,863   19,380 
Deferred tax asset  14,880   13,041 
Deferred tax asset, net  750   762 
Prepaid expenses and other current assets  14,071   12,597   8,234   8,347 
Assets held for sale, net  -   70,855 
Total current assets  92,315   139,904   50,763   132,013 
                
Property and equipment, net  28,849   10,489   14,547   13,802 
Patents and licensed technologies, net  9,381   10,832   8,253   8,811 
Other intangible assets, net  17,515   9,701   7,936   8,337 
Indefinite-lived intangible asset  29,850   - 
Goodwill  74,282   24,930 
Deferred tax asset  23,709   24,039 
Goodwill, net  23,404   24,048 
Deferred tax asset, net  587   567 
Other assets, net  1,569   213   178   185 
Total assets $277,470  $220,108  $105,668  $187,763 
                
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Current portion of notes payable $202  $838  $801  $704 
Current portion of debt  80,108   10,000 
Current portion of long term debt  3,000   38,732 
Accounts payable  13,302   14,785   12,339   12,419 
Accrued compensation and related expenses  3,289   3,230   2,811   2,622 
Other accrued liabilities  16,580   22,032   10,371   13,022 
Deferred revenues  5,089   5,961 
Current portion of deferred revenues  3,998   4,480 
Liabilities held for sale  -   34,497 
Total current liabilities  118,570   56,846   33,320   106,476 
        
Long-term liabilities:                
Long-term note payable, net of current maturities  40   82 
Long-term debt, net of current portion  481   - 
Deferred revenues  1,446   2,758 
Deferred tax liability  9,809   - 
Notes payable, net of current maturities  11   25 
Long term debt, net of current maturities  37,018   37,768 
Deferred revenues, net of current portion  876   1,127 
Other liabilities  7,216   61   148   102 
Total liabilities  137,562   59,747   71,373   145,498 
                
Commitments and Contingencies (Note 12)        
Commitment and contingencies (Note 12)        
                
Stockholders' equity:                
Preferred Stock, $.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2014 and December 31, 2013  -   - 
Common stock, $.01 par value, 50,000,000 shares authorized; 19,049,582 and 18,903,245 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively  
190
   189 
Preferred Stock, $.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2015 and December 31, 2014  -   - 
Common Stock, $.01 par value, 50,000,000 shares authorized; 22,076,718 and 20,376,245 shares issued and outstanding, respectively  221   204 
Additional paid-in capital  107,917   104,954   113,627   110,391 
Retained earnings  30,911   53,679 
Accumulated other comprehensive income  890   1,539 
Accumulated deficit  (77,830)  (67,817)
Accumulated other comprehensive loss  (1,723)  (513)
Total stockholders' equity  139,908   160,361   34,295   42,265 
Total liabilities and stockholders' equity $277,470  $220,108  $105,668  $187,763 
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 13 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands, except share and per share amounts)
(Unaudited)(unaudited)
 
For the Three Months Ended
September 30,
     
 2014  2013  For the Three Months Ended March 31, 
     2015  2014 
Revenues:        
Product sales $29,542  $41,693  $22,773  $45,665 
Services  6,069   4,200   5,376   4,410 
Clinic services  18,092   - 
  53,703   45,893 
          28,149   50,075 
Cost of revenues:                
Product sales  6,846   7,345   5,944   8,608 
Services  1,869   1,721   1,978   1,737 
Clinic services  14,246   - 
  22,961   9,066   7,922   10,345 
                
Gross profit  30,742   36,827   20,227   39,730 
                
Operating expenses:                
Engineering and product development  821   805   755   795 
Selling and marketing  28,840   30,973   20,132   31,625 
General and administrative  11,678   5,972   4,729   7,587 
  41,339   37,750   25,616   40,007 
Loss from continuing operations before interest and other financing expense, net  (5,389)  (277)
                
Operating loss  (10,597)  (923)
        
Other (loss) income:        
Interest and other financing (expense) income, net  (3,824)  473 
        
Loss before income tax (expense) benefit  (14,421)  (450)
Interest and other financing expense, net  (2,551)  (147)
Loss from continuing operations before income taxes  (7,940)  (424)
                
Income tax (expense) benefit  (522)  1,336   (365)  79 
                
Net (loss) income $ (14,943) $886 
Loss from continuing operations  (8,305)  (345)
                
Net (loss) income per share:        
Discontinued operations:        
Loss from discontinued operations, net of taxes  (1,667)  - 
Loss on sale of discontinued operations  (41)  - 
        
Net loss $ (10,013) $ (345)
        
Basic net loss per share:        
Continuing operations $ (0.42) $(0.02) 
Discontinued operations  ( 0.09)  0.00 
 $ (0.51) $(0.02) 
Diluted net loss per share:        
Continuing operations $ (0.42) $(0.02) 
Discontinued operations  ( 0.09)  0.00 
 $ (0.51) $0.02 
Shares used in computing net loss per share:        
Basic $ (0.80) $0.04   19,794,210   18,719,419 
Diluted $ (0.80) $0.04   19,794,210   18,719,419 
                
Shares used in computing net (loss) income per share:        
Basic  18,724,419   19,982,967 
Diluted  18,724,419   20,441,262 
        
Other comprehensive (loss) income :        
Other comprehensive (loss) income:        
Foreign currency translation adjustments  (1,678)  1,884  $ (1,210) $337 
                
Comprehensive (loss) income $ (16,621) $2,770 
Comprehensive loss $ (11,223) $ (8)
                

The accompanying notes are an integral part of these condensed consolidated financial statements.
- 24 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In thousands, except share and per share amounts)
(Unaudited)
  
For the Nine Months Ended
September 30,
 
  2014  2013 
     
Revenues    
Product sales $108,683  $150,381 
Services  15,980   10,793 
Clinic services  31,235   - 
   155,898   161,174 
         
Cost of revenues        
Product sales  22,328   27,513 
Services  5,501   4,809 
Clinic services  23,129   - 
   50,958   32,322 
         
Gross profit  104,940   128,852 
         
Operating expenses:        
Engineering and product development  2,339   2,392 
Selling and marketing  90,886   90,767 
General and administrative  30,717   17,899 
   123,942   111,058 
         
Operating (loss) profit  (19,002)  17,794 
         
Other (loss) income:        
Interest and other financing (expense) income, net  (4,145)  470 
         
(Loss) income before income tax benefit (expense)  (23,147)  18,264 
         
Income tax benefit (expense)  379   (3,072)
         
Net (loss) income $ (22,768) $15,192 
         
Net (loss) income per share:        
Basic $ (1.22) $0.74 
Diluted $ (1.22) $0.72 
         
Shares used in computing net (loss) income per share:        
Basic  18,722,459   20,518,493 
Diluted  18,722,459   20,976,788 
         
Other comprehensive income (loss):        
Foreign currency translation adjustments  (649)  92 
         
Comprehensive (loss) income $ (23,417) $15,284 
         

The accompanying notes are an integral part of these condensed consolidated financial statements.
- 3 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30, 2014MARCH 31, 2015
(In thousands, except share and per share amounts)
(Unaudited)

           
           
  Common Stock  Additional Paid-In  Retained  Accumulated Other Comprehensive   
  Shares  Amount  Capital  Earnings  Income  Total 
BALANCE, JANUARY 1, 2014  18,903,245  $189  $104,954  $53,679  $1,539  $160,361 
Stock-based compensation related to stock options and restricted stock  -   -   3,874   -   -   3,874 
Stock options issued to consultants for services  -   -   70   -   -   70 
Restricted stock issued, net of payroll taxes paid  146,337   1   (981)  -   -   (980)
Other comprehensive loss  -   -   -   -   (649)  (649)
Net loss for the nine months ended September 30, 2014      -   -   (22,768)  -   (22,768)
BALANCE, September 30, 2014  19,049,582  $190  $107,917  $30,911  $890  $139,908 


           
           
  Common Stock  Additional Paid-In  Accumulated  Accumulated Other Comprehensive   
  Shares  Amount  Capital  Deficit  Loss  Total 
BALANCE, JANUARY 1, 2015  20,376,245  $204  $110,391  $ (67,817) $ (513) $42,265 
Stock-based compensation related to stock options and restricted stock, including accelerated vesting for discontinued operations  1,700,473   17   3,320   -   -   3,337 
Registration costs  -   -   (84)  -   -   (84)
Other comprehensive loss  -   -   -   -   (1,210)  (1,210)
Net loss for the three months ended March 31, 2015      -   -   (10,013)  -   (10,013)
BALANCE, MARCH 31, 2015  22,076,718  $221  $113,627  $ (77,830) $ (1,723) $34,295 
























The accompanying notes are an integral part of these condensed consolidated financial statements.
- 45 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)unaudited)

  For the Three Months Ended March 31, 
  2015  2014 
Cash Flows From Operating Activities:    
Net loss $ (10,013) $ (345)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  1,865   1,636 
Provision for doubtful accounts  406   813 
Deferred income taxes  (47)  857 
Stock-based compensation  974   1,262 
Gain disposal of property and equipment  -   (10)
Financing expense  1,481   - 
Changes in operating assets and liabilities:        
Accounts receivable  5,687   4,367 
Inventories  (624)  571 
Prepaid expenses and other assets  330   (280)
Accounts payable  (1,487)  (5,837)
Accrued compensation and related expenses  200   (641)
Other accrued liabilities (see Note 9)  (2,518)  (6,383)
Other liabilities  1   42 
Deferred revenues  (712)  (538)
Net cash used in operating activities – continuing operations  (4,457)  (4,486)
Net cash provided by operating activities – discontinued operations  541   - 
Net cash used in operating activities  (3,916)  (4,486)
         
Cash Flows From Investing Activities:        
Purchases of property and equipment  (31)  (85)
Lasers placed into service  (1,758)  (1,717)
Proceeds from (investments in) short-term deposit  87   (4,235)
Proceeds on sale of property and equipment  -   20 
Acquisition, net of cash received  -   (42)
Net cash used in investing activities – continuing operations  (1,702)  (6,059)
Net cash provided by investing activities – discontinued operations  38,245   - 
Net cash provided by (used in) investing activities  36,543   (6,059)
(Unaudited)


  
For the Nine Months Ended
September 30,
 
  2014  2013 
Cash Flows From Operating Activities:
    
Net (loss) income $ (22,768) $15,192 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:        
Depreciation and amortization  7,599   4,510 
Provision for doubtful accounts  5,831   3,428 
Deferred income taxes  250   3,438 
Stock-based compensation  3,944   3,795 
Insurance reserves  (256)  - 
Loss on disposal of property and equipment  (10)  - 
Amortization of bank debt issue costs and discount  2,358   - 
Changes in operating assets and liabilities:        
Accounts receivable  2,177   (5,761)
Inventories  2,665   (5,142)
Prepaid expenses and other assets  (1,218)  (994)
Accounts payable  (11,746)  1,456 
Accrued compensation and related expenses  (2,003)  200 
Other accrued liabilities  (11,953)  (9,158)
Deferred revenues  (2,274)  252 
Net cash (used in) provided by operating activities  (27,404)  11,216 
         
Cash Flows From Investing Activities:        
Purchases of property and equipment  (438)  (710)
Sales of (investment in) short term bank deposits  14,106   (481)
Acquisition, net of cash received  (77,510)  84 
Lasers placed in service  (5,387)  (4,430)
Proceeds from sales of property and equipment  20   - 
Net cash used in investing activities  (69,209)  (5,537)
         
Cash Flows From Financing Activities:        
Payments on notes payable  (679)  (624)
Repayments of term debt  (326)  (28)
Proceeds from credit facilities  75,000   - 
Repayments of credit facilities  (5,687)  - 
Proceeds from option exercises  -   23 
Repurchase of company stock  -   (18,982)
Issuance of restricted stock, net of payroll taxes paid  (980)  - 
Net cash (used in) provided by financing activities  67,328   (19,611)
Effect of exchange rate changes on cash  (237)  54 
Net decrease in cash and cash equivalents  (29,522)  (13,878)
Cash and cash equivalents, beginning of period  45,388   44,348 
         
Cash and cash equivalents, end of period $15,866  $30,470 
         
Supplemental information:        
Cash paid for income taxes $1,036  $6,582 
         
Cash paid for interest $936  $13 











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

- 56 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

  For the Three Months Ended March 31, 
  2015  2014 
     
Cash Flows From Financing Activities:    
Registration costs  (84)  - 
Repayment of debt  (36,478)  - 
Payments on notes payable  (189)  (224)
Repayment of short-term debt  -   (5,000)
Net cash used in financing activities – continuing operations  (36,751)  (5,224)
Net cash used in financing activities – discontinued operations  (66)  - 
Net cash used in financing activities  (36,817)  (5,224)
         
Effect of exchange rate changes on cash  (216)  105 
Net decrease in cash and cash equivalents  (4,406)  (15,664)
Cash and cash equivalents, beginning of period  10,605   45,388 
         
Cash and cash equivalents, end of period $6,199  $29,724 
         
Supplemental information:        
         
Cash paid for income taxes $97  $405 
Cash paid for interest $1,182  $47 
         


















The accompanying notes are an integral part of these condensed consolidated financial statements
- 7 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Note 1
The Company:
Background
PhotoMedex, Inc. (and its subsidiaries) (the "Company") is a Global Skin Health products and services company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians ophthalmologists, optometrists, consumers and patients.consumers. The Company provides proprietary products and services that address skin diseases and conditions including psoriasis, vitiligo, acne, actinic keratosis (a precursor to certain types of skin cancer), photo damage and unwanted hair as well as fixed-site laser vision correction services at our LasikPlus® vision centers.
On December 13, 2011, the Company closed the reverse merger with Radiancy, Inc. Immediately following the reverse merger, the pre-reverse merger shareholders of PhotoMedex, Inc. ("Pre-merged PhotoMedex") collectively owned approximately 20% of the Company's outstanding common stock, and the former Radiancy, Inc. stockholders owned approximately 80% of the Company's outstanding common stock.
The merger was accounted for as a reverse acquisition with Radiancy treated for accounting purposes as the acquirer. As such, the financial statements of Radiancy, Inc. were treated as the historical financial statements of the Company, with the results of Pre-merged PhotoMedex, Inc. being included from December 14, 2011 and thereafter.
On March 3, 2014, PhotoMedex' wholly-owned subsidiary, Radiancy, Inc., formed a wholly-owned subsidiary in Hong Kong, Radiancy (HK) Limited, through which the Company has started to directly market certain products and services to patients and consumers in selected markets in that region.
On March 5, 2014, PhotoMedex formed a wholly-owned subsidiary in India, PhotoMedex India Private Limited, through which the Company plans to directly market certain products and services to patients and consumers in selected markets in that country.hair.
On May 12, 2014, PhotoMedex completed the acquisition of 100% of the shares of LCA-Vision Inc. ("LCA-Vision" or "LCA"), which was a publicly–traded Delaware corporation. LCA is a provider of fixed-site laser vision corrections services at its LasikPlus® vision centers. Through this acquisition, the Company addedintended to add an additional operating segment to its organization. The Company plansplanned to begin to directly market certain of its existing products from these centers. The results of operations of LCA-Vision have been included from May 13, 2014 through September 30, 2014 inJanuary 31, 2015 into the Company's consolidated financial statements.statements as a discontinued operation. (See Note 23, Acquisition of LCA-Vision Inc.).
On August 18, 2014,January 31, 2015, the Company formed a wholly-owned subsidiarysold 100% of the shares of LCA-Vision Inc. for $40 million in Korea, PhotoMedex Korea Limited, through whichcash. Excluding working capital adjustments and professional fees, the Company plansrealized net proceeds of approximately $37.7 million, substantially all of which were used to directly market certain productsrepay indebtedness. The LCA-Vision assets and servicesliabilities were considered to patientsbe held for sale as of December 31, 2014. For the statement of operations, for the three months ended March 31, 2015, the activity related to LCA's operations through the date of disposition, and consumers in selected markets in that country.
The Company has a business plan focused on four key components – skilled direct sales force to target Physician and Professional Segments; expertise in global consumer marketing; a full product life cycle model representing the ability to develop and commercialize innovative products from concept through regulatory, physician acceptance, and ultimately marketed directly to the consumerany gains or losses therefrom, are captured as dictated by normal product-life-cycle evolution and gaining market share in the competitive laser vision correction space through adaptation of the Company's established marketing methodologies as well as establishing XTRAC centers of excellence in key markets where our clinics exist and thereby leverage under-utilized capacity at these clinics. The Company reorganized its business into four operating segments to better align its organization based upon the Company's management structure, products and services offered, markets served and types of customers.discontinued operations. (See Note 2,Discontinued Operations.)
On May 12, 2014, the Company entered into an $85 million senior secured credit facilities ("the Facilities") with JP Morgan Chase ("Chase") which included a $10 million revolving credit facility and a $75 million four-year term loan. The facilities were utilized to refinance the existing term debt with Chase, fund the acquisition of LCA and for working capital and other general corporate purposes.
- 6 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Interest is determined at Eurodollar plus a margin between 3.25% and 4.50%. The margin is updated quarterly based on the then-current leverage ratio. The facilities are secured by a first priority security interest in and lien on all assets of the Company. All current and future subsidiaries are guarantors on the facilities.
There are financial covenants including a maximum leverage covenant and a minimum fixed charge covenant, which the Company must maintain. These covenants will be determined quarterly based on a rolling past four quarters of financial data. As of September 30, 2014, the Company continued to fail to meet both financial covenants and remains in default of the credit facilities.
On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and engaged a third-party independent advisor to assist the Company in negotiating a longer term solution to the defaults. The parties had entered into an initial Forbearance Agreement (the "Initial Forbearance Agreement") on August 25, 2014. On November 4, 2014,Effective February 28, 2015, the Company entered into ana Second Amended and Restated Forbearance Agreement (the "Amended"Second Amended Forbearance Agreement") with the lenders that are parties to the Credit Agreement dated May 12, 2014, and with Chase, as Administrative Agent for the Lenders.
Pursuant to the terms of the Second Amended Forbearance Agreement, the Lenders have agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default from August 25, 2014 until February 28, 2015,April 1, 2016, or earlier if anany new event of default occurs (the "Forbearance Period"). TheChase and the Lenders agreed that the Company shall not be obligated to pay the principal amounts set forth in the Credit Agreement for any date identified therein during the period beginning on February 28, 2015 and ending on the end of the Forbearance Period (the "Effective Period"), and that any failure to do so shall not constitute a default or event of default. Instead, the Lenders and the Company agreed tothat the Company would make prepayments against the Term Loan of $250,000 on the term loanfirst business day of $938 each on November 1 and December 1, 2014, and on January 1 and February 1, 2015,month during the Forbearance Period, which will be applied in direct order of maturity. The Company also agreed that, on or before the second businessfifth calendar day after certain dates set forth in the Amended Forbearance Agreement,of each month, the Company would pay against the revolving loans an amount equalTerm Loan $125,000 to 75%the extent that the cash-on-hand exceeds $5 million, and 100% of the cash-on-hand that exceeded $18 million. In addition,in excess of $7 million, also to be applied to the Term Loan in inverse order of maturity.
Under the provisions of the Second Amended Forbearance Agreement, the Company will make a payment of $1.5 million toward the revolving loans on or before February 16, 2015. The interest rates on the Loans undernot have to comply with certain financial covenants contained in the Credit Agreement is increasedfor the Forbearance Period, and that any failure to do so shall not constitute a default or event of default. However, the Company has to meet certain minimum EBITDA targets (as defined in the forbearance agreement) for the quarters ending March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015. The Company has met the EBITDA target as of March 31, 2015.
- 8 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Pursuant to the Second Amended Forbearance Agreement, all loans under the Facilities shall, beginning November 1, 2014, tobear interest at the CB Floating Rate (as defined in the Credit Agreement) plus 4.00%; an additional 2.00% will be added to that rate upon. Additionally, following the occurrence and continuance of any Defaultdefault or Eventevent of Defaultdefault (other than a specified eventSpecified Event of default).Default), the Company's obligations under the Facilities shall, at the option of Chase and the Lenders, bear interest at the rate of 2.00% plus the rate otherwise in effect.
The Company and its subsidiaries have also agreed not to pay in cash any compensation to either the Company's Chief Executive Officer or President that is based on a percentage of sales or another metric other than those officer's base salary, perquisites and standard benefits provided to or on behalf of those executives under the terms of their employment agreements. Those payments may be accrued or deferred and paid in cash only after the repayment of the Facilities in full.
The Company has retainedagreed to provide, on or before May 29, 2015, a strategic business plan for the overall direction of the Company's and its subsidiaries' businesses, including projected income statements, balance sheets, schedules of cash receipts and cash disbursements, payments and month-end balances, and detailed notes and assumptions, projected on a monthly basis through April 1, 2016. The Company has also agreed to provide quarterly updates to that plan by August 31, 2015, November 30, 2015 and February 29, 2016.
The Company continues to retain the services of both Getzler Henrich & Assoc. LLC, a third-party independent business advisor, as well as Canaccord Genuity, Inc., a banking and financial services company, and has also retained the services of Nomura Securities International, Inc., also a banking and financial services company. During the Forbearance Period,Agreement and amendments, the Company and these advisors will continue to prepare and distribute offering memoranda and other marketing materials to prospective lenders with regard to seeking a newproposed credit facility for the Company, the proceeds of which would be in an amount sufficient to repay in full and in cash the Company's remaining obligations under the Credit Agreement.Facilities, and to explore other strategic alternatives. The closing of any such a proposed Refinancingrefinancing or alternative arrangement would occur no later than the end of the Forbearance Period. Furthermore, the Company will evaluate all strategic alternatives as part of its engagement with its investment advisors.
The Company agreed to limit certain capital expenditures to $575,$100,000 per quarter, except for those involving the Company's XTRAC ® or VTRAC ®  medical devices, and will not make investments or acquire any other interests in affiliated companies except as agreed to by the Lenders. The
As consideration for the Lender's entry into the Second Amended Forbearance Agreement, the Company alsohas agreed to executepay the Lenders certain documents pledging 64,896 sharesforbearance fees (the "Forbearance Fees"), which are earned on the last business day of Radiancy (Israel) Ltd. and 13,000 shares of PhotoMedex Korea Ltd., as well as a Subordination Agreement in favoreach of the Administrative Agentspecified months: for May and June 2015, $750,000 each month; for July through September 2015, $1,000,000 each month; for October through December 2015, $1,250,000 each month; and for January through March 2016, $1,500,000 each month. However, should the Company complete a capital transaction acceptable to the Lenders with respectthat reduces the then-outstanding principal balance of the Term Loan to less than $10 million and repays all Forbearance Fees accrued and unpaid to that date, the monthly Forbearance Fee for the remainder of the Forbearance Period shall be earned and accrued in an amount that is 50% of the amount specified for each of the remaining months. In addition, the $500,000 Forbearance Fee set forth in Section 4.10(b) of the Amended Forbearance Agreement remains due and payable to the Company's secured loan to its subsidiary, PhotoMedex Technology, Inc.Lenders on the earlier of the Expiration Date or the Termination Date of the Forbearance Period.
The Second Amended Forbearance Agreement is also subject to customary covenants, including limitations on the incurrence of or payments on indebtedness to other persons or entities and requirements that the Company provide periodic financial information and information regarding the status of outstanding litigation involving the Company and its subsidiaries to the Lenders.
If, by the end As of the Forbearance Period,March 31, 2015, the Company and its Lenders have not entered into another Forbearance Agreement or otherwise reached an agreement regarding the Credit Agreement and the Facilities, the Lenders haveis in compliance with these covenants.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


the right to declare all of the obligations under the Credit Agreement and Facilities due and payable, including principal and interest, as authorized by the Credit Agreement, and to enforce additional obligations under the Forbearance Agreement. Such a result would have a material adverse effect on the Company and its financial condition.
As consideration for the Lender's entry into the Forbearance Agreement, the Company paid the Lender a fee of $196.
Basis of Presentation:
Accounting Principles
The accompanying condensed consolidated financial statements and related notes should be read in conjunction with our consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 20132014 ("fiscal 2013"2014"). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") related to interim financial statements. As permitted under those rules, certain information and footnote disclosures normally required or included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been condensed or omitted. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are considered necessary to present fairly the results of the Company's financial position and operating results for the interim periods. All such adjustments are of a normal recurring nature.
The results for the three and nine months ended September 30, 2014March 31, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 20142015 or for any other interim period or for any future period.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and the wholly- -ownedand majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The LCA-Vision results have been
Held for Sale Classification and Discontinued Operations
A disposal group is reported as held for sale when management has approved or received approval to sell and is committed to a formal plan, the disposal group is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the next 12 months and certain other specified criteria are met. A disposal group classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying value of the business exceeds its estimated fair value less cost to sell, a loss is recognized. However, when disposal group meets the held for sale criteria, the Company, first evaluates whether the carrying amounts of the assets not covered by ASC 360-10 included in the financial statements from May 13, 2014,disposal group (such as goodwill) are required to be adjusted in accordance with other applicable GAAP before measuring the day followingdisposal group at fair value less cost to sell.
Assets and liabilities related to a disposal group classified as held for sale are segregated in the closing dateconsolidated balance sheet in the period in which the business is classified as held for sale.
Operations of a disposal group are reported as discontinued operations if the disposal group is classified as held for sale, the operations and cash flows of the acquisition.
Reclassification
Certain reclassifications from the prior year presentationbusiness have been made to conformor will be eliminated from our ongoing operations as a result of a disposal transaction and we will not have any significant continuing involvement in the operations of the business after the disposal transaction. See below regarding change to the criteria for reporting discontinued operations.
The results of discontinued operations are reported in discontinued operations in the consolidated statement of operations for current year presentation. These reclassifications didand prior periods commencing in the period in which the business meets the criteria of a discontinued operation, and include any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell. Depreciation is not have material impactrecorded on assets of a business while it is classified as held for sale.
At December 31, 2014, held for sale assets and liabilities consisted of the Company's equity, net assets,LCA operating segment, and its results of operations or cash flows.were presented as discontinued operations in the consolidated statement of operations in the periods ended December 31, 2014 and March 31, 2015 (see also Note 2Discontinued Operations).
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Revenue Recognition
The Company recognizes revenues from product sales when the following four criteria have been met: (i) the product has been delivered or the services have been performed and the Company has no significant remaining obligations; (ii) persuasive evidence of an arrangement exists; (iii) the price to the buyer is fixed or determinable; and (iv) collection is reasonably assured. Revenues from product sales are recorded net of provisions for estimated chargebacks, rebates, expected returns and cash discounts.
The Company ships most of its products FOB shipping point, although from time to time certain customers, for example governmental customers, will insist uponbe granted FOB destination.destination terms. Among the factors the Company takes into account when determining the proper time at which to recognize revenue are (i) when title to the goods transfers and (ii) when the risk of loss transfers. Shipments to distributors or physicians that do not fully satisfy the collection criteria are recognized when invoiced amounts are fully paid or fully assured.assured and included in deferred revenues until that time.
For revenue arrangements with multiple deliverables within a single, contractually binding arrangement (usually sales of products with separately priced extended warranty), each element of the contract is accounted for as a separate unit of accounting when it provides the customer value on a stand-alone basis and there is objective evidence of the fair value of the related unit.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


With respect to sales arrangements under which the buyer has a right to return the related product, revenue is recognized only if all the following conditions are met: the price is fixed or determinable at the date of sale; the buyer has paid, or is obligated to pay and the obligation is not contingent on resale of the product; the buyer's obligation would not be changed in the event of theft or physical destruction or damage of the product; the buyer has economic substance; the Company does not have significant obligations for future performance to directly bring about resale of the product by the buyer; and the amount of future returns can be reasonably estimated.
The Company provides a provision for product returns based on the experience with historical sales returns, in accordance with ASC Topic 605-15 with respect to sales of product when a right of return exists. Reported revenues are shown net of the returns provision. Such allowance for sales returns is included in Other Accrued Liabilities. (See Note 89).
Deferred revenue includes amounts received with respect to extended warranty maintenance, repairs and other billable services and amounts not yet recognized as revenues. Revenues with respect to such activities are deferred and recognized on a straight-line basis over the duration of the warranty period, the service period or when service is provided, as applicable to each service.
The Company has two distribution channels for its phototherapy treatment equipment. The Company either (i) sells its lasers through a distributor or directly to a physician or (ii) places its lasers in a physician's office (at no charge to the physician) and generally charges the physician a fee for an agreed upon number of treatments. In some cases, the Company and the customer stipulate to a quarterly or other periodic target of procedures to be performed, and accordingly revenue is recognized ratably over the period.
When the Company places a laser in a physician's office, it generally recognizes service revenue based on the number of patient treatments performed, or purchased under a periodic commitment, by the physician. Amounts collected with respect to treatments to be performed through laser-access codes that are sold to physicians free of a periodic commitment, but not yet used, are deferred and recognized as a liability until the physician performs the treatment. Unused treatments remain an obligation of the Company because the treatments can only be performed on Company-owned equipment. Once the treatments are performed, this obligation has been satisfied.
The Company defers substantially all revenue from sales of laser-access treatment codes ordered by and performed to its customers within the last two weeks of the period in determining the amount of procedures performed by its physician-customers. Management believes this approach closely approximates the actual amount of unused treatments that existed at the end of a period.
Patient Receivables and Allowance for Doubtful Accounts
The Company, through its subsidiary LCA-Vision, provides financing to some of its patients, including those who could not otherwise obtain third-party financing. The terms of the financing usually require the patient to pay an up-front fee which is intended to cover some or all of the variable costs, and then generally the remainder of the payments are automatically deducted from the patient's bank account over a period of 12 to 36 months. The Company has recorded an allowance for doubtful accounts as a best estimate of the amount of probable credit losses from the patient financing program. Each month, management reviews and adjusts the allowance based upon past experience with patient financing. The Company charges-off receivables against the allowance for doubtful accounts when it is probable that a receivable will not be recovered. The Company's policy is to reserve for all patient receivables that remain open past their financial maturity date and to provide reserves for patient collectability rates, recent default activity and the current credit environment. Bad debt expense, on patient receivables, was $133 and $244 or less than 1% of the clinics revenues for the three months ended September 30, 2014 and the period of May 13, 2014 through September 30, 2014, respectively.
For patients that the Company internally finances, the Company charges interest at market rates. Finance and interest charges on patient receivables were $205 and $318 for the periods ended September 30, 2014.
- 911 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Insurance Reserves
The Company, through its subsidiary LCA-Vision, maintains a captive insurance company to provide professional liability insurance coverage for claims brought against the Company and its optometrists. In addition, the captive insurance company's charter allows it to provide professional liability insurance for the Company's ophthalmologists, none of whom are currently insured by the captive. The Company uses the captive insurance company for both primary insurance and excess liability coverage. A number of claims are now pending with the captive insurance company. Since the captive insurance company is wholly-owned enterprise, it is included in the Company's consolidated financial statements. As of September 30, 2014, the insurance reserves were $6,094, which represented an actuarially determined estimate of future costs associated with claims filed as well as claims incurred but not yet reported. The actuaries determine loss reserves by comparing the Company's historical claim experience to comparable insurance industry experience.
Functional Currency
The currency of the primary economic environment in which the operations of the Company, its U.S. subsidiaries and Radiancy Ltd., its subsidiary in Israel, are conducted is the US dollar ("$" or "dollars"). Thus, the functional currency of the Company and its subsidiaries (other than the foreign subsidiaries mentioned below) is the dollar (which is also the reporting currency of the Group). The operations of the other foreign subsidiaries are each conducted in the local currency of the subsidiary. These currencies include: Great Britain Pounds (GBP), Brazilian Real (BRL), Hong Kong Dollar (HKD), Columbian Peso (COP), South Korean Won (KRW) and Indian Rupee (INR). Substantially all of the Group's revenues are derived in dollars or in other currencies linked to the dollar. Purchases of most materials and components are carried out in, or linked to the dollar.
Balances denominated in, or linked to, foreign currencies are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions included in the statement of comprehensive income (loss), the exchange rates applicable to the relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financing income or expenses.
Assets and liabilities of foreign subsidiaries, whose functional currency is their local currency, are translated from their respective functional currency to U.S. dollars at the balance sheet date exchange rates. Income and expense items are translated at the average rates of exchange prevailing during the year. Translation adjustments are reflected in the consolidated balance sheets as a component of accumulated other comprehensive income.income (loss). Deferred taxes are not provided on translation adjustments as the earnings of the subsidiaries are considered to be permanently reinvested.
Fair Value Measurements
The Company measures and discloses fair value in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification 820, Fair Value Measurements and Disclosures ("ASC Topic 820"). ASC Topic 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions there exists a three-tier fair-value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


 •Level 1 – unadjusted quoted prices are available in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
 •Level 2 – pricing inputs are other than quoted prices in active markets that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
 •Level 3 – pricing inputs are unobservable for the non-financial asset or liability and only used when there is little, if any, market activity for the non-financial asset or liability at the measurement date. The inputs into the determination of fair value require significant management judgment or estimation. Fair value is determined using comparable market transactions and other valuation methodologies, adjusted as appropriate for liquidity, credit, market and/or other risk factors

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
The fair value of cash and cash equivalents and short term bank deposits are based on its demand value, which is equal to its carrying value. The estimated fair values of notes payable and long term debt which are based on borrowing rates that are available to the Company for loans with similar terms, collateral and maturity approximate the carrying values. Additionally, the carrying value of all other monetary assets (including long term receivables which bear interest) and liabilities (including the secured credit facilities) is estimated to be equal to their fair value due to the short-term nature or commercial terms of these instruments.
- 12 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Derivative financial instruments are measured at fair value, on a recurring basis. The fair value of derivatives generally reflects the estimated amounts that the Group would receive or pay to terminate the contracts at the reporting dates, based on the prevailing currency prices and the relevant interest rates. Such measurement is classified within Level 2.
In addition to items that are measured at fair value on a recurring basis, there are also assets and liabilities that are measured at fair value on a nonrecurring basis. Assets and liabilities that are measured at fair value on a nonrecurring basis include certain long-lived assets, including goodwill. As such, we have determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.
Derivatives
The groupCompany applies the provisions of Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging. In accordance with ASC Topic 815, all the derivative financial instruments are recognized as either financial assets or financial liabilities on the balance sheet at fair value. The accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For derivative financial instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge or a hedge of a net investment in a foreign operation.
From time to time the Company carries out transactions involving foreign exchange derivative financial instruments (mainly forward exchange contracts) which are designed to hedge the cash flows expected to be paid with respect to forecasted expenses of the Israeli subsidiary (Radiancy) denominated in Israeli local currency (NIS) which is different than its functional currency.
Such derivatives were not designated as hedging instruments, and accordingly they were recognized in the balance sheet at their fair value, with changes in the fair value carried to the Statement of Comprehensive Income (Loss) and included in interest and other financing income (expenses),expenses, net.
- 11 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


At September 30, 2014,March 31, 2015, the balance of such derivative instruments amounted to approximately $632$468 in liabilitiesassets and approximately $449 and $266$206 were recognized as financing expenseincome in the Statement of Comprehensive (Loss) Income during the three and nine monthsquarter ended September 30, 2014, respectively.that date.
The nominal amounts of foreign currency derivatives as of September 30, 2014March 31, 2015 consist of forward transactions for the exchange of $17,807$7,200 into NIS as of September 30, 2014.
Accrued Enhancement Expense
The Company, through its subsidiary LCA-Vision, includes participation in its LasikPlus Advantage Plan® (acuity program) in the base surgical price for substantially all of its patients. Under the acuity program, if determined to be medically appropriate, the Company provides post-surgical enhancements free of charge should the patient not achieve the desired visual correction during the initial procedure. Under this pricing structure, the Company accounts for the acuity program similar to a warranty obligation. Accordingly, the Company accrues the costs expected to be incurred to satisfy the obligation as a liability and cost of revenue at the point of sale given its ability to estimate reasonably such costs based on historical trends and the satisfaction of all other revenue recognition criteria.
This estimate is reviewed throughout the year with consideration to factors such as procedure cost and historical procedure volume when determining the appropriateness of the recorded balance.March 31, 2015.
Accrued Warranty Costs
The Company offers a standard warranty on product sales generally for a one to two-year period. In the case of domestic sales of XTRAC lasers, however, the Company has offered longer warranty periods, ranging from three to four years, in order to meet competition or meet customer demands. The Company provides for the estimated cost of the future warranty claims on the date the product is sold. Total accrued warranty is included in Other Accrued Liabilities on the balance sheet. The activity in the warranty accrual during the ninethree months ended September 30,March 31, 2015 and 2014 and 2013 is summarized as follows:
 September 30,  March 31, 
 2014  2013  2015  2014 
 (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Accrual at beginning of year $1,151  $1,440  $761  $1,151 
Additions charged to warranty expense  545   1,123   271   256 
Expiring warranties  (209)  (344)  (102)  (69)
Claims satisfied  (667)  (1,077)  (116)  (247)
Total  820   1,142   814   1,091 
Less: current portion  (755)  (1,071)  (673)  (1,021)
Accrued extended warranty $65  $71  $141  $70 
For extended warranty on the consumer products, see Revenue Recognition above.
- 1213 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Earnings Per Share
Basic and diluted earnings per common share were calculated using the following weighted-average shares outstanding:
 
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014 2013 2014 2013 2014  2014 
Weighted-average number of common and common equivalent shares outstanding:            
Basic number of common shares outstanding 18,724,419 19,982,967 18,722,459 20,518,493  19,794,210   18,719,419 
Dilutive effect of stock options and warrants - 458,295 - 458,295  -   - 
Diluted number of common and common stock equivalent shares outstanding 18,724,419 20,441,262 18,722,459 20,976,788  19,794,210   18,719,419 
Diluted earnings per share for the three and nine months ended September 30, 2014,March 31, 2015, exclude the impact of unvested restricted stock, common stock options and warrants, totaling 2,623,6823,563,503 shares, as the effect of their inclusion would be anti-dilutive.anti-dilutive, due to the net loss for the period. Diluted earnings per share for the three and nine months ended September 30, 2013,March 31, 2014, excluded the impact of unvested restricted stock, common stock options and warrants, totaling 2,101,8732,444,016 shares, as the effect of their inclusion would be anti-dilutive.anti-dilutive, due to the net loss for the period.
Adoption of New Accounting Standards
In April 2014, the FASB issued Accounting Standard Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08").
The amendments in ASU 2014-08 change the criteria for reporting discontinued operations while enhancing disclosures in this area. Under the new guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization's operations and financial results. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations.
The provisions of ASU 2014-08 were required to be applied in a prospective manner to disposals or classifications as held for sale components of an entity that occur with annual periods beginning on or after December 15, 2014 and interim periods within those years.
The company applied the provisions of ASU 2014-08 in the first quarter of 2015.
The adoption of ASU 2014-08 did not have a material impact on the Company's consolidated results of operations and financial condition and also did not affect disposals or classifications as held for sale, of components (such as the sale of LCA) that occurred before the provisions of ASU 2014-08 became effective.
Recently Issued Accounting Standards
In May 2014, The FASB issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09").
ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative and qualitative, to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
- 14 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

An entity should apply the amendments in this ASU using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional disclosures.
For a public entity, the amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period (the first quarter of fiscal year 2017 for the Company). Early application is not permitted. The Company is in the process of assessing the impact, if any, of ASU 2014-09 on its consolidated financial statements.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provide guidance on management's responsibility in evaluating whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 also provide guidance related to the required disclosures as a result of management evaluation.
- 13 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.
Adoption of New Accounting StandardsNote 2
Effective January 1, 2014,Discontinued Operations:
LCA, acquired by the Company adopted Accounting Standard Update 2013-11, Income Taxes (Topic 740): Presentationon May 12, 2104, is a provider of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensusfixed-site laser vision corrections services at its LasikPlus® vision centers. The vision centers provide the staff, facilities, equipment and support services for performing laser vision correction that employs advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. The vision centers are supported by independent ophthalmologists and credentialed optometrists, as well as other healthcare professionals. Substantially all of LCA's revenues are derived from the delivery of laser vision correction procedures performed in the vision centers. After preliminary investigations and discussions, the Board of Directors of the FASB Emerging Issues Task Force) ("ASU 2013-11").Company, with the aid of its investment banker, had reached a formal decision during December 2014 to enter into, substantive, confidential discussions with potential third-party buyers and began to develop plans for implementing a disposal of the assets and operations of the business. The Company accordingly classified this former segment as held for sale in accordance and discontinued operations with ASC Topic 360. On February 2, 2015, the Company closed on sale transaction of 100% of the shares of LCA for $40 million in cash. Excluding estimated working capital adjustments and direct expenses (professional fees to third parties), the Company realized net proceeds of approximately $37.7 million which amount is considered as the fair value less cost to sell of LCA. The sale was effective January 31, 2015. No income tax benefit was recognized by the Company from the loss on the sale of discontinued operations.
The amendments in ASU 2013-11 state thataccompanying condensed consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. Also, as of December 31, 2014, balance sheet items related to LCA were presented as assets held for sale and as liabilities held for sale respectively. The Company recognized an unrecognized tax benefit, or a portionestimated loss of an unrecognized tax benefit, should be presented$44,598 on the sale of the discontinued operations in the financial statementsyear ended December 31, 2014, which included a decrease in the implied fair value of goodwill, related to LCA, of $43,091. The remaining loss of $1,507 represents the difference between the adjusted net purchase price and the carrying value of the disposal group. The impairment amount is categorized as level 3 measurements. For the three months ended March 31, 2015, the Company recorded an adjustment of $41 on the sale of the discontinued operations of LCA.
Revenues from LCA, reported as discontinued operations, for the three months ended March 31, 2015 was $9,158. Loss from LCA, reported as discontinued operations, for the three months ended March 31, 2015 was $1,667, which includes stock compensation of $2,363 related to the contractual acceleration of vesting of awards then outstanding to employees from LCA, included as a reductionresult of acceleration of vesting periods, due to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be presented net of deferred tax assets.
ASU 2013-11 applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. For public companies the amendments in this ASU became effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments were applied prospectively to all unrecognized tax benefits that existed at the effective date.
The adoption of the standard did not have a material impact on the Company's consolidated results of operations and financial condition.
Effective January 1, 2014, the Company adopted Accounting Standards Update 2013-5, Foreign Currency Matters (Topic 830) Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ("ASU 2013-5").
ASU 2013-5 clarifies that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business (other than a sale of in-substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. ASU 2013-5 also clarifies that if the business combination achieved in stages relates to a previously held equity method investment (step-acquisition) that is a foreign entity, the amount of accumulated other comprehensive income that is reclassified and included in the calculation of gain or loss shall include any foreign currency translation adjustment related to that previously held investment.
For public companies, the amendments in this Update became effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. In accordance with the transition requirements, the amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted.
The adoption of the standard did not have a material impact on the Company's consolidated results of operations and financial condition.LCA.
- 1415 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The following is a summary of assets and liabilities held for sale in the condensed consolidated balance sheet as of December 31, 2014:
  December 31, 2014 
Assets:  
Cash and cash equivalents $4,514 
Accounts receivable  2,759 
Inventories  119 
Deferred tax assets  1,930 
Other current assets  2,492 
Property & Equipment, net  14,519 
Goodwill, net  6,491 
Other intangible assets, net  38,331 
Other assets  1,207 
Assets held for sale  72,362 
Less: Impairment  (1,507)
Assets held for sale, net $70,855 
     
Liabilities:    
Accounts payable $5,518 
Other accrued liabilities  5,933 
Deferred revenues  97 
Long term debt:  1,080 
Other liabilities  6,870 
Deferred tax liability  14,999 
Liabilities held for sale  34,497 
     
Total net assets of discontinued operations $36,358 
All such assets were disposed of, and the liabilities extinguished upon closing of the sale transaction in February 2015.
Note 23
Acquisition:
Acquisition of LCA-Vision Inc.:
On May 12, 2014, PhotoMedex Inc., completed the acquisition of 100% of the shares of LCA-Vision, a previously publicly-traded Delaware corporation.
LCA is a provider of fixed-site laser vision corrections services at its LasikPlus® vision centers. The vision centers provide the staff, facilities, equipment and support services for performing laser vision correction that employs advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. The vision centers are supported by independent ophthalmologists and credentialed optometrists, as well as other healthcare professionals. Substantially all of LCA's revenues are derived from the delivery of laser vision correction procedures performed in the vision centers.
- 16 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

The purchase price of LCA-Vision was $106,552 in aggregate consideration, paid in cash (including the full use of the credit facility), consisting of:
Fair value LCA-Vision stock (A) $103,896 
Fair value of LCA-Vision restricted stock units, including payroll taxes (B)  2,656 
Total purchase price $106,552 
 
A.Based on 19,347,554 outstanding shares of LCA-Vision common stock at May 12, 2014.
B.Based on 476,436 outstanding or deemed to be outstanding restricted stock units of LCA-Vision common stock at May 12, 2014.
The fair value of the assets acquired and liabilities assumed were based on management estimates and values derived from an outside independent appraisal. The Company expectsexpected that the allocation willwould be finalized within twelve months after the merger. However, LCA was sold in January 2015 and it is presented as a discontinued operations, see Note 2. Accordingly management has determined to retain the provisional amounts. Based on the purchase price allocation, the following table summarizes the estimated provisional fair value amounts of the assets acquired and liabilities assumed at the date of acquisition:
Cash and cash equivalents $29,042 
Current assets, excluding cash and cash equivalents  6,114 
Deferred tax asset, current  1,124 
Property, plant and equipment  17,269 
Identifiable intangible assets  39,050 
Other assets  1,518 
Total assets acquired at fair value  94,117 
     
Current liabilities  (19,009)
Long-term debt  (1,603)
Deferred tax liability, long-term  (9,138)
Other long-term liabilities  (7,397)
Total liabilities assumed  (37,147)
     
Net assets acquired $56,970 
The purchase price exceeded the fair value of the net assets acquired by $49,582, which was recorded as goodwill. LCA was recognized at that time as a new reportable segment and the entire goodwill was allocated to the activities of LCA.
On January 31, 2015, the Company sold 100% of the shares of LCA-Vision Inc. for $40 million in cash. Excluding working capital adjustments and professional fees, the Company realized net proceeds of approximately $37.7 million.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The consolidated results of operations do not include any revenues or expenses related to the LCA-Vision business on or prior to May 13, 2014, the consummation date of the acquisition. The Company's unaudited pro-forma results for the three and nine months ended September 30, 2013 and for the nine months ended September 30, 2014 summarize the combined results of PhotoMedex and LCA-Vision in the following table, assuming the acquisition had occurred on January 1, 2013 and after giving effect to the acquisition adjustments, including amortization of the tangible and definite-lived intangible assets were acquired in the transaction:
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2013  2014  2013 
  (unaudited)  (unaudited)  (unaudited) 
       
Net revenues $66,549  $190,479  $232,743 
Net income (loss)  (2,234)  (31,690)  10,347 
Net income (loss) per share:            
Basic $ (0.11) $ (1.69) $0.50 
Diluted $ (0.11) $ (1.69) $0.49 
Shares used in calculating net income (loss) per share:            
Basic  19,982,967   18,722,459   20,518,493 
Diluted  20,441,262   18,722,459   20,976,788 
These unaudited pro-forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have actually resulted had the acquisition occurred on January 1, 2013, nor to be indicative of future results of operations.
Note 34
Inventories, net:Inventories:
 September 30, 2014  December 31, 2013  
March 31, 2015
  December 31, 2014 
 (unaudited)    (unaudited)   
Raw materials and work in progress $9,364  $12,631  $7,699  $7,483 
Finished goods  15,493   14,916   12,164   11,897 
Total inventories, net $24,857  $27,547 
Total inventories $19,863  $19,380 
Work-in-process is immaterial, given the Company's typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials.
- 16 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Note 45
Property and Equipment, net:Equipment:
 September 30, 2014  December 31, 2013  March 31, 2015  December 31, 2014 
 (unaudited)    (unaudited)   
Lasers-in-service $25,261  $12,599  $20,725  $18,974 
Equipment, computer hardware and software  5,853   4,730   4,902   4,870 
Furniture and fixtures  1,353   705   764   767 
Land and building  2,906   - 
Leasehold improvements  5,831   534   477   481 
  41,204   18,568   26,868   25,092 
Accumulated depreciation and amortization  (12,355)  (8,079)  (12,321)  (11,290)
Property and equipment, net $28,849  $10,489  $14,547  $13,802 
Depreciation and related amortization expense was $4,727$1,052 and $2,085$824 for the ninethree months ended September 30,March 31, 2015 and 2014, and 2013, respectively.
Note 56
Patents and Licensed Technologies, net:
 September 30, 2014  December 31, 2013  March 31, 2015  December 31, 2014 
 (unaudited)    (unaudited)   
Gross Amount beginning of period $15,648  $15,411  $15,626  $15,648 
Additions  139   171   29   168 
Translation differences  (49)  66   (139)  (190)
Gross Amount end of period  15,738   15,648   15,516   15,626 
                
Accumulated amortization  (6,357)  (4,816)  (7,263)  (6,815)
                
Patents and licensed technologies, net $9,381  $10,832  $8,253  $8,811 
Related amortization expense was $1,541$513 and $1,532$512 for the ninethree months ended September 30,March 31, 2015 and 2014, and 2013, respectively.
Estimated amortization expense for amortizable patents and licensed technologies assets for the next five yearsfuture periods is as follows:
Last three months of 2014 $515 
2015  2,048 
Last nine months of 2015 $1,544 
2016  2,024   2,021 
2017  909   885 
2018  899   908 
2019  894 
Thereafter  2,986   2,001 
Total $9,381  $8,253 

- 1718 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Note 67
Goodwill and Other Intangible Assets, net:Assets:
As part of the purchase price allocation for the reverse acquisition, in December 2011, the Company recorded goodwill in the amount of $24,005 and definite-lived intangibles in the amount of $12,000. As part of the provisional purchase price allocation for the LCA-Vision acquisition in May 2014, the Company recorded goodwill in the amount of $49,582, indefinite-lived intangibles in the amount of $29,850 and definite-lived intangibles in the amount of $9,200. Goodwill reflects the value or premium of the acquisition price in excess of the fair values assigned to specific tangible and intangible assets. The goodwill resulting from the acquisition of LCA-Vision was allocated to the activities of LCA-Vision, which was recognized as a new reportable segment ("Clinics"). Goodwill and the LCA-Vision trademark name havehas an indefinite useful life and therefore areis not amortized as an expense, but areis reviewed at least annually for impairment. The goodwill and other identifiable assetsimpairment of LCA-Vision are subjectits fair value to change based upon the final allocation of the purchase price.Company. The purchase price intrinsically recognizes the benefits of leveraging under-utilized clinicsthe broadened depth of the management team and the addition of a sizeable direct sales force creating greater access to the physician community with branded products and technologies. Furthermore, the purchase price paid by establishing XTRAC centersRadiancy, Inc., a private company, includes, among other things, other benefits such as the intrinsic value of excellence in key markets.being a Nasdaq-listed issuer post-merger and now having access to capital markets and stockholder liquidity.

  Goodwill  Indefinite -lived Trademarks 
Balance at January 1, 2014 $24,930  $- 
Additions for LCA-Vision acquisition  49,582   29,850 
Translation differences  (230)  - 
Balance at September 30, 2014 $74,282  $29,850 
Balance at January 1, 2015 $24,048 
Translation differences  (644)
Balance at March 31, 2015 $23,404 

The Company has no accumulated impairment loss onlosses of goodwill or indefinite-lived assetsrelated to the continuing operations as of September 30, 2014.March 31, 2015. See Note 2 regarding impairment of goodwill allocated to the discontinued operations.

Set forth below is a detailed listing of other definite-lived intangible assets:
 September 30, 2014  March 31, 2015  December 31, 2014 
 (unaudited)  (unaudited)       
 Trademarks  Customer Relationships  Managed Care Network  Total  Trademarks  Customer Relationships  Total  Trademarks  Customer Relationships  Total 
Gross Amount beginning of period $5,772  $6,417  $-  $12,189  $5,692  $6,289  $11,981  $5,772  $6,417  $12,189 
Additions  -   -   9,200   9,200 
Translation differences  (22)  (33)  -   (55)  (57)  (94)  (151)  (80)  (128)  (208)
Gross Amount end of period  5,750   6,384   9,200   21,334   5,635   6,195   11,830   5,692   6,289   11,981 
                                        
Accumulated amortization  (1,606)  (1,782)  (431)  (3,819)  (1,855)  (2,039)  (3,894)  (1,731)  (1,913)  (3,644)
                                        
Net Book Value $4,144  $4,602  $8,769  $17,515  $3,780  $4,156  $7,936  $3,961  $4,376  $8,337 
Related amortization expense was $300 for each of the periods ended March 31, 2015 and 2014. Customer Relationships embody the value to the Company of relationships that Pre-merged PhotoMedex had formed with its customers. Trademarks include the tradenames and various trademarks associated with Pre-merged PhotoMedex products (e.g. "XTRAC", "Neova" "Omnilux" and "Lumiere").
Estimated amortization expense for the above amortizable intangible assets for the future periods is as follows:
Last nine months of 2015 $900 
2016  1,200 
2017  1,200 
2018  1,200 
2019  1,200 
Thereafter  2,236 
Total $7,936 

- 1819 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)



  December 31, 2013 
   
  Trademarks  Customer Relationships  Managed Care Network  Total 
Gross Amount beginning of period $5,744  $6,372  $-  $12,116 
Translation differences  28   45   -   73 
Gross Amount end of period  5772   6,417   -   12,189 
                 
Accumulated amortization  (1,178)  (1,310)  -   (2,488)
                 
Net Book Value $4,594  $5,107  $-  $9,701 
Related amortization expense was $1,331 and $900 for the periods ended September30, 2014 and 2013, respectively. Customer Relationships embody the value to the Company of relationships that Pre-merged PhotoMedex had formed with its customers. Definite useful life trademarks include the tradenames and various trademarks associated with Pre-merged PhotoMedex products (e.g. "XTRAC", "Neova" "Omnilux" and "Lumiere"). Additions to Trademarks include the tradename/trademark associated with LCA-Vision services. This tradename is considered to have an indefinite live. Managed Care Network relates to relationships with leading managed care providers (i.e. employee vision plans) that refers business to LCA-Vision. The Managed Care Network is to be amortized over a ten-year life.
Estimated amortization expense for the above amortizable intangible assets for the next five years is as follows:
Last three months of 2014 $587 
2015  2,350 
2016  2,350 
2017  2,350 
2018  2,350 
Thereafter  7,528 
Total $17,515 
Note 78
Accrued Compensation and related expenses:
  September 30, 2014  December 31, 2013 
  (unaudited)   
Accrued payroll and related taxes $1,569  $707 
Accrued vacation  401   290 
Accrued commissions and bonus  1,319   2,233 
Total accrued compensation and related expense $3,289  $3,230 

- 19 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


  March 31, 2015  December 31, 2014 
  (unaudited)   
Accrued payroll and related taxes $620  $513 
Accrued vacation  410   211 
Accrued commissions and bonuses  1,781   1,898 
Total accrued compensation and related expense $2,811  $2,622 
Note 89
Other Accrued Liabilities:
 September 30, 2014  December 31, 2013  March 31, 2015  December 31, 2014 
 (unaudited)    (unaudited)   
Accrued warranty, current, see Note 1 $755  $1,094  $673  $665 
Accrued taxes, net  1,812   1,023   1,534   1,362 
Accrued sales returns (1)  7,061   16,046   5,941   7,651 
Insurance liability reserves, current  803   - 
Accrued enhancement expenses, current  900   - 
Other accrued liabilities  5,249   3,869   2,223   3,344 
Total other accrued liabilities $16,580  $22,032  $10,371  $13,022 
(1)The activity in the accrued sales returns liability account was as follows:
  Nine Months Ended September 30, 
  2014  2013 
  (unaudited)  (unaudited) 
Balance at beginning of year $16,046  $11,901 
Additions that reduce net sales  28,321   29,246 
Deductions from reserves  (37,306)  (32,714)
Balance at end of period $7,061  $8,433 
Note 9
Long-Term Other Liabilities:
  September 30, 2014  December 31, 2013 
  (unaudited)   
Long-term insurance liability reserves, net of current portion $5,291  $- 
Accrued enhancement expenses, net of current portion  1,124   - 
Other liabilities  801   61 
         
Total long-term liabilities $7,216  $61 
  
Three Months Ended
March 31,
 
  2015  2014 
  (unaudited)  (unaudited) 
Balance at beginning of year $7,651  $16,046 
Additions that reduce net sales  6,519   9,899 
Deductions from reserves  (8,229)  (16,172)
Balance at end of period $5,941  $9,773 
Note 10
Long-term Debt:
In the following table is a summary of the Company's long-term debt:
  September 30, 2014  December 31, 2013 
  (unaudited)   
Senior-secured credit facilities $79,313  $- 
Term note  -   10,000 
Third-party debt  1,276   - 
Sub-total  80,589   10,000 
Less: current portion  80,108   10,000 
Long-term debt $481  $- 

- 20 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


  March 31, 2015  December 31,2014 
  (unaudited)   
Senior-secured credit facilities $40,018  $76,500 
Less: current portion  (3,000)  (38,732)
Long-term debt $37,018  $37,768 
Senior Secured Credit Facilities
On May 12, 2014, the Company entered into an $85 million senior secured credit facilities ("the Facilities") with JP Morgan Chase ("Chase") which included a $10 million revolving credit facility and a $75 million four-year term loan. The facilities were utilized to refinance the existing term debt with Chase, fund the acquisition of LCA and for working capital and other general corporate purposes.
- 20 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Interest is determined at Eurodollar plus a margin between 3.25% and 4.50%. The margin is updated quarterly based on the then-current leverage ratio. The facilities are secured by a first priority security interest in and lien on all assets of the Company. All current and future subsidiaries are guarantors on the facilities. There are financial covenants including; a maximum leverage covenant and a minimum fixed charge covenant, which the Company mustwas required to maintain. These covenants will be determined quarterly based on a rolling past four quarters of financial data. As of September 30,December 31, 2014 and March 31, 2015, the Company continued to fail to meet both financial covenants and is in default of the credit facilities
On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and engaged a third-party independent advisor to assist the Company in negotiating a longer term solution to the defaults. The parties had entered into an initial Forbearance Agreement (the "Initial Forbearance Agreement") on August 25, 2014. On November 4, 2014, the Company entered into an Amended and Restated Forbearance Agreement (the "Amended Forbearance Agreement") with the lenders that are parties to the Credit Agreement and with Chase, as Administrative Agent for the Lenders.
Effective February 28, 2015, the Company entered into a Second Amended and Restated Forbearance Agreement (the "Second Amended Forbearance Agreement") with the lenders (the "Lenders") that are parties to the Credit Agreement dated May 12, 2014, and with JP Morgan Chase, as Administrative Agent for the Lenders.
Pursuant to the terms of the Second Amended Forbearance Agreement, the Lenders have agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default from August 25, 2014 until February 28, 2015,April 1, 2016, or earlier if an event of default occurs (the "Forbearance Period"). TheChase and the Lenders agreed that the Company shall not be obligated to pay the principal amounts set forth in Section 2.08(b) of the Credit Agreement for any date identified therein during the period beginning on February 28, 2015 and ending on the end of the Forbearance Period (the "Effective Period"), and that any failure to do so shall not constitute a default or event of default. Instead, the Lenders and the Company agreed tothat the Company would make prepayments against the Term Loan of $250,000 on the term loanfirst business day of $938 each on November 1 and December 1, 2014, and on January 1 and February 1, 2015,month during the Forbearance Period, which will be applied in direct order of maturity. The Company also agreed that, on or before the second businessfifth calendar day after certain dates set forth in the Amended Forbearance Agreement,of each month, the Company would pay against the revolving loans an amount equalTerm Loan $125,000 to 75%the extent that the cash-on-hand exceeds $5 million, and 100% of the cash-on-hand that exceeded $18 million. In addition,in excess of $7 million, also to be applied to the Term Loan in inverse order of maturity. For the three months ended March 31, 2015, the Company paid $36,482 of principal payments on the loan.
Under the provisions of the Second Amended Forbearance Agreement, the Company will make a paymentnot have to comply with certain financial covenants contained in Section 6.11 of $1.5 million toward the revolving loans on or before February 16, 2015. The interest rates on the Loans under the Credit Agreement is increasedfor the Forbearance Period, and that any failure to do so shall not constitute a default or event of default. However, the Company will have to meet certain minimum EBITDA targets (as defined in the forbearance agreement) for the quarters ending March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015. The Company has met the EBITDA target as of March 31, 2015.
Pursuant to the Second Amended Forbearance Agreement, all loans under the Facilities shall, beginning November 1, 2014, tobear interest at the CB Floating Rate (as defined in the Credit Agreement) plus 4.00%; an additional 2.00% will be added to that rate upon. Additionally, following the occurrence and continuance of any Defaultdefault or Eventevent of Defaultdefault (other than a specified eventSpecified Event of default).Default), the Company's obligations under the Facilities shall, at the option of Chase and the Lenders, bear interest at the rate of 2.00% plus the rate otherwise in effect.
The Company and its subsidiaries have also agreed not to pay in cash any compensation to either the Company's Chief Executive Officer or President that is based on a percentage of sales or another metric other than those officer's base salary, perquisites and standard benefits provided to or on behalf of those executives under the terms of their employment agreements. Those payments may be accrued or deferred and paid in cash only after the repayment of the Facilities in full.
- 21 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

The Company has retainedagreed to provide, on or before May 29, 2015, a strategic business plan for the overall direction of the Company's and its subsidiaries' businesses, including projected income statements, balance sheets, schedules of cash receipts and cash disbursements, payments and month-end balances, and detailed notes and assumptions, projected on a monthly basis through April 1, 2016. The Company has also agreed to provide quarterly updates to that plan by August 31, 2015, November 30, 2015 and February 29, 2016.
The Company continues to retain the services of both Getzler Henrich & Assoc. LLC, a third-party independent business advisor, as well as Canaccord Genuity, Inc., a banking and financial services company, and has also retained the services of Nomura Securities International, Inc., also a banking and financial services company. During the Forbearance Period,Agreement, the Company and these advisors will continue to prepare and distribute offering memoranda and other marketing materials to prospective lenders with regard to seeking a newproposed credit facility for the Company, the proceeds of which would be in an amount sufficient to repay in full and in cash the Company's remaining obligations under the Credit Agreement.Facilities, and to explore other strategic alternatives. The closing of any such a proposed Refinancingrefinancing or alternative arrangement would occur no later than the end of the Forbearance Period. Furthermore, the Company will evaluate all strategic alternatives as part of its engagement with its investment banking advisors.
The Company agreed to limit certain capital expenditures to $575,$100,000 per quarter, except for those involving the Company's XTRAC ® or VTRAC ®  medical devices, and will not make investments or acquire any other interests in affiliated companies except as agreed to by the Lenders. The
As consideration for the Lender's entry into the Second Amended Forbearance Agreement, the Company alsohas agreed to executepay the Lenders certain documents pledging 64,896 sharesforbearance fees (the "Forbearance Fees"), which are payable on the last business day of Radiancy (Israel) Ltd. and 13,000 shares of PhotoMedex Korea Ltd., as well as a Subordination Agreement in favoreach of the Administrative Agentspecified months: for May and June 2015, $750,000 each month; for July through September 2015, $1,000,000 each month; for October through December 2015, $1,250,000 each month; and for January through March 2016, $1,500,000 each month. However, should the Company complete a capital transaction acceptable to the Lenders with respectthat reduces the then-outstanding principal balance of the Term Loan to less than $10 million and repays all Forbearance Fees accrued and unpaid to that date, the monthly Forbearance Fee for the remainder of the Forbearance Period shall be earned and accrued in an amount that is 50% of the amount specified for each of the remaining months. In addition, the $500,000 Forbearance Fee set forth in Section 4.10(b) of the Amended Forbearance Agreement remains due and payable to the Company's secured loan to its subsidiary, PhotoMedex Technology, Inc.Lenders on the earlier of the Expiration Date or the Termination Date of the Forbearance Period. All Forbearance Fees are considered earned and are included in the Obligations under the Credit Agreement. The total Forbearance Fees are being expensed on a straight line basis over the term of the Second Amended Forbearance Agreement. For the three months ended March 31, 2015, the Company expensed $1,481 of these forbearance fees.
The Second Amended Forbearance Agreement is also subject to customary covenants, including limitations on the incurrence of or payments on indebtedness to other persons or entities and requirements that the Company provide periodic financial information and information regarding the status of outstanding litigation involving the Company and its subsidiaries to the Lenders.
The following table summarizes the future minimum payments that the Company expects to make for long-term debt:
Last nine months of 2015 $2,250 
2016  37,768 
  $40,018 

- 2122 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


If, by the end of the Forbearance Period, the Company and its Lenders have not entered into another Forbearance Agreement or otherwise reached an agreement regarding the Credit Agreement and the Facilities, the Lenders have the right to declare all of the obligations under the Credit Agreement and Facilities due and payable, including principal and interest, as authorized by the Credit Agreement, and to enforce additional obligations under the Forbearance Agreement. Such a result would have a material adverse effect on the Company and its financial condition.
As consideration for the Lender's entry into the Forbearance Agreement, the Company paid the Lender a fee of $196.
As the Amended Forbearance Agreement restructures the secured credit facilities and the related payment terms, the debt is no longer considered to be long term payment terms. As such the Company has classified the debt as current. In addition, due to the intention to refinance the credit facility with other creditors, the unamortized related debt issue costs and debt discount of $2,021 have been expensed in the three months ended September 30, 2014.
Term-Note Credit Facility
In December 2013, the Company, through its subsidiary, Radiancy, Inc., entered into a term-note facility with JP Morgan Chase ("Chase"). The facility has maximum principal amount of $15 million and is for a term of one year. As of December 31, 2013, the Company had total borrowings of $10 million under this facility. The stated interest rate for any draw under the credit facility was set as the greater of (i) prime rate, (ii) federal funds effective rate plus .5% or (iii) LIBOR plus 2.5%. Each draw has a repayment period of one year with principal due at maturity, although any draw may be paid early with penalty. This term-note was cancelled at the time the senior secured credit facilities were entered into.
Third-party debt
Through the acquisition of LCA-Vision, the Company assumed debt to a third party for purchases of equipment. LCA-Vision had outstanding debt related to the 2013 purchases of excimer lasers for all of the full-service vision centers. The terms of the financing are over an original 36-month term at a fixed interest rate of 3.5%. The financing agreement does not contain any financial covenants and is secured by the excimer lasers.
The following table summarizes the future minimum payments that the Company expects to make for long-term debt:
Last three months of 2014 $3,009 
2015  77,305 
2016  275 
Total minimum payments $80,589 
     
Note 11
Income Taxes:
The Company's effective tax rate is dependent uponexpense includes federal, state and foreign income taxes at statutory rates and the geographic distributioneffects of its earnings or losses (mainly between US and Israel).various permanent differences.
The difference between the Company's effective tax rates for the three and nine month periodsperiod ended September 30, 2014March 31, 2015 and the U.S. Federal statutory rate (34%) resulted primarily from Pre-merged PhotoMedex current operationsfederal and state losses for which have generated losses, which reducedno tax benefit is provided due to the overall corporate tax expense and which will have effect on current tax expense when the Company elected to file a U.S. consolidated income tax return.100% valuation allowance for those jurisdictions. In addition, the Israeli and UK subsidiaries' earnings are taxed at rates lower than the U.S. federal statutory rate (Israel 16% preferred income tax rate, 26.5% standard corporation tax rate and in the UK 20%).
- 22 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and can be ambiguous;During the three months ended March 31, 2015, the Company had no material changes to liabilities for uncertain tax positions. The Company is therefore, obliged to make many subjective assumptionscurrently under examination for its 2012 federal return and judgments regardingvarious states. At this time, the applicationCompany does not believe that the results of such laws and regulations tothese examinations will have a material impact on its facts and circumstances. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to changes over time. Any changes in the Company's subjective assumptions and judgments could materially affect amounts recognized in its consolidated balance sheets and statements of income.financial statements.
Note 12
Commitments and contingencies:
With the acquisition of LCA-Vision, the Company has additional operating lease obligations. The total value of these lease obligations are $19,630, with $5,322 due less than 1 year; $8,653 due between 1 to 3 years; $4,728 due 3 to 5 years and $927 due more than 5 years from now.
The Company's subsidiary, LCA-Vision, is in a business that results in malpractice lawsuits. LCA-Vison is insured through the captive insurance company to provide coverage for current claims brought against LCA-Vision. The captive insurance company is used for both primary insurance and excess liability coverage. A number of claims are now pending with the captive insurance company.
The loss reserves are based on the LCA-Vision's historical claim experience, comparable industry experience and recent trends that would impact the ultimate settlement of claims. However, due to the uncertainties inherent in the determination of these liabilities, the ultimate settlement of claims incurred through September 30, 2014 could differ from the amounts recorded. At September 30, 2014, the Company maintained insurance reserves of $6,094 of which $803 is considered to be current. Although the insurance reserve reflects management's best estimate of the amount of probable loss, management believes the range of loss that is reasonably possible to have been incurred to be approximately $4,327 to $12,935 at September 30, 2104. Any adjustments required with respect to the recorded insurance reserve as a result of changes of these estimates are recorded in the period determined.
During the year ended December 31, 2013, Radiancy, Inc., a wholly-owned subsidiary of PhotoMedex, commenced legal action against Viatek Consumer Products Group, Inc., over Viatek's Pearl and Samba hair removal products which Radiancy believes infringe the intellectual property covering its no!no! hair removal devices. The first suit, which was filed in the United States Federal Court, Southern District of New York, includes claims against Viatek for patent infringement, trademark and trade dress infringement, and false and misleading advertising. A second suit against Viatek was filed in Canada, where the Pearl is offered on that country's The Shopping Channel, alleging trademark and trade dress infringement, and false and misleading advertising. Viatek's response contains a variety of counterclaims and affirmative defenses against both Radiancy and its parent company PhotoMedex, including, among other counts, claims regarding the invalidity of Radiancy's patents and antitrust allegations regarding Radiancy's conduct.
Radiancy, and PhotoMedex, had moved to dismiss PhotoMedex from the case, and to dismiss the counterclaims and affirmative defenses asserted by Viatek. On March 28, 2014, the Court granted the Company's motion and dismissed our parent company, PhotoMedex from the lawsuit. The Court also dismissed certain counterclaims and affirmative defenses asserted by Viatek, including Viatek's counterclaims against Radiancy for antitrust, unfair competition, and tortious interference with business relationships and Viatek's affirmative defenses of unclean hands and inequitable conduct before the U.S. Patent and Trademark Office in procuring its patent. Radiancy had also moved for sanctions against Viatek for failure to provide meaningful and timely responses to Radiancy's discovery requests; on April 1, 2014, the Court granted Radiancy's motion for sanctions against Viatek.that motion. Viatek appealed both the sanctions ruling and the dismissal of Viatek's counterclaims and defenses from the case, as well as PhotoMedex'sPhotoMedex dismissal as a plaintiff; the Court has denied those appeals in their entirety.appeals. The Court alsohas appointed a Special Master to oversee discovery discovery. A Markman hearing on the patents at issue was held on March 2, 2015. Viatek has requested a Markman hearing as well as thean opportunity to supplement its patent invalidity contentions in the US case; the Company and Radiancy are opposing both requests to the Court.opposes that request. Radiancy has been granted permission by the US Court to supplement its earlier sanctions motion to include the legal fees and costs associated with preparing and prosecuting that motion.
- 23 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


As of October 30, 2014,March 31, 2015, discovery continuesand related court hearings continue in both the US and the Canadian cases. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case is still in the early stages of discovery to determine the validity of any claim or claims made by Viatek. Therefore, the Company has not recorded any reserve or contingent liability related to this particular legal matter. However, in the future, as the case progresses, the Company may be required to record a contingent liability or reserve for this matter.
On December 20, 2013, PhotoMedex, Inc. was served with a putative class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania against the Company and its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. The suit filed by Mr. Guy Ratz, a former employee of Radiancy (Israel) Ltd., a wholly-owned subsidiary of the Company, alleges various violations of the Federal securities laws between November 7, 2012 and November 14, 2013, including that the Company2013.
- 23 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and its officers made false and misleading statements or failed to disclose material facts concerning the Company's business. Two other shareholders filed suit through other firms; the Asbestos Workers Local 14 Pension Fund was appointed the lead plaintiff in this case. An amended complaint was filed by the plaintiffs on April 15, 2014. The Company filed a motion to dismiss the case in its entirety; briefing continues on that motion. The complaint seeks certification of the putative class as well as an unspecified amount of monetary damages, pre-and post-judgment interest and attorneys' fees, expert witness fees and other costs. The Company and its officers intend to vigorously defend themselves against this lawsuit. per share amounts)

A mediation on possible settlement of this action was held on November 10, 2014; the parties including the Company's insurance carrier have agreed on a possible settlement. On March 11, 2015, the Court entered an order preliminarily approving that proposed settlement, which provides a fund of $1.5 million for the benefit of those persons or entities who purchased securities issued by the Company during the period November 6, 2012 and November 5, 2013, inclusive.  The settlement fund will also pay for plaintiffs' counsel's fees and expenses approved by the Court with respect to the action. The Company maintains insurance that will help defray the cost of the proposed settlement, and does not expect the proposed settlement to have a material impact on its financial results. The proposed settlement is subject to final approval by the Court.  A hearing has been scheduled for November 10, 2014. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the cases have only been initiated and no discovery has been conductedat 9:30 a.m., on July 20, 2015 to determine whether to (i) approve the validitysettlement, (ii) dismiss the action with prejudice, and (iii) provide for the payment of any claim or claims madeplaintiffs' counsel's attorney's fees and expenses, and consider an application for reimbursement of expenses (including lost wages) of the lead plaintiff. The Company has paid its own legal fees up to the deductible cap on its insurance policy, and all amounts to be paid to plaintiffs and plaintiff's counsel will be paid by plaintiffs. Therefore,the carrier of the insurance policy.
The Company was served on July 29, 2014 with an application to certify a class action, filed in Israel District Court for Tel Aviv against the Company has not recorded any reserve or contingent liability relatedand its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. The plaintiffs' who initiated this complaint have agreed to these particular legal matters. However,be part of, and be bound by, the possible settlement reached in the future, asUnited States District Court for the cases progress,Eastern District of Pennsylvania against the Company may be required to record a contingent liability or reserve for these matters.and the same two top executives.
Six putativeThere were multiple class-action lawsuits were filed in connection with PhotoMedex's proposed acquisition of LCA-Vision, Inc. Two of those suits were filed in the Court of Chancery of the State of Delaware and four were filed in the Court of Common Pleas of Hamilton County, Ohio. All cases assertasserted claims against LCA-Vision, Inc., and a mix of other defendants, including LCA's chief executive officer and directors, PhotoMedex, and Gatorade Acquisition Corp., a wholly owned subsidiary of PhotoMedex. The complaints generally allege that the proposed acquisition undervalued LCA and deprived LCA's shareholders of the opportunity to participate in LCA's long-term financial prospects, that the "go shop" and "deal-protection" provisions of the Merger Agreement were designed to prevent LCA from soliciting or receiving competing offers, that LCA's Board breached its fiduciary duties and failed to maximize that company's stockholder value, and that LCA, PhotoMedex, and Gatorade aided and abetted the LCA defendants' alleged breaches of duty. The complaints seek injunctive relief, unspecified damages, and other relief. The Ohio plaintiffs agreed to consolidate their suits and take the lead on this matter, althoughparties have reached a possible settlement in these suits. On March 23, 2015, the Ohio Court did not formally consolidate the suits until April 24, 2014. The Delaware suits were consolidated on March 25, 2014; on or aroundentered an order preliminarily approving that same date, the parties reached an agreement by which LCA and the other defendants agreed to produce certain discovery to the plaintiffs on an expedited basis. On April 30, 2014, the Ohio plaintiffs (with the Delaware plaintiffs' concurrence) agreed to withdraw their motion for a preliminary injunction and not seek to enjoin the stockholder vote or the consummation of the merger in return for LCA's agreement to make certain supplemental disclosures related to the merger. Those supplemental disclosures were filed by LCA under a Form 8-K on April 30, 2014. This agreement did not affectproposed settlement. Under the terms of settlement, LCA had published certain additional disclosure statements regarding its acquisition by the Merger Agreement orCompany and its financial statements prior to its shareholder vote on the amountacquisition, which was held on May 12, 2014. The settlement also provides for the proposed payment of consideration LCA stockholders would be entitledplaintiffs' counsel's fees and expenses with respect to receive in the merger.action. The Company intendsbelieves that LCA maintains insurance that will help defray the cost of the proposed settlement; the Company will contribute less than $100,000 to continuethe settlement, plus the payment of its legal fees, and does not expect the proposed settlement to vigorously defend itself inhave a material impact on its financial results. The proposed settlement is subject to final approval by the lawsuits if the parties cannot enter into a formal stipulation of settlement. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated, as the cases have only been recently initiated and little discoveryCourt. A hearing has been conductedscheduled at 8:30 a.m., on June 19, 2015 to determine whether to approve the validitysettlement, whether the settlement provided adequate notice to shareholders, thereafter dismiss the action with prejudice, whether the court should enter a complete bar order regarding this matter, and whether to provide for the payment of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters if the cases cannot be resolved.
- 24 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except shareplaintiffs' counsel's attorney's fees and per share amounts)


expenses.
On April 25, 2014, a putative class action lawsuit was filed in the United States District Court for the District of Columbia against the Company's subsidiary, Radiancy, Inc. and Dolev Rafaeli, Radiancy's President. The suit was filed by Jan Mouzon and twelve other customers residing in ten different states who purchased Radiancy's no!no! Hair products. It alleges various violations of state business and consumer protection codes including false and misleading advertising, unfair trade practices, and breach of express and implied warranties. The complaint seeks certification of the putative class, or, alternatively, certification as subclasses of plaintiffs residing in those specific states. The complaint also seeks an unspecified amount of monetary damages, pre-and post-judgment interest and attorneys' fees, expert witness fees and other costs. Dr. Rafaeli was served with the Complaint on May 5, 2014; to date, Radiancy, has not been served. The Company has filed a motion to dismiss this case; that motion is pending before the Court. A mediation has beenwas scheduled in this matter for November 24, 2014. 2014, but no settlement was reached. On March 30, 2015, the Court dismissed this action in its entirety for failure to state a claim. The Court specifically dismissed with prejudice the claims pursuant to New York General Business Law §§349-50 and the implied warranty of fitness for a particular purpose; the other counts against Radiancy were dismissed without prejudice. The Court also granted Dr. Rafaeli's motion to dismiss the actions against him for lack of
- 24 -
personal jurisdiction over him by the Court. The Court denied the plaintiffs request for jurisdictional discovery with respect to Dr. Rafaeli and plaintiffs request to amend the complaint. Radiancy and its officers intend to continue to vigorously defend themselves against any attempts to continue this lawsuit. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
On June 30, 2014, the Company's subsidiary, Radiancy, Inc., was served with a putative class action lawsuit filed in the Superior Court in the State of California, County of Kern. The suit was filed by April Cantley, who purchased Radiancy's no!no! Hair products. It alleges various violations of state business and consumer protection codes including false and misleading advertising, breach of express and implied warranties and breach of the California Legal Remedies Act. The complaint seeks certification of the putative class, which consists of customers in the State of California who purchased the no!no! Hair devices. The complaint also seeks an unspecified amount of monetary damages, pre-and post-judgment interest and attorneys' fees, expert witness fees and other costs. Radiancy has filed an Answer to this Complaint; the case is now in the discovery phase. Radiancy and its officers intend to vigorously defend themselves against this lawsuit. Discovery has now commenced in this action. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
The Company was served on July 29, 2014 with an application to certify a class action, filed in Israel District Court for Tel Aviv against the Company and its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. Under Israeli procedures, an application is filed with the Court, the Company had 90 days to submit its response, and then the Court reviews the application and the response and determines whether to certify the application as a class action. The application, served by a shareholder of the Company, alleges various violations of the Israeli Securities Law 5728-1968, including that the Company and its officers made false and/or misleading statements or failed to disclose material facts in its public reports concerning the Company's business, and therefore influenced the Company's share price. The plaintiff seeks class action status to include all purchasers of the Company's stock between May 3, 2012 and November 6, 2013, specifying an amount in monetary damages of 145 Million New Israeli Shekels or $42,050,000. The plaintiff also seeks pre-and post-judgment interest and attorneys' fees and other costs. The Israeli Court has rejected the service of process by plaintiffs, noting that the agency upon whom service was effected was not authorized to receive service for any of the defendants, and that both Dr. Rafaeli and Mr. McGrath were not residents of Israel for purposes of service of process. The Court also held that the plaintiffs were in violation of key procedural rules governing the filing and prosecution of such matters. Plaintiffs' counsel filed an appeal of the Court's decision on or about October 6, 2014.The Company and its officers are already parties to a lawsuit containing similar allegations filed in the United States District Court for the Eastern District of Pennsylvania on December 20, 2013, and intend to vigorously defend themselves against both actions.  At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made and any damages stated by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
- 25 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


From time to time in the ordinary course of our business, we and certain of our subsidiaries are involved in certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, and claims regarding false advertising and product efficacy which were already raised and reviewed in the Tria litigation. We believe, based on discussions with legal counsel, that these other litigations and claims will likely be resolved without a material effect on our consolidated financial position, results of operations or liquidity. However, litigation is inherently unpredictable, and excessive verdicts can result from litigation. Although we believe we have substantial defenses in these matters, we may, in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in a particular period.
Note 13
Employee Stock Benefit Plans:
Post-Reverse Merger
Following the closing of the December 2011 reverse acquisition, the previousThe Company has a Non-Employee Director Stock Option Plan of PhotoMedex (the acquired entity) was adopted by the group.Plan. This plan has authorized 120,000370,000 shares; of which 7,000 shares had been issued or were reserved for issuance as awards of shares of common stock, and 14,57812,912 shares were reserved for outstanding stock options. On July 31, 2014,The directors, who were elected to our Board in connection with the shareholders approved an increasereverse merger, each received a one-time stock award of 5,000 shares of the Company's common stock in the authorized shares to 370,000 shares under the stock based benefit plan.January 2012.
In addition, following the closing of the December 2011 reverse acquisition, the previousCompany has a 2005 Equity Compensation Plan ("2005 Equity Plan") of Pre-merged PhotoMedex (the acquired entity) was also adopted for use by the group.. The 2005 Equity Plan has authorized 3,000,0006,000,000 shares, of which 867,4323,071,095 shares had been issued or were reserved for issuance as awards of shares of common stock, and 1,293,601966,526 shares were reserved for outstanding options. On Julyoptions as of March 31, 2014, the shareholders approved an increase in the authorized shares to 6,000,000 shares under the stock based benefit plan.2015.
- 25 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Stock option activity under all of the Company's share-based compensation plans for the ninethree months ended September 30, 2014March 31, 2015 was as follows:
 Number of Options  Weighted Average Exercise Price  Number of Options  Weighted Average Exercise Price 
Outstanding, January 1, 2014  1,132,678  $16.51 
Outstanding, January 1, 2015  1,159,554  $16.23 
Granted  180,500   14.11   -   - 
Exercised  -   -   -   - 
Cancelled  (4,999)  58.63   (180,116)  15.39 
Outstanding, September 30, 2014  1,308,179  $16.02 
Options exercisable at September 30, 2014  517,179  $16.45 
Outstanding, March 31, 2015  979,438  $16.38 
Options exercisable at March 31, 2015  626,138  $16.23 
At September 30, 2014,March 31, 2015, there was $8,004$7,260 of total unrecognized compensation cost related to non-vested option grants and stock awards that is expected to be recognized over a weighted-average period of 2.53.4 years. The intrinsic value of options outstanding and exercisable at September 30, 2014March 31, 2015 was not significant.
The Company calculates expected volatility for a share-based grants based on historic daily stock price observations of its common stock. For estimating the expected term of share-based grants made in the three and nine months ended September 30, 2014,March 31, 2015, the Company has adopted the simplified method. The Company has used historical data to estimate expected employee behaviors related to option exercises and forfeitures and included these expected forfeitures as a part of the estimate of expense as of the grant date.
- 26 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The Company uses the Black-Scholes option-pricing model to estimate fair value of grants of stock options with the following weighted-average assumptions:
Nine Months Ended
September 30, 2014
Risk-free interest rate2.17%
Volatility78.41%
Expected dividend yield0%
Expected life5.5 years
Estimated forfeiture rate0%
options. With respect to grants of options, the risk-free rate of interest is based on the U.S. Treasury rates appropriate for the expected term of the grant or award.
On April 17, 2014,February 26, 2015, the Company issued 5,000 shares of common stock to a non-employee director for an aggregate fair value of $75.
On May 12, 2014, the Company granted 141,3371,495,000 restricted stock units to three LCA employees as parta number of their respective employment agreements related to the acquisition. Theseemployees. The restricted shares have a purchase price of $0.01 per share and vest, and cease to be subject to the Company's right of repurchase, over a three-yearfour-year period. The Company determined the fair value of the awards to be the fair valuequoted market price of the Company's common stock units on the date of issuance less the value paid for the award. The aggregate fair value of these restricted stock units issued was $1,936. The Company also granted an aggregate of 109,000 options to purchase common stock to a number of employees with a strike price of $13.70, which was higher than the quoted market value of our stock at the date of grants. The options vest over four years and expire ten years from the date of grant. The aggregate fair value of these options granted was $975.
On February 27, 2014, the Company granted an aggregate of 71,500 options to purchase common stock to a number of employees and consultants with a strike price of $14.80, which was higher than the quoted market value of our stock at the date of grants. The options vest over five years and expire ten years from the date of grant. The aggregate fair value of the options granted was $718.$2,766.
Total stock based compensation expense was $3,944$3,337, including $2,363 that is included in discontinued operations, and $3,795$1,262 for the ninethree months ended September 30,March 31, 2015 and 2014, and 2013, including amounts relating to consultants.
- 27 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


consultants.
Note 14
Business Segments and Geographic Data:
Following the acquisition of LCA-Vision, the Company'sThe Company organized its business was aligned into fourthree operating segments to better align its organization based upon the Company's management structure, products and services offered, markets served and types of customers, as follows: The Consumer segment derives its revenues from the design, development, manufacturing and selling of long-term hair reduction and acne consumer products. The Physician Recurring segment derives its revenues from the XTRAC procedures performed by dermatologists, the sales of skincare products, the sales of surgical disposables and accessories to hospitals and surgery centers and on the repair, maintenance and replacement parts on our various products. The Professional segment generates revenues from the sale of equipment, such as lasers, medical and esthetic light and heat-based products and LED products. The Clinics segment generates revenues from services performed and products sold in our vision centers. Management reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance. For a period during 2014 through January 31, 2015 the Company had a fourth operating segment, Clinics segment. This represented our LCA business which is classified as discontinued operations as of December 31, 2014. See also Note 2, Discontinued Operations.
- 26 -
PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Interest and other financing income (expense), net is also not allocated to the operating segments. Unallocated assets include cash and cash equivalents, prepaid expenses and deposits.
The following tables reflect results of operations from our business segments for the periods indicated below:
Three Months Ended September 30,March 31, 2015 (unaudited)
  CONSUMER  PHYSICIAN RECURRING  PROFESSIONAL  
TOTAL
 
Revenues $18,129  $7,558  $2,462  $28,149 
Costs of revenues  3,497   2,777   1,648   7,922 
Gross profit  14,632   4,781   814   20,227 
Gross profit %  80.7%  63.3%  33.1%  71.9%
                 
Allocated operating expenses:                
Engineering and product development  338   321   96   755 
Selling and marketing expenses  14,719   5,191   222   20,132 
                 
Unallocated operating expenses  -   -   -   4,729 
   15,057   5,512   318   25,616 
Income (loss) from continuing operations  (425)  (731)  496   (5,389)
                 
Interest  and other financing expense, net  -   -   -   (2,551)
                 
Income (loss) from continuing operations before taxes $ (425) $ (731) $496  $ (7,940)
                 



Three Months Ended March 31, 2014 (unaudited)
 Consumer  Physician Recurring  Professional  Clinics  Total  CONSUMER  PHYSICIAN RECURRING  PROFESSIONAL  
TOTAL
 
Revenues $24,938  $8,823  $1,850  $18,092  $53,703  $40,870  $7,219  $1,986  $50,075 
Costs of revenues  4,363   3,094   1,258   14,246   22,961   6,250   2,830   1,265   10,345 
Gross profit  20,575   5,729   592   3,846   30,742   34,620   4,389   721   39,730 
Gross profit %  82.5%  64.9%  32.0%  21.3%  57.2%  84.7%  60.8%  36.3%  79.3%
                                    
Allocated operating expenses:                                    
Engineering and product development  306   314   201   -   821   287   310   198   795 
Selling and marketing expenses  20,001   3,843   204   4,792   28,840   27,157   4,011   457   31,625 
                                    
Unallocated operating expenses  -   -   -   -   11,678   -   -   -   7,587 
  20,307   4,157   405   4,792   41,339   27,444   4,321   655   40,007 
Income (loss) from operations  268   1,572   187   (946)  (10,597)  7,176   68   66   (277)
                                    
Interest and other financing expense, net  -   -   -   -   (3,824)
Interest and other financing income, net  -   -   -   (147)
                                    
Net income (loss) before taxes $268  $1,572  $187  $(946) $ (14,421)
Income (loss) before taxes $7,176  $68  $66  $ (424)
                                    
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)



Three Months Ended September 30, 2013 (unaudited)
  Consumer  Physician Recurring  Professional  Clinics  Total 
Revenues $36,910  $7,359  $1,624  $-  $45,893 
Costs of revenues  4,730   3,272   1,064   -   9,066 
Gross profit  32,180   4,087   560   -   36,827 
Gross profit %  87.2%  55.5%  34.5%  N/A  80.2%
                     
Allocated operating expenses:                    
Engineering and product development  279   341   185   -   805 
Selling and marketing expenses  26,958   3,370   645   -   30,973 
                     
Unallocated operating expenses  -   -   -   -   5,972 
   27,237   3,711   830   -   37,750 
Income (loss) from operations  4,943   376   (270)  -   (923)
                     
Interest and other financing expense, net  -   -   -   -   473 
                     
Net income (loss) before taxes $4,943  $376  $ (270) $-  $ (450)
                     


Nine Months Ended September 30, 2014 (unaudited)
  Consumer  Physician Recurring  Professional  Clinics  
Total
 
Revenues $94,261  $24,649  $5,753  $31,235  $155,898 
Costs of revenues  14,596   9,349   3,884   23,129   50,958 
Gross profit  79,665   15,300   1,869   8,106   104,940 
Gross profit %  84.5%  62.1%  32.5%  26.0%  67.3%
                     
Allocated operating expenses:                    
Engineering and product development  898   881   560   -   2,339 
Selling and marketing expenses  70,382   12,122   935   7,447   90,886 
                     
Unallocated operating expenses  -   -   -   -   30,717 
   71,280   13,003   1,495   7,447   123,942 
Income (loss) from operations  8,385   2,297   374   659   (19,002)
                     
Interest and other financing expense, net  -   -   -   -   (4,145)
                     
Net income (loss) before taxes $8,385  $2,297  $374  $659  $ (23,147)
                     

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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)



Nine Months Ended September 30, 2013 (unaudited)
  Consumer  Physician Recurring  Professional  Clinics  Total 
Revenues $134,643   20,690  $5,841  $-  $161,174 
Costs of revenues  19,422   9,217   3,683   -   32,322 
Gross profit  115,221   11,473   2,158   -   128,852 
Gross profit %  85.6%  55.5%  36.9%  N/A  79.9%
                     
Allocated operating expenses:                    
Engineering and product development  775   982   635   -   2,392 
Selling and marketing expenses  79,293   9,777   1,697   -   90,767 
                     
Unallocated operating expenses  -   -   -   -   17,899 
   80,068   10,759   2,332   -   111,058 
Income (loss) from operations  35,153   714   (174)  -   17,794 
                     
Interest  and other financing income, net  -   -   -   -   470 
                     
Net income before taxes $35,153  $714  $ (174) $-  $18,264 
                     

For the three and nine months ended September 30,March 31, 2015 and 2014, and 2013 (unaudited), net revenues by geographic area (determined by ship to location) were as follows:
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2014  2013  2014  2013 
North America 1
 $43,792  $35,239  $125,568  $122,170 
Asia Pacific 2
  2,248   1,778   7,263   16,980 
Europe (including Israel)  7,423   8,083   21,915   19,577 
South America  240   793   1,152   2,447 
  $53,703  $45,893  $155,898  $161,174 
                 
1 United States
 $41,338  $30,287  $114,718  $98,832 
1 Canada
 $2,454  $4,952  $10,850  $23,338 
2  Japan
 $435  $205  $1,423  $11,455 

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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


  
Three Months Ended
March 31,
 
  2015  2014 
  (unaudited)  (unaudited) 
North America 1
 $20,764  $39,972 
Asia Pacific 2
  2,371   2,377 
Europe (including Israel)  4,899   7,408 
South America  115   318 
  $28,149  $50,075 
         
1 United States
 $18,678  $34,766 
1 Canada
 $2,062  $5,206 
2  Japan
 $91  $698 
As of September 30, 2014March 31, 2015 and December 31, 2013,2014, long-lived assets by geographic area were as follows:
 September 30, 2014  December 31, 2013  March 31, 2015  December 31, 2014 
 (unaudited)    (unaudited)   
North America $27,399  $9,119  $13,169  $12,385 
Asia Pacific  249   -   310   286 
Europe (including Israel)  1,197   1,370   1,065   1,127 
South America  4   -   3   4 
 $28,849  $10,489  $14,547  $13,802 
The Company discusses segmental details in its Management Discussion and Analysis found elsewhere in this Quarterly Report on Form 10-Q.
Note 15
Significant Customer Concentration:
No single customer wasaccounted for more than 10% of total company revenues for either of the three and nine months ended March 31, 2015 or 2014.
Note 16
Subsequent Events:
In April 2015, the Company signed an exclusive distribution agreement, by its Radiancy Inc. subsidiary, with Synergy Trading Corporation for certain no!no!™ products in Japan. 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 for immediate shipment.
The Company entered into a Third Amendment to Standard Industrial/commercial Multi-Tenant Lease-Net, effective April 30, 2015, for our manufacturing facility located in Carlsbad, California. The Amendment extends the lease for that facility an additional twenty-four months; the lease now expires on September 30, 2014 and2017. Monthly base rent for the threefacility for the period October 1, 2015-September 30, 2016 is set at $16,227; that monthly base rent increases to $16,714 for the succeeding twelve months. The Base Rent includes a one-time Lessee Improvement Allowance up to $42,000 to perform certain improvements to the facility. The lease also requires the Company to pay its proportionate share of certain expenses, including real property taxes, real property insurance and nine months ended September 30, 2013.

common area maintenance charges.    
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

ITEM 2.                          Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of PhotoMedex, Inc., a Nevada corporation (referred to in this Report as "we," "us," "our," "PhotoMedex," or "registrant") and other statements contained in this Report that are not historical facts. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that characterize our business. In particular, we encourage you to review the risks and uncertainties described in Item 1A "Risk Factors" included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2013.2014. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this report or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition or results of operations and statements — see "Cautionary Note Regarding Forward-Looking Statements" that appears at the end of this discussion. These statements, like all statements in this report, speak only as of their date (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments.
The following financial data, in this narrative, are expressed in thousands, except for the earnings per share.
Introduction, Outlook and Overview of Business Operations
Our current strategic focus istechnologies, products and research efforts are directed to addressing a worldwide aesthetic industry. We provide dermatologists, professional aestheticians, and consumers with the equipment and skin care products they need to treat psoriasis, vitiligo, acne, and UV damage, among other skin conditions. 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 four key components:direct-to-consumer sales and creative marketing programs that drive brand awareness. During 2013 and throughout 2014, we began to benefit from the impact of these marketing methodologies and expertise on our XTRAC® Excimer Laser and NEOVA® topical skin care lines while continuing to realize organic and geographic growth of additional brands.
•Skilled direct sales force to target Physician and Professional Segments;
•Expertise in global consumer marketing;
•A full product life cycle model representing the ability to develop and commercialize innovative products from concept through regulatory and physician acceptance, and ultimately marketed directly to the consumer as dictated by normal product life-cycle evolution; and
•Gaining market share in the competitive laser vision correction space through adaptation of the Company's established marketing methodologies as well as establishing XTRAC centers of excellence in key markets where our clinics exist and thereby leverage under-utilized capacity at these clinics.
To execute our strategic initiatives, we rely in part on a.) a skilled sales force to target Physicians and other healthcare professionals; b.) a developed expertize in global consumer marketing; and c.) a business model addressing the full product life cycle representing the ability to develop and commercialize innovative products from concept thru regulatory and physician acceptance, ultimately marketed directly to the consumer as dictated by normal product life cycle evolution.
We believe that we are one of only a few aesthetic companies to have succeeded in taking professional technologies geared toward physicians and med spas and adapting them for the home-use market. Our professional- and consumer-use products are listed below, noting that this is not an exhaustive listing of our product portfolio but represents our current key areas of focus.
Key Technology Platforms and Brands
Thermicon® brand Heat Transfer Technology. In this technique, a patented thermodynamic wire gently singes and burns off the hair above the skin's surface. It conducts heat pulses, which enable longer-lasting hair removal. This technology drives our home-use no!no! Hair Removal 8800™ device, which is designed to reduce hair growth. Product variations include devices designed for men and for sensitive, small areas such as the face, among other versions including the recently launched no!no! Hair Removal PRO which introduces patented pulsed Thermicon technology producing 35% more energy aimed at removing more hair in less time.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


 •
LHE® brand Technology. LHE® combines direct heat and a full-spectrum light source to give a greater treatment advantage for psoriasis and acne care, skin tightening, skin rejuvenation, wrinkle reduction, collagen renewal, vascular and pigmented lesion treatments, and hair removal. Using LHE®, the Mistral intelligent phototherapy medical device can treat a larger spot size than a laser with less discomfort. In addition, our research finds that LHE offers meaningful results for thin, light hair. The technology is used in the no!no! Skin™, a handheld consumer product sold worldwide under the no!no!® brand. The no!no! Skin™ is a 510(k)-cleared product that has been clinically shown to reduce acne by 81% over 24 hours. The technology is also used in the no!no! Glow™, which is a 510(k)-cleared device and is a miniaturized LHE device also delivering anti-agingant-aging benefits for the at-home consumer in a hand-held size.
 •
Kyrobak®. Kyrobak uses clinically proven, proprietary technology to treat unspecified, lower back pain. The unique combination of Continuous Passive Motion (CPM) and Oscillation therapy is a non-invasive, relaxing method for long lasting relief of back pain. Used for better than 3 decades in professional rehabilitation and chiropractic settings, CPM has been proven to increase mobility of the joints, draw more oxygen and blood flow to the area, allowing the muscles to relax and release pressure between the vertebrae allowing the spine to open up and decompress.
 •
XTRAC® Excimer Laser. XTRAC received FDA clearance in 2000 and has since become a widely recognized treatment among dermatologists for psoriasis and other skin conditions for which there are no cures. The machine delivers narrow ultraviolet B ("UVB") light to affected areas of skin, leading to psoriasis remission in an average of 8 to 12 treatments and of vitiligo after 48 treatments. XTRAC is endorsed by the National Psoriasis Foundation, and its use for psoriasis is covered by nearly all major insurance companies, including Medicare. More than half of all major insurance companies now offer reimbursement for vitiligo as well, a figure that is increasing.
 •
NEOVA®. This line of topical formulations is designed to prevent premature skin aging due to UV-induced DNA damage. The therapy seeks to repair photo-damaged skin using a novel combination of two key ingredients: DNA repair enzymes and our Copper Peptide Complex®. The NEOVA line includes DNA Damage Control SILC SHEER SPF 45, an award-winning tinted sunscreen. The DNA repair enzymes of this sunscreen are clinically shown to reduce UV damage by 45% and increase UV protection by 300% in one hour.
 •
Light-emitting Diode (LED) Technology. Our LED technology is used in both its Omnilux™ and Lumière™ Light Therapy systems. Omnilux is FDA cleared to treat wrinkles, acne, minor muscle pain and pigmented lesions, and is applicable to all skin types. Lumière is designed for use in non-medical applications and combines the LED light with a line of topical lotions to improve the appearance of fine lines, wrinkles, skin tone and blemishes, giving aesthetic professionals a complete non-invasive skin care solution.
•
LASIK Plus®. We are a provider of fixed-site laser vision correction services at our LasikPlus® vision centers. Our vision centers provide the staff, facilities, equipment and support services for performing laser vision correction that employ advanced laser technologies to help correct nearsightedness, farsightedness and astigmatism. Our vision centers are supported by independent ophthalmologists and credentialed optometrists, as well as other healthcare professionals. The ophthalmologists perform the laser vision correction procedures in our vision centers, and ophthalmologists or optometrists conduct pre-procedure evaluations and post-operative follow-up care in-center. Most of our patients currently receive a procedure called laser-assisted in situ keratomileusis ("LASIK"), which we began performing in the United States in 1996.
As of September 30, 2014, we operated 60 LasikPlus fixed-site laser vision correction centers, generally located in metropolitan markets in the United States consisting of 51 full-service LasikPlus fixed-site laser vision correction centers and nine pre- and post-operative LasikPlus satellite vision centers. Included in the 51 full-service vision centers are four vision centers owned and operated by ophthalmologists who license our trademarks. Beginning in 2011, we began offering refractive lens and cataract services in certain of our existing markets.
Our revenue generation is categorized as Consumer, Physician-Recurring Professional or Clinics.Professional. Each segment benefits from the combination of our proprietary global consumer marketing engine with our direct sales force for U.S. physicians.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Consumer
The global consumer market is our largest business unit due to our ability ofsuccess at bringing professional technologies into the home-use arena. Cumulatively, we have sold more than 5 million no!no!® products to consumers, the majority of whom have been in Japan and North America.
We continue to develop and add to our marketing programs (in typesbelieve we have opportunity for further expansion given the cumulative number of creative, languages, and media formats – print, online, radio, and TV) to effectively reach the large population groupsno!no! brand products we've sold (more than 5 million) versus the size of the major markets where we have expanded our sales efforts,presence and/or substantive marketing initiatives, including:, the United States with approximately 318 million people; Japan with a population of approximately 127 million people; Brazil (pop.187 million); Germany (pop. 81 million); United Kingdom (pop. 64 million); Columbia (pop. 47 million); Canada (pop. 35 million); Australia (pop. 23 million) and Hong Kong (pop. 7 million).
Our consumer marketing platform is built upon a proprietary direct-to-consumer sales engine and creative marketing programs that drive brand awareness, in addition to presence in select retail and live home shopping channels.Home Shopping Channels.
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Sales Channels
Our multi-channel marketing and distribution model consists of television, online, print and radio direct-response advertising, as well as high-end retailers. We believe that this marketing and distribution model, through which each channel complements and supports the others, provides:
 •greater brand awareness across channels;
 •cost-effective consumer acquisition and education;
 •premium brand building; and
 •improved convenience for consumers.
Direct to Consumer. Our direct-to-consumer channel consists of sales generated through infomercials, commercials, websites and call centers. We utilize several forms of advertising to drive our direct-to-consumer sales and brand awareness, including print, online, television and radio.
Retailers and Home Shopping Channels. Our retailers and home shopping channels enable us to provide additional points of contact to educate consumers about our solutions, expand our presence beyond our direct to consumer activity and further strengthen and enhance our brand image.
Distributors. In some territories, we operate through exclusive distribution agreements with leading distribution companies that are dominant in their respective market and have the ability to promote our products through their existing retail and home shopping networks.
Markets
North America. Our consumer distribution segment in North America had sales of approximately $17$13 million and $28$33 million for the three months ended September 30,March 31, 2015 and 2014, and 2013, respectively. Our consumer distribution segment in North America had sales of approximately $71 million and $102 million for the nine months ended September 30, 2014 and 2013, respectively. We use a mix of direct-to-consumer advertising that includes infomercials, commercials, catalog, print, radio and internet-based marketing campaigns, coupled with select retail resellers, such as Neiman Marcus, Nordstrom, Henri Bendel, Planet Beauty, Bed, Bath & Beyond and others; home shopping channels such as HSN; and online retailers such as Dermadoctor.com and Drugstore.com. We believe these channels complement each other, as consumers that have seen our direct-to-consumer advertising may purchase at our retailers, and those who have seen our solutions demonstrated at our retailers may purchase solutions through our websites or call centers.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


International (excluding North America). In the international consumer segment, sales were approximately $8$5 million and $9$8 million for the three months ended September 30,March 31, 2015 and 2014, and 2013, respectively. In the international consumer segment, sales were approximately $24 million and $32 million for the nine months ended September 30, 2014 and 2013, respectively. We utilize various sales and marketing methods including those focused onsales by direct-to-consumer, sales customers ofto retailers and home shopping channels as well as supporting our third-party distributor partners in certain countries.channels. Our main international markets are Asia, Europe,Japan, United Kingdom and Australia with the recent additions of Germany, Brazil, Columbia and South America.Hong Kong.
Physician Recurring
Physician recurring sales primarily include those generated from two of our product lines: (1) XTRAC® lasers, a noninvasive, FDA-cleared solution for psoriasis and vitiligo, and (2) NEOVA® skin care, a topical therapy combining DNA repair enzymes and copper peptide complexes to prevent premature skin aging. Both XTRAC and NEOVA represent recurring revenue streams with significant market opportunities. In addition, our expertise in direct-to-consumer advertising and innovative marketing programs is anticipated to drive greater brand awareness and adoption for both XTRAC and NEOVA products.
XTRAC®
The XTRAC business is considered a recurring revenue stream given its pay-per-use model, where the machines are provided to professionals who then pay us based on the number of treatments administered with the device. We have historically employed a direct sales force marketing primarily to dermatologists to create awareness of the XTRAC therapy. Beginning in 2012 we initiated direct to patient XTRAC advertising in the United States targeted at psoriasis and vitiligo patients through testing a variety of media including television and radio. We continue to increase our advertising expenditures in this area to reach the more than 10 million patients in the United States afflicted with these diseases.
We intend to expand this business model outside North America. We have initiated this activity by setting up subsidiaries in India and Korea with the intent of commencing operations to develop recurring revenue opportunities using our phototherapy technologies including XTRAC and VTRAC.
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NEOVA®
Sales of the NEOVA skin care products historically have been driven by physicians, who act as spokespersons to their patients in support of the NEOVA line. We have marketed to physicians in the dermatology and plastic surgery field, through a direct sales force but have begun to supplement these efforts with a direct-to-consumer approach to lead patients into those practices. NEOVA addresses a sizeable global market for anti-aging skin care products. In addition, we have increased marketing exposure to NEOVA by offering an introduction to the product line as an added-value purchase to consumers responding to our no!no! brand advertising.
Professional
Sales under the professional business segment are mainly generated from capital equipment, such as our XTRAC-Velocity and VTRAC equipment, our LHE® brand products and our Omnilux and Lumière Light Therapy systems.
We view this segment as an area of opportunity for us since the reverse acquisition with Radiancy, Inc., or Radiancy, completed on December 13, 2011. We now possess a greatly expanded product offering for the physician community. In addition, following the December 2011 reverse acquisition, we inherited from Pre-merged PhotoMedex a 48-person, experienced direct sales force that already reaches a network of approximately 3,000 physician locations in the U.S. We are now also distributing through this direct sales force the LHE-based professional products in addition to our other equipment to physicians, dermatologists, salons, spas, and other aesthetic practitioners. We view this fully trained sales staff as a significant opportunity, as well as a resource in expanding the Professional segment of our revenues.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Clinics
Revenues generated in the Clinics segment is substantially derived from the delivery of laser vision correction procedures performed in our U.S. vision centers. With the acquisition of LCA-Vision, we operate 60 LasikPlus® vision centers in the U.S: 51 full-service LasikPlus® fixed-site laser vision corrections centers and nine LasikPlus® satellite centers. We included in the 60 vision centers four vision centers owned and operated by ophthalmologists who license our trademarks. The satellite vision centers perform pre-operative and post-operative exams, providing added convenience for patients who live considerable distances from our full-service LasikPlus® vision centers in that market. We have also been working to establish and expand a partner network of eye care professionals to share patients who desire to have laser vision correction and other refractive surgeries.
These revenues are dependent on the volume of procedures and the mix of procedures among the different types of laser technology. The procedures are impacted by a number of factors, including the following:
•General economic conditions and consumer confidence and discretionary spending levels;
•Our ability to generate customers through our arrangements with vision plans, direct-to-consumer advertising, word-of-mouth referrals, and our partner network relationships;
•The availability of patient financing;
•Government mandated limits on flexible spending accounts
•Our ability to manage equipment and operating costs; and
•The impact of competitors and discounting practices in our industry.
Sales and Marketing
As of September 30, 2014,March 31, 2015, our sales and marketing personnel consisted of 10289 full-time positions.
Critical Accounting Policies and Estimates
LCA-Vision Patient Receivables and Allowance for Doubtful Accounts
We, through our subsidiary LCA-Vision, provide financing to some of our patients, including those who could not otherwise obtain third-party financing. The terms of the financing usually require the patient to pay an up-front fee which is intended to cover some or all of the variable costs, and then generally the remainder of the payments are automatically deducted from the patient's bank account over a period of 12 to 36 months. We record an allowance for doubtful accounts based on a best estimate of the amount of probable credit losses from the patient financing program. Each month, management reviews and adjusts the allowance based upon past experience with patient financing. We charges-off receivables against the allowance for doubtful accounts when it is probable that a receivable will not be recovered. Our policy is to reserve for all patient receivables that remain open past their financial maturity date and to provide reserves for patient collectability rates, recent default activity and the current credit environment.
For our patients that we internally finance, we charges interest at market rates.
Accrued Enhancement Expense
We include participation in our LasikPlus Advantage Plan® (acuity program) in the base surgical price for substantially all of our patients. Under the acuity program, if determined to be medically appropriate, we provide post-surgical enhancements free of charge should the patient not achieve the desired visual correction during the initial procedure. Under this pricing structure, we account for the acuity program as a warranty obligation. Accordingly, we accrue the costs expected to be incurred to satisfy the obligation as a liability and direct cost of service at the point of sale given our ability to estimate reasonably such costs based on historical trends and the satisfaction of all other revenue recognition criteria.
This estimate is reviewed throughout the year with consideration to factors such as procedure cost and historical procedure volume when determining the appropriateness of the recorded balance.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Insurance Reserves
We, through our subsidiary LCA-Vision, maintain a captive insurance company to provide professional liability insurance coverage for claims brought against us and our optometrists. In addition, the captive insurance company's charter allows it to provide professional liability insurance for our ophthalmologists, none of whom are currently insured by the captive. We use the captive insurance company for both primary insurance and excess liability coverage. A number of claims are now pending with the captive insurance company. Since the captive insurance company is wholly-owned enterprise so it is included in our consolidated financial statements. Our actuaries determine loss reserves by comparing our historical claim experience to comparable insurance industry experience.
Other than those noted above, thereThere have been no additional changes to our critical accounting policies and estimates in the three and nine months ended September 30, 2014.March 31, 2015. Critical accounting policies and the significant estimates made in accordance with them are regularly discussed with our Audit Committee. Those policies are discussed under "Critical Accounting Policies" in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013.

2014.
Results of Operations (The following financial data, in this narrative, are expressed in thousands, except for the earnings per share.)
Revenues
The following table presents revenues from our fourthree business segments for the periods indicated below:
 For the Three Months Ended September 30, 2014  For the Three Months Ended September 30, 2013  
For the Three Months Ended
March 31,
 
 Product Sales  Services  Clinic Services  Total  Product Sales  Services  Clinic Services  Total  2015  2014 
Consumer $24,938  $-  $-  $24,938  $36,910  $-  $-  $36,910  $18,129  $40,870 
Physician Recurring  2,754   6,069   -   8,823   3,159   4,200   -   7,359   7,558   7,219 
Professional  1,850   -   -   1,850   1,624   -   -   1,624   2,462   1,986 
Clinics  -   -   18,092   18,092   -   -   -   - 
                                        
Total Revenues $29,542  $6,069  $18,092  $53,703  $41,693  $4,200  $-  $45,893  $28,149  $50,075 

  For the Nine Months Ended September 30, 2014  For the Nine Months Ended September 30, 2013 
  Product Sales  Services  Clinic Services  Total  Product Sales  Services  Clinic Services  Total 
Consumer $94,261  $-  $-  $94,261   134,643  $-  $-  $134,643 
Physician Recurring  8,669   15,980   -   24,649   9,897   10,793   -   20,690 
Professional  5,753   -   -   5,753   5,841   -   -   5,841 
Clinics  -   -   31,235   31,235   -   -   -   - 
                                 
Total Revenues $108,683  $15,980  $31,235  $155,898  $150,381  $10,793  $-  $161,174 
We completed the acquisition of LCA-Vision on May 12, 2014 and as such, these revenues are included only for the period of May 13, 2014 through September 30, 2014. There are no corresponding revenues for the three and nine months ended September 30, 2013.
- 3732 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Consumer Segment
The following table illustrates the key changes in the revenues of the Consumer segment, by sales channel, for the periods reflected below:
 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
Direct-to-consumer $17,037  $29,351  $69,669  $91,393  $13,773  $30,787 
Distributors  404   1,232   1,743   14,958   95   627 
Retailers and home shopping channels  7,497   6,327   22,849   28,292   4,261   9,456 
                        
Total Consumer Revenues $24,938  $36,910  $94,261  $134,643  $18,129  $40,870 
For the three months ended September 30, 2014,March 31, 2015, consumer products revenues were $24,938$18,129 compared to $36,910$40,870 in the three months ended September 30, 2013. For the nine months ended September 30, 2014, consumer products revenues were $94,261 compared to $134,643 in the nine months ended September 30, 2013.March 31, 2014. The decreasesdecrease of 32.4% and 30.0%55.6% during the periods respectively was mainly due to the following reasons:
 •
Direct to Consumer. Revenues for the three months ended September 30, 2014March 31 2015 were $17,037$13,773 compared to $29,351$30,787 for the same period in 2013. Revenues for the nine months ended September 30, 2014 were $69,669 compared to $91,393 for the same period in 2013.2014. The decreases in revenuesdecrease of 42% and 24%, respectively, were55% was due to management's decision to significantly reduce amounts spent on short-form TV advertising during the period due to highly irregular response rates from this format as well as limited availability of relevant media at attractive cost-effective pricing. The decrease in revenue also has an impact on the total amount of sales returns liability as reflected in Note 89 of the financial statement footnotes. The methodology used to determine both the expense and the accrued liability has been consistently applied across all periods presented.
 •
Retailers and Home Shopping Channels. Revenues for the three months ended September 30, 2014March 31, 2015 were $7,497$4,261 compared to $6,327$9,456 for the same period in 2013, an increase of 18%. Revenues for the nine months ended September 30, 2014 were $22,849 compared to $28,292 for the same period in 2013, a2014. The decrease of 19%. The changes between the periods were55% was mainly due to the timing of specials on the various home shopping channel customers, mainly in the United States ("US") and the United Kingdom ("UK").UK. Furthermore, reduced levels of advertising in the Direct to Consumer channel negatively impacts sales at the retail level.
 •
Distributors Channels. Revenues for the three months ended September 30, 2014March 31, 2015 were $404$95 compared to $1,232$627 for the same period in 2013. Revenues for the nine months ended September 30, 2014 were $1,743 compared to $14,958 for the same period in 2013.2014. The decreasesdecrease in revenues of 67% and 88% were85% was due to our distributora delay in Japan who modified its business model during 2013, affecting its role in the supply chain between its manufacturers and the Japan retailers they supply and causing revenuesorders from our Japan distributor were $66 and $227 for the three and nine months ended September 30, 2014, respectively. For the three and nine months ended September 30, 2013, the revenues from our Japan distributor were $52 and $10,920, respectively. During the fourth quarter of 2013, we terminated our distribution agreement with the Japan distributor.Asia Pacific until April 2015.

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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The following table illustrates the key changes in the revenues of the Consumer segment, by markets, for the periods reflected below:
 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
North America $17,020  $28,404  $70,754  $102,671  $13,326  $33,180 
International  7,918   8,506   23,507   31,972   4,803   7,690 
                        
Total Consumer Revenues $24,938  $36,910  $94,261  $134,643  $18,129  $40,870 

International revenues, excluding the decrease in Japan, increased by $2,228 for the nine month period, which was partially due to our expansion in new international markets including Brazil, Germany, Hong Kong and Columbia.
- 33 -

Physician Recurring Segment
The following table illustrates the key changes in the revenues of the Physician Recurring segment for the periods reflected below:
 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2014  2014 
XTRAC Treatments $6,069  $4,200  $15,980  $10,793  $5,376  $4,410 
Neova skincare  1,616   1,882   5,431   6,250   1,327   1,927 
Surgical products  441   509   1,326   1,511   371   397 
Other  697   768   1,912   2,136   484   485 
                        
Total Physician Recurring Revenues $8,823  $7,359  $24,649  $20,690  $7,558  $7,219 
XTRAC Treatments
Recognized treatment revenue for the three months ended September 30, 2014March 31, 2015 was $6,069,$5,376, which approximates 87,00077,000 treatments, with prices between $65 to $95 per treatment, compared to recognized treatment revenues for the three months ended September 30, 2013 was $4,200,March 31, 2014 of $4,410, which approximates 60,000 treatments with prices between $65 to $85 per treatment. Recognized treatment revenue for the nine months ended September 30, 2014 was $15,980, which approximates 228,000 treatments, with prices between $65 to $95 per treatment, compared to recognized treatment revenues for the nine months ended September 30, 2013 was $10,793, which approximates 154,00063,000 treatments with prices between $65 to $85 per treatment. Increases in procedures are dependent upon building market acceptance through marketing programs with our physician partners and their patients to show that the XTRAC procedures will be of clinical benefit and will be generally reimbursed by insurers. We have historically employed a direct sales force marketing primarily to dermatologists to create awareness of the XTRAC therapy. Beginning in 2012 we initiated direct to patient XTRAC advertising in the United States targeted at psoriasis and vitiligo patients through testing a variety of media including television and radio. We continue to increase our advertising expenditures in this area to reach the more than 10 million patients in the United States afflicted with these diseases.
We defer substantially all sales of treatment codes ordered by and delivered to the customer within the last two weeks of the period in determining the amount of procedures performed by our physician-customers. Management believes this approach closely approximates the actual amount of unused treatments that existed at the end of a period. For the three months ended September 30, 2014, we recognized net revenues of $22 under this approach compared to $149 for the three months ended September 30, 2013. For the nine months ended September 30, 2014,March 31, 2015, we deferred net revenues of $33$169 under this approach compared to deferred net revenues of $95$81 for the ninethree months ended September 30, 2013.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


March 31, 2014.
NEOVA skincare
For the three months ended September 30, 2014,March 31, 2015, revenues were $1,616$1,327 compared to $1,882$1,927 for the three months ended September 30, 2013. For the nine months ended September 30, 2014, revenues were $5,431 compared to 6,250 for the nine months ended September 30, 2013.March 31, 2014. These revenues are generated from the sale of various skin, hair, and wound care products to physicians in both the domestic and international markets.
Surgical products
For the three months ended March 31, 2015 and 2014, revenues were $371 and $397, respectively. These revenues are generated from the sale of various related laser fibers and laser disposables in both the domestic and international markets.
The following table illustrates the key changes in the revenues of the Physicians Recurring segment, by markets, for the periods reflected below:
 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
North America $8,092  $6,371  $22,175  $18,132  $7,033  $6,389 
International  731   988   2,474   2,558   525   830 
                        
Total Physicians Recurring Revenues $8,823  $7,359  $24,649  $20,690  $7,558  $7,219 
- 34 -

Professional Segment
The following table illustrates the key changes in the revenues of the Professional segment for the periods reflected below:
 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
Dermatology equipment $864  $784  $3,057  $2,903  $1,648  $1,215 
LHE equipment  610   426   1,566   1,828   437   470 
Other equipment  376   414   1,130   1,110 
Omnilux/Lumiere equipment  239   271 
Surgical lasers  138   30 
                        
Total Professional Revenues $1,850  $1,624  $5,753  $5,841  $2,462  $1,986 
Dermatology equipment
For the three months ended September 30,March 31, 2015 and 2014, and 2013, dermatology equipment revenues were $864$1,648 and $784, respectively. For the nine months ended September 30, 2014 and 2013, dermatology equipment revenues were $3,057 and $2,903,$1,215, respectively. There were no domestic XTRAC laser sales for the three and nine months ended September 30, 2014March 31, 2015 and 2013.2014. We sell the laser directly to the customer only for certain reasons, including the costs of logistical support and customer preference. Our preference is to consign lasers to customers which will thrive under the per-procedure model. Internationally, we sold twenty-threeforty systems for the three months ended September 30, 2014, twelveMarch 31, 2015, fifteen of which were VTRAC systems, a lamp-based alternative UVB light source that has a wholesale sales price that is below our competitors' international dermatology equipment and below our XTRAC laser. WeInternationally, we sold twentythirty-three systems for the three months ended September 30, 2013, seven of which were VTRAC systems. We sold seventy-five systems for the nine months ended September 30,March 31, 2014, thirty-eight of which were VTRAC systems. We sold eighty-four systems for the nine months ended September 30, 2013 forty-fivetwenty of which were VTRAC systems.
LHE® brand products
LHE® brand products revenues include revenues derived from the sales of mainly Mistral™, Kona™, FSD™, SpaTouch Elite™ and accessories. These devices are sold to physicians, spas and beauty salons.
For the three months ended September 30,March 31, 2015 and 2014, and 2013, LHE® brand products revenues were $610$437 and $426,$470, respectively.
Omnilux/Lumiere equipment
For the ninethree months ended September 30,March 31, 2015 and 2014, and 2013, LHE® brand productsOmnilux/Lumiere equipment revenues were $1,566$239 and $1,828,$271, respectively. These revenues are generated from the sale of LED devices. The Omnilux units are sold for medical applications and the Lumière is a sister technology to Omnilux with the same patent protection, but it is designed for use in non-medical applications, especially at salons and spas.
- 40 -
Surgical lasers

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except shareSurgical lasers revenues include revenues derived from the sales of surgical laser systems. For the three months ended March 31, 2015 and per share amounts)


2014, surgical laser revenues were $138, representing five laser systems and $30, representing one laser system, respectively.
The following table illustrates the key changes in the revenues of the Professional segment, by markets, for the periods reflected below:
  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2014  2013  2014  2013 
North America $588  $406  $1,422  $1,390 
International  1,262   1,218   4,331   4,451 
Total Professional Revenues $1,850  $1,624  $5,753  $5,841 
Clinics Segment
The following table illustrates the key changes in the revenues of the Clinics segment for the periods reflected below:
  
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2014  2013  2014  2013 
Clinics revenues $18,092  $-  $31,235  $- 
Amortization of prior deferred revenues  -   -   -   - 
Total Clinics Revenues $18,092  $-  $31,235  $- 
The number of procedures for the three and nine month periods ended September 30 2014 was 10,676 and 18,225, respectively. All revenues in this segment are generated through the LCA-Vision products and services. Since we completed the acquisition on May 12, 2014 and in accordance with generally accepted accounting principles these revenues are included only for the period of May 13, 2014 through September 30, 2014. There are no corresponding revenues for the three and nine months ended September 30, 2013.
  For the Three Months Ended March 31, 
  2015  2014 
North America $415  $393 
International  2,047   1,593 
         
Total Professional Revenues $2,462  $1,986 
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Cost of Revenues: all segments
The following table presentsillustrates cost of revenues from our fourthree business segments for the periods indicatedlisted below:
  For the Three Months Ended September 30, 2014  For the Three Months Ended September 30, 2013 
  Product Sales  Services  Clinic Services  Total  Product Sales  Services  Clinic Services  Total 
Consumer $4,363  $-  $-  $4,363  $4,730  $-  $-  $4,730 
Physician Recurring  1,225   1,869   -   3,094   1,551   1,721   -   3,272 
Professional  1,258   -   -   1,258   1,064   -   -   1,064 
Clinics  -   -   14,246   14,246   -   -   -   - 
                                 
Total Cost of Revenues $6,846  $1,869  $14,246  $22,961  $7,345  $1,721  $-  $9,066 

 For the Nine Months Ended September 30, 2014  For the Nine Months Ended September 30, 2013  For the Three Months Ended March 31, 
 Product Sales  Services  Clinic Services  Total  Product Sales  Services  Clinic Services  Total  2015  2014 
Consumer $14,596  $-  $-  $14,596  $19,422  $-  $-  $19,422  $3,497  $6,250 
Physician Recurring  3,848   5,501   -   9,349   4,408   4,809   -   9,217   2,777   2,830 
Professional  3,884   -   -   3,884   3,683   -   -   3,683   1,648   1,265 
Clinics  -   -   23,129   23,129   -   -   -   - 
                                        
Total Cost of Revenues $22,328  $5,501  $23,129  $50,958  $27,513  $4,809  $-  $32,322  $7,922  $10,345 
Overall, excluding the clinics cost of revenues, cost of revenues has decreased in the segments due to the related decreasesdecrease in the consumer and professional revenues. We completed the acquisition of LCA-Vision on May 12, 2014 and as such, these cost of revenues are included only for the period of May 13, 2014 through September 30, 2014. There are no corresponding cost of revenues for the three and nine months ended September 30, 2013.
Gross Profit Analysis
Gross profit decreased to $30,742$20,227 for the three months ended September 30, 2014March 31, 2015 from $36,827$39,730 during the same period in 2013.2014. As a percentage of revenues, the gross margin was 57.3%71.9% for the three months ended September 30, 2014 andMarch 31, 2015 from 80.2% for the same period in 2013.
Gross profit decreased to $104,940 for the nine months ended September 30, 2014 from 128,85279.3% during the same period in 2013. As a percentage of revenues, the gross margin was 67.3% for the nine months ended September 30, 2014 and from 79.9% for the same period in 2013.2014.
The following table analyzes changes in our gross margin for the periods presented below:
Company Profit Analysis 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2014  2013  2014  2013 
Revenues $53,703  $45,893  $155,898  $161,174 
Percent increase/(decrease)  17.0%      (3.3%)    
Cost of revenues  22,961   9,066   50,958   32,322 
Percent increase  153.3%      57.7%    
Gross profit $30,742  $36,827  $104,940  $128,852 
Gross margin percentage  57.2%  80.2%  67.3%  79.9%
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Company Profit Analysis For the Three Months Ended March 31, 
  2015  2014 
Revenues $28,149  $50,075 
Percent decrease  (43.8%)    
Cost of revenues  7,922   10,345 
Percent decrease  (23.4%)    
Gross profit $20,227  $39,730 
Gross margin percentage  71.9%  79.3%
The primary reasons for the changes in gross profit for the three and nine months ended September 30, 2014,March 31, 2015, compared to the same period in 2013,2014, were due mainly to decreases in consumer revenues.direct response revenues as well as home shopping and retailers within the Consumer segment. Offsetting this, the Physician Recurring segment which has a lower margin than the Consumer segment, had 45% and 48%5% greater revenues than the prior year periods, respectively,period with a greater gross margin percentage driven by greater utilization of our installed base of XTRAC equipment. In addition, with the completion of the acquisition of LCA-Vision, we now have the Clinics segment which has typically lower gross margin percentages than our other segments due to the fixed costs associated with operating 60 facilities. The activities of LCA-Vision are included for the period of May 13, 2014 through September 30, 2014. There is no corresponding activity in the three and nine months ended September 30, 2013.
The following table analyzes the gross profit for our Consumer segment for the periods presented below:
Consumer Segment 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
Revenues $24,938  $36,910  $94,261  $134,643  $18,129  $40,870 
Percent decrease  (32.4%)      (30.0%)      (55.6%)    
Cost of revenues  4,363   4,730   14,596   19,422   3,497   6,250 
Percent decrease  (7.7%)      (24.8%)      (44.1%)    
Gross profit $20,575  $32,180  $79,665  $115,221  $14,632  $34,620 
Gross margin percentage  82.5%  87.2%  84.5%  85.6%  80.7%  84.7%
Gross profit for the three and nine months ended September 30, 2014March 31, 2015 decreased by $11,605 and $35,556, respectively,$19,988 from the comparable periodsperiod in 2013.2014. The key factorsfactor for these decreases were due tothis decrease was the following:decrease in all channels of consumer revenues.
The Consumer segment had decreases in revenues in the three and nine months ended September 30, 2014 compared to the prior year periods. This segment provides the highest gross margin of our segments, so changes to these revenues significantly impact our overall gross margin.
- 36 -

The following table analyzes the gross profit for our Physician Recurring segment for the periods presented below:
Physician Recurring Segment 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
Revenues $8,823  $7,359  $24,649  $20,690  $7,558  $7,219 
Percent increase  19.9%      19.1%      4.7%    
Cost of revenues  3,094   3,272   9,349   9,217   2,777   2,830 
Percent (decrease)/increase  (5.4%)      1.4%    
Percent decrease  (0.2%)    
Gross profit $5,729  $4,087   15,300  $11,473  $4,781  $4,389 
Gross margin percentage  64.9%  55.5%  62.1%  55.5%  63.3%  60.8%
Gross profit for the three and nine months ended September 30, 2014March 31, 2015 increased by $1,642 and $3,827, respectively,$392 from the comparable periodsperiod in 2013.2014. The primary reason for the increased gross marginsmargin is the increase in number of XTRAC treatments on the existing installed laser base of equipment. Incremental treatments delivered on existing equipment incur negligible incremental costs.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


The following table analyzes the gross profit for our Professional segment for the periods presented below:
Professional Segment 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
  For the Three Months Ended March 31, 
 2014  2013  2014  2013  2015  2014 
Revenues $1,850  $1,624  $5,753  $5,841  $2,462  $1,986 
Percent increase/(decrease)  13.9%      (1.5%)    
Percent increase  24.0%    
Cost of revenues  1,258   1,064   3,884   3,683   1,648   1,265 
Percent increase  18.2%      5.5%      30.3%    
Gross profit $592  $560  $1,869  $2,158  $814  $721 
Gross margin percentage  32.0%  34.5%  32.5%  36.2%  33.1%  36.3%
Gross profit for the three months ended September 30, 2014March 31, 2015 was consistent with the comparable period in 2013. Gross profit for the nine months ended September 30, 2014 decreased $289 compared with the comparable period in 2013. The key factor for the decrease was the decrease in revenues for each product type.2014.
The following table analyzes the gross profit for our Clinics segment for the periods presented below:
Clinics Segment 
For the Three Months Ended
September 30,
  
For the Nine Months Ended
September 30,
 
  2014  2013  2014  2013 
Revenues $18,092  $-  $31,235  $- 
   Percent increase  N/A      N/A    
Cost of revenues  14,246   -   23,129   - 
   Percent increase  N/A      N/A    
Gross profit $3,846  $-  $8,106  $- 
Gross margin percentage  21.3%  N/A  25.9%  N/A
The Clinics segment consists of the activities of LCA-Vision which have been included after the completion of the acquisition on May 12, 2014, or the period of May 13, 2014 through September 30, 2014. There is no corresponding activity in the three and nine months ended September 30, 2013.
The costs of revenues for the Clinics segment consist of:
•Medical professional and license fees, including per procedure fees for the ophthalmologists performing laser vision correction and other services, and per procedure license fees paid to the equipment suppliers of our excimer and femtosecond lasers;
•Direct costs of services, including the salary component of physician compensation for certain physicians employed by us, staff compensation, facility costs of operating laser vision correction centers, equipment lease and maintenance costs, medical malpractice insurance costs, surgical supplies, financing charges for third-party patient financing, and other costs related to revenues; and
•Depreciation of equipment and leasehold improvements.
Engineering and Product Development
Engineering and product development expenses for the three months ended September 30, 2014 increasedMarch 31, 2015 decreased to $821$755 from $805$795 for the three months ended September 30, 2013. Engineering and product development expenses for the nine months ended September 30, 2014 decreased to $2,339 from $2,392 for the nine months ended September 30, 2013.March 31, 2014. The majority of this expense relates to the salaries of our worldwide engineering and product development team and is in line with the prior year.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Selling and Marketing Expenses
For the three months ended September 30, 2014,March 31, 2015, selling and marketing expenses decreased to $28,840$20,132 from $30,973$31,625 for the three months ended September 30, 2013.March 31, 2014. The decrease was primarily for the following reasons:
 •We decreased no!no! Hair Removal direct to consumer advertising by approximately $2,722activities in North America due to management's decision to significantly reduce amounts spent on short-form TV advertising during the period as a result of highly irregular response rates from this format. We continuously monitor the performance on all of our media avenues and when results are not as expected, we reduce and/or change the affected areas of our media.
 •Additionally, mediaOverall, Media buying and advertising expenses in the three months ended September 30, 2014March 31, 2015 were 33.5%38.1% of total revenues compared to 41.7%37.4% of total revenues in the three months ended September 30, 2013.March 31, 2014. There was change in the mix of revenues toward business channels and segments that are less dependent upon the level of advertising investment. Direct to consumer revenues are 31.7%48.9% of total revenues for the three months ended September 30, 2014March 31, 2015 compared to 64.0%61.5% of total revenues for the three months ended September 30, 2013. In addition, we added new marketing initiatives to support Neova, Kyrobak, XTRAC therapy, as well as no!no! hair in Brazil and Germany spending approximately $2,926 compared to $1,241 for the three months ended September 30, 2013.
•In addition there was an increase of approximately $4,792 in costs from LCA-Vision reflecting activities from the newly acquired company. There were no corresponding sales and marketing expenses related to LCA-Vision for the period ended September 30, 2013 which reflect periods before the acquisition date of May 12,March 31, 2014.
For the nine months ended September 30, 2014, selling and marketing expenses increased to $90,886 from $90,767 for the nine months ended September 30, 2013. The increase was primarily for the following reasons:
•Compared to the prior year period, we increased no!no! Hair Removal, Neova, no!no! skin and Kyrobak direct to consumer activities in the UK, Brazil and Germany via commercials, infomercial, online campaigns, radio and print media, which resulted in an increase in advertising, media buying, and other related selling and marketing expenses. Additionally we have increased the marketing activities of the XTRAC laser system in the US market.
•Media buying and advertising expenses in the nine months ended September 30, 2014 were 35.7% of total revenues compared to 31.9% of total revenues in the nine months ended September 30, 2013. The factors listed above as well as the change in mix of revenues particularly as a result of the decrease in revenues from our Japan distributor during the first six months of 2013. These distributor revenues require substantially less sales and marketing costs than what is required in the direct channel. Direct to consumer revenues 44.69% of total revenues for the nine months ended September 30, 2014 compared to 56.7% of total revenues for the nine months ended September 30, 2013. In addition, we added new initiatives to support Neova, Kyrobak, XTRAC therapy, as well as no!no! hair in Brazil and Germany spending approximately $8,194 compared to $2,905 for the nine months ended September 30, 2013.
•
In addition, there was an increase of approximately $7,447 in costs from LCA-Vision reflecting activities, from the newly acquired company, from the acquisition date thru September 30, 2014. There were no corresponding sales and marketing expenses related to LCA-Vision for the period ended September 30, 2013 which reflect periods before the acquisition date of May 12, 2014.

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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


General and Administrative Expenses
For the three months ended September 30, 2014,March 31, 2015, general and administrative expenses increaseddecreased to $11,678$4,729 from $5,972$7,587 for the three months ended September 30, 2013.March 31, 2014. The increasedecrease was due to the following reasons:
 •WeIn the three months ended March 31, 2015, we have recorded $916a reduction in expense of $1,616 related to a settlement of an insurance claim.
•In the three months ended March 31, 2014, we had recorded $979 in costs related to the various litigations.
•We have had an increase in bad debt expenses related to both the Canada and Germany markets as well as an international distributor of approximately $1,026.
•We have recorded $568 in bank debt related costs and expenses.
•There was an increase of $2,417 in costs related to LCA-Vision. As we completed the acquisition on May 12, 2014 these expenses were included only for the period of May 13, 2014 through September 30, 2014. There were no corresponding expenses in our financial statements for the three months ended September 30, 2104.
For the nine months ended September 30, 2014, general and administrative expenses increased to $30,717 from $17,899 for the nine months ended September 30, 2013. The increase was due to the following reasons:
•We have recorded $2,879 in costs related to theupcoming acquisition of LCA Vision.
•We have recorded $568 in bank debt related costs and expenses.
•We have had an increase in bad debt expenses related to both the Canada and Germany markets as well as an international distributor of approximately $2,658.
•We have recorded $2,310 in costs related to the various litigations.
•There was an increase of $3,799 in costs related to LCA-Vision. As we completed the acquisition on May 12, 2014 these expenses were included only for the period of May 13, 2014 through September 30, 2014. There were no corresponding expenses in our financial statements for the nine months ended September 30, 2104.
Interest and Other Financing (Expense) Income,Expense, Net
Net interest and other financing expense for the three months ended September 30, 2014March 31, 2015 increased to $3,824, as compared to an income of $473$2,551 from $147 for the three months ended September 30, 2013. Net interest and other financing expense for the nine months ended September 30, 2014 increased to $4,145, as compared to an income of $470 for the nine months ended September 30, 2013.March 31, 2014. The increase of $2,404 is partiallymainly due to an increase in interest expense of $3,126 and $1,652, respectively,$2,376, which included $1,481 of forbearance fees that were accrued for during the three and nine months ended September 30, 2014.March 31, 2015. The interest expense was related to the long term debt and the amortization of the related debt costs that was entered into in May 2014. During the three months ended September 30, 2014, the remaining related debt costs were written off as current period expense due to the restructuring of the long term debt. The remaining change was due to currency fluctuation of the U.S. Dollar versus the New Israeli Shekel, the Euro, the GBP and the Australian Dollar. The functional currency of all U.S. members of the group, as well as Radiancy Ltd. (Israel), is the U.S. Dollar. The other foreign subsidiaries' functional currency is the each subsidiaries' respective local currency.
Taxes on Income, Net
For the three months ended September 30, 2014,March 31, 2015, the net taxes on income amounted to $522$365 as compared to a benefit of $1,336$79 for the three months ended September 30, 2013. For the nine months ended September 30, 2014, the net taxes on income amounted to a benefit of $379 as compared to an expense of $3,072 for the nine months ended September 30, 2013.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


March 31, 2014.
Net IncomeLoss
The factors described above resulted in net loss, including discontinued operations, of $14,943$10,013 during the three months ended September 30, 2014,March 31, 2015, as compared to net income of $886$345 during the three months ended September 30, 2013,March 31, 2014, a decrease of 179%. The factors described above resulted in net loss of $22,768 during the nine months ended September 30, 2014, as compared to net income of $15,192 during the nine months ended September 30, 2013, a decrease of 250%2802%.
To supplement our consolidated financial statements presented elsewhere within this report, in accordance with GAAP, management provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted income.
Management's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP measures. These non-GAAP measures are provided to enhance readers' overall understanding of our current financial performance and to provide further information for comparative purposes.
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Specifically, management believes the non-GAAP measures provide useful information to management and investors by isolating certain expenses, gains and losses that may not be indicative of our core operating results and business outlook. In addition, management believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation to the most directly comparable GAAP measure of all non-GAAP measures included in this report is as follows:
   For the Three Months ended September 30, 
  2014  2013  Change 
       
Net income $ (14,943) $886  $ (15,829)
             
Adjustments:            
Depreciation and amortization  3,402   1,551   1,851 
Interest expense, net  3,127   1   3,126 
Income tax expense (benefit)  522   (1,336)  1,858 
             
EBITDA  (7,892)  1,102   (8,994)
             
Stock-based compensation expense  1,388   1,211   177 
Acquisition costs  14   -   14 
Major litigation  916   -   916 
Extraordinary items, according to credit facility definition  568   -   568 
             
Non-GAAP adjusted income $ (5,006) $2,313  $ (7,319)
             

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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)



 For the Nine Months ended September 30,  For the Three Months ended March 31, 
 2014  2013  Change  2015  2014  Change 
            
Net income $ (22,768) $15,192  $ (37,960)
Net loss $ (10,013) $ (345) $ (9,668)
                        
Adjustments:                        
Depreciation and amortization  7,599   4,510   3,089   1,865   1,636   229 
Interest expense, net  3,683   10   3,673   2,423   47   2,376 
Income tax expense (benefit)  (379)  3,072   (3,451)  365   (79)  444 
                        
EBITDA  (11,865)  22,784   (34,649)  (5,360)  1,259   (6,619)
                        
Stock-based compensation expense  3,944   3,795   149 
Stock-based compensation expense, including accelerated vesting  3,337   1,262   2,075 
Acquisition costs  2,879   -   2,879   -   979   (979)
Major litigation  2,310   -   2,310   223   775   (552)
Extraordinary items, according to credit facility definition  2,200   -   2,200   762   -   762 
                        
Non-GAAP adjusted income $ (532) $26,579  $ (27,111)
Non-GAAP adjusted (loss) income $ (1,038) $4,275  $ (5,313)
                        
Liquidity and Capital Resources
At September 30, 2014,March 31, 2015, our current ratio was 0.781.52 compared to 2.461.24 at December 31, 2013.2014. As of September 30, 2014March 31, 2015 we had ($26,255)$17,443 of working capital compared to $83,058$25,537 as of December 31, 2013.2014. Cash and cash equivalents were $15,866$6,199 as of September 30, 2014,March 31, 2015, as compared to $45,388$10,605 as of December 31, 2013.2014. In addition, we had $7 and $14,113$87 in short term bank deposits as of September 30, 2014 and December 31, 2013, respectively.2014.
On May 12, 2014, we entered into an $85 million senior secured credit facilities ("the Facilities") with JP Morgan Chase ("Chase") which included a $10 million revolving credit facility and a $75 million four-year term loan. The facilities were utilized to refinance the existing term debt with Chase, fund the acquisition of LCA and for working capital and other general corporate purposes.
Interest was initially determined at Eurodollar plus a margin between 3.25% and 4.50%. The margin is updated quarterly based on the then-current leverage ratio. The facilities are secured by a first priority security interest in and lien on all our assets. All current and future subsidiaries are guarantors on the facilities. There arewere financial covenants including; a maximum leverage covenant and a minimum fixed charge covenant, which we must maintain. These covenants will be determined quarterly based on a rolling past four quarters of financial data.
As of September 30, 2014, we continued to fail to meet both financial covenants and is in default of the credit facilities.
On August 4, 2014, we received a notice of default and a reservation of rights from Chase and engaged a third-party independent advisor to assist us in negotiating a longer term solution to the defaults. The parties had entered into an initial Forbearance Agreement (the "Initial Forbearance Agreement") on August 25, 2014. On November 4, 2014, we entered into an Amended and Restated Forbearance Agreement (the "Amended Forbearance Agreement") with the lenders that are parties to the Credit Agreement and with Chase, as Administrative Agent for the Lenders.
As of December 31, 2014 and March 31, 2015, we continued to fail to meet both financial covenants and are in default of the credit facilities.
Effective February 28, 2015, we entered into an Second Amended and Restated Forbearance Agreement (the "Second Amended Forbearance Agreement") with the lenders (the "Lenders") that are parties to the Credit Agreement dated May 12, 2014, and with JP Morgan Chase, as Administrative Agent for the Lenders.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Pursuant to the terms of the Second Amended Forbearance Agreement, the Lenders have agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default from August 25, 2014 until February 28, 2015,April 1, 2016, or earlier if an event of default occurs (the "Forbearance Period"). WeChase and the Lenders agreed that we shall not be obligated to pay the principal amounts set forth in Section 2.08(b) of the Credit Agreement for any date identified therein during the period beginning on February 28, 2015 and ending on the end of the Forbearance Period (the "Effective Period"), and that any failure to do so shall not constitute a default or event of default. Instead, the Lenders and the Company agreed that we would make prepayments against the Term Loan of $250,000 on the term loanfirst business day of $938 each on November 1 and December 1, 2014, and on January 1 and February 1, 2015,month during the Forbearance Period, which will be applied in direct order of maturity. We also agreed that, on or before the second businessfifth calendar day after certain dates set forth in the Amended Forbearance Agreement,of each month, we would pay against the revolving loans an amount equalTerm Loan $125,000 to 75%the extent that the cash-on-hand exceeds $5 million, and 100% of the cash-on-hand that exceeded $18 million. In addition,in excess of $7 million, also to be applied to the CompanyTerm Loan in inverse order of maturity.
Under the provisions of the Second Amended Forbearance Agreement, we will make a paymentnot have to comply with certain financial covenants contained in Section 6.11 of $1.5 million toward the revolving loans on or before February 16, 2015. The interest rates on the Loans under the Credit Agreement is increasedfor the Forbearance Period, and that any failure to do so shall not constitute a default or event of default. However, we will have to meet certain minimum EBITDA targets (as defined in the forbearance agreement) for the quarters ending March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015. The Company has met the minimum EBITDA target for the quarter ended March 31, 2015.
Pursuant to the Second Amended Forbearance Agreement, all loans under the Facilities shall, beginning November 1, 2014, tobear interest at the CB Floating Rate (as defined in the Credit Agreement) plus 4.00%; an additional 2.00% will be added to that rate upon. Additionally, following the occurrence and continuance of any Defaultdefault or Eventevent of Defaultdefault (other than a specified eventSpecified Event of default).Default), our obligations under the Facilities shall, at the option of Chase and the Lenders, bear interest at the rate of 2.00% plus the rate otherwise in effect.
We and our subsidiaries have also agreed not to pay in cash any compensation to the either our Chief Executive Officer or President that is based on a percentage of sales or another metric other than those officer's base salary, perquisites and standard benefits provided to or on behalf of those executives under the terms of their employment agreements. Those payments may be accrued or deferred and paid in cash only after the repayment of the Facilities in full.
We have retainedagreed to provide, on or before May 29, 2015, a strategic business plan for the overall direction of the Company and our subsidiaries' businesses, including projected income statements, balance sheets, schedules of cash receipts and cash disbursements, payments and month-end balances, and detailed notes and assumptions, projected on a monthly basis through April 1, 2016. We have also agreed to provide quarterly updates to that plan by August 31, 2015, November 30, 2015 and February 29, 2016.
We continue to retain the services of both Getzler Henrich & Assoc. LLC, a third-party independent business advisor, as well as Canaccord Genuity, Inc., a banking and financial services company, and have also retained the services of Nomura Securities International, Inc., also a banking and financial services company. During the Forbearance Period,Agreement, we and our advisors will continue to prepare and distribute offering memoranda and other marketing materials to prospective lenders with regard to seeking a newproposed credit facility for us, the proceeds of which would be in an amount sufficient to repay in full and in cash our remaining obligations under the Credit Agreement.Facilities, and to explore other strategic alternatives. The closing of any such a proposed Refinancingrefinancing or alternative arrangement would occur no later than the end of the Forbearance Period. Furthermore, we will evaluate all strategic alternatives as part of our engagement with our investment banking advisors.
We have agreed to limit certain capital expenditures to $575,$100,000 per quarter, except for those involving our XTRAC ® or VTRAC ®  medical devices, and will not make investments or acquire any other interests in affiliated companies except as agreed to by the Lenders. We also
- 40 -

As consideration for the Lender's entry into the Second Amended Forbearance Agreement, we has agreed to executepay the Lenders certain documents pledging 64,896 sharesforbearance fees (the "Forbearance Fees"), which are earned on the last business day of Radiancy (Israel) Ltd. and 13,000 shares of PhotoMedex Korea Ltd., as well as a Subordination Agreement in favoreach of the Administrative Agentspecified months: for May and June 2015, $750,000 each month; for July through September 2015, $1,000,000 each month; for October through December 2015, $1,250,000 each month; and for January through March 2016, $1,500,000 each month. However, should we complete a capital transaction acceptable to the Lenders with respectthat reduces the then-outstanding principal balance of the Term Loan to our secured loanless than $10 million and repays all Forbearance Fees accrued and unpaid to our subsidiary, PhotoMedex Technology, Inc.that date, the monthly Forbearance Fee for the remainder of the Forbearance Period shall be earned and accrued in an amount that is 50% of the amount specified for each of the remaining months.  In addition, the $500,000 Forbearance Fee set forth in Section 4.10(b) of the Amended Forbearance Agreement remains due and payable to the Lenders on the earlier of the Expiration Date or the Termination Date of the Forbearance Period. All Forbearance Fees are considered earned and are included in the Obligations under the Credit Agreement.  The total Forbearance Fees are being expensed over the period of the Second Amended Forbearance Agreement.
The Second Amended Forbearance Agreement is also subject to customary covenants, including limitations on the incurrence of or payments on indebtedness to other persons or entities and requirements that we provide periodic financial information and information regarding the status of outstanding litigation involving us and our subsidiaries to the Lenders.
If, byOn December 12, 2014, we closed on a registered offering in which wet sold an aggregate of 645,000 shares of our common stock at an offering price of $2.19 per share. The sale resulted in net proceeds of approximately $1.4 million.
We believe our existing balances of cash and cash equivalents will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with our existing operations through the endfirst quarter of 2016. However, there is no guarantee that we will be able to comply with all of the terms of the Second Amended Forbearance Period,Agreement. To the extent that we and our Lenders have not entered into anotherfail to comply with the terms of the Second Amended Forbearance Agreement, or otherwise reached an agreement regarding the Credit Agreement and the Facilities, the Lenders have the right to declare all of the obligations under the Credit Agreement and Facilities due and payable, including principal and interest, as authorized by the Credit Agreement, and to enforce additional obligations under the Second Amended Forbearance Agreement. Such a result would have a material adverse effect on us and our financial condition.
As consideration for the Lender's entry into the Forbearance Agreement, we paid the Lender a fee of $196.
On August 18, 2012, the Board of Directors approved a stock repurchase program up to a maximum to $25 million. In August 2013, the Board of Directors has authorized an additional $30 million share re-purchase program of its common shares in the open market over the next twelve months, at such times and prices as determined appropriate by the Company's management in collaboration with the Board of Directors. To date, we have repurchased 2,987,413 shares at an average price of $13.98 per share for a total of $41,757. The shares will be purchased with cash on hand, and future purchases are subject to certain limitations and covenants in connection with the acquisition debt financing provided for the LCA Vision, Inc. acquisition on May 12, 2014.
We believe our existing balances of cash and cash equivalents will be sufficient to satisfy our working capital needs, capital asset purchases, outstanding commitments, including under the Forbearance Agreement, and other liquidity requirements associated with our existing operations through and beyond the fourth quarter of 2015. However, if we were unable to meet our obligations under the Forbearance Agreement and the lenders accelerate the amounts due under the Facilities, then we do not expect to have sufficient cash and cash equivalents to satisfy such amounts and our other liquidity requirements. In such case, we would need to seek alternative sources of financing, which may not be available to us or may not be available to us on reasonable terms.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


Net cash and cash equivalents used in operating activities was $27,404$3,916 for the ninethree months ended September 30, 2014March 31, 2015 compared to cash provided by of $11,216$4,486 for the ninethree months ended September 30, 2013.March 31, 2014. The primary reason for the change was the sale of LCA-Vision during the quarter ended March 31, 2015.
Net cash and cash equivalents provided by investing activities was $36,543 for the three months ended March 31, 2015 compared to cash used in investing activities was $69,209of $6,059 for the ninethree months ended September 30, 2014 compared to $5,537March 31, 2014. The primary reason for the nine months ended September 30, 2013. Thischange was primarily due to the acquisitionsale of LCA-Vision net of cash received andduring the increase in the placement of lasers into service for the nine monthsquarter ended September 30, 2014. These decreases were partially offset by the sales of short-term investments.March 31, 2015.
When we retire a laser from service that is no longer useable, we write off the net book value of the laser, which is typically negligible. Over the last few years, such retirements of lasers from service have been immaterial.
Net cash and cash equivalents providedused by financing activities was $67,328$36,817 for the ninethree months ended September 30, 2014March 31, 2015 compared to cash used of $19,611$5,224 for the ninethree months ended September 30, 2013.March 31, 2014. In the ninethree months ended September 30, 2014,March 31, 2015, we had proceeds from credit facilities of $75,000. This increase was offset, in part, to payments on credit facilities of $5,687$36,478 and $189 for certain notes payable and other debt of $1,004. In the nine months ended September 30, 2013, we repurchased company stock for $18,982 and had payments on notes payable and other debt of $652.payable.
Commitments and Contingencies
None.There were no items that significantly impacted our commitments and contingencies as discussed in the notes to our 2014 annual financial statements included in our Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
At September 30, 2014,March 31, 2015, we had no off-balance sheet arrangements.
Impact of Inflation
We have not operated in a highly inflationary period, and we do not believe that inflation has had a material effect on sales or expenses.
- 41 -

Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "project," "predict," "intend," "potential" and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. We discuss many of these risks, uncertainties and other factors in our Annual Report on Form 10-K for the year ended December 31, 2013,2014, and in this Quarterly Report on Form 10-Q in greater detail under Item 1A. "Risk Factors." Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by our cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk
Foreign Exchange Risk
During the three and nine months ended September 30, 2014,March 31, 2015, there were no material changes to our market risk disclosures as set forth in Part II Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in the Annual Report on Form 10-K that we filed for the year ended December 31, 2013.2014.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


ITEM 4.  Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, (as such term is defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), as of September 30, 2014.March 31, 2015. Based on that evaluation, management has concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level described below.
Limitations on the Effectiveness of Controls.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting in our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - Other Information
ITEM 1. Legal Proceedings
During the year ended December 31, 2013, Radiancy, Inc., a wholly-owned subsidiary of PhotoMedex, commenced legal action against Viatek Consumer Products Group, Inc., over Viatek's Pearl and Samba hair removal products which Radiancy believes infringe the intellectual property covering its no!no! hair removal devices. The first suit, which was filed in the United States Federal Court, Southern District of New York, includes claims against Viatek for patent infringement, trademark and trade dress infringement, and false and misleading advertising. A second suit against Viatek was filed in Canada, where the Pearl is offered on that country's The Shopping Channel, alleging trademark and trade dress infringement, and false and misleading advertising. Viatek's response contains a variety of counterclaims and affirmative defenses against both Radiancy and its parent company PhotoMedex, including, among other counts, claims regarding the invalidity of Radiancy's patents and antitrust allegations regarding Radiancy's conduct.
Radiancy, and PhotoMedex, had moved to dismiss PhotoMedex from the case, and to dismiss the counterclaims and affirmative defenses asserted by Viatek. On March 28, 2014, the Court granted the Company's motion and dismissed PhotoMedex from the lawsuit. The Court also dismissed certain counterclaims and affirmative defenses asserted by Viatek, including Viatek's counterclaims against Radiancy for antitrust, unfair competition, and tortious interference with business relationships and Viatek's affirmative defenses of unclean hands and inequitable conduct before the U.S. Patent and Trademark Office in procuring its patent. Radiancy had also moved for sanctions against Viatek for failure to provide meaningful and timely responses to Radiancy's discovery requests; on April 1, 2014, the Court granted Radiancy's motion for sanctions against Viatek.that motion. Viatek appealed both the sanctions ruling and the dismissal of Viatek's counterclaims and defenses from the case, as well as PhotoMedex's dismissal as a plaintiff; the Court has denied those appeals in their entirety.appeals. The Court alsohas appointed a Special Master to oversee discovery. A Markman hearing on the patents at issue was held on March 2, 2015. Viatek has requested a Markman hearing as well as thean opportunity to supplement its patent invalidity contentions in the US case; the Company and Radiancy are opposing both requests to the Court.opposes that request. Radiancy has been granted permission by the US Court to supplement its earlier sanctions motion to include the legal fees and costs associated with preparing and prosecuting that motion. As of October 30, 2014,March 31, 2015, discovery continuesand related court hearings continue in both the US and the Canadian cases. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case is still in the early stages of discovery to determine the validity of any claim or claims made by Viatek. Therefore, the Company has not recorded any reserve or contingent liability related to this particular legal matter. However, in the future, as the case progresses, the Company may be required to record a contingent liability or reserve for this matter.
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PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


On December 20, 2013, PhotoMedex, Inc. was served with a putative class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania against the Company and its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. The suit filed by Mr. Guy Ratz, a former employee of Radiancy (Israel) Ltd., a wholly-owned subsidiary of the Company, allegesalleged various violations of the Federal securities laws between November 7, 2012 and November 14, 2013, including that the Company and its officers made false and misleading statements or failed to disclose material facts concerning the Company's business. Two other shareholders filed suit through other firms; the Asbestos Workers Local 14 Pension Fund was appointed the lead plaintiff in this case. An amended complaint was filed by the plaintiffs on April 15, 2014. The Company filed a motion to dismiss the case in its entirety; briefing continues on that motion. The complaint seeks certification of the putative class as well as an unspecified amount of monetary damages, pre-and post-judgment interest and attorneys' fees, expert witness fees and other costs. The Company and its officers intend to vigorously defend themselves against this lawsuit. 2013. A mediation on possible settlement of this action was held on November 10, 2014; the parties including the Company's insurance carrier have agreed on a possible settlement. On March 11, 2015, the Court entered an order preliminarily approving that proposed settlement, which provides a fund of $1.5 million for the benefit of those persons or entities who purchased securities issued by the Company during the period November 6, 2012 and November 5, 2013, inclusive.  The settlement fund will also pay for plaintiffs' counsel's fees and expenses approved by the Court with respect to the action. The Company maintains insurance that will help defray the cost of the proposed settlement, and does not expect the proposed settlement to have a material impact on its financial results. The proposed settlement is subject to final approval by the Court. A hearing has been scheduled for November 10, 2014. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the cases have only been initiated and no discovery has been conductedat 9:30 a.m., on July 20, 2015 to determine whether to (i) approve the validitysettlement, (ii) dismiss the action with prejudice, and (iii) provide for the payment of any claim or claims madeplaintiffs' counsel's attorney's fees and expenses, and consider an application for reimbursement of expenses (including lost wages) of the lead plaintiff. The Company has paid its own legal fees up to the deductible cap on its insurance policy, and all amounts to be paid to plaintiffs and plaintiff's counsel will be paid by plaintiffs. Therefore,the carrier of the insurance policy.
The Company was served on July 29, 2014 with an application to certify a class action, filed in Israel District Court for Tel Aviv against the Company has not recorded any reserve or contingent liability relatedand its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. The plaintiffs who initiated this complaint have agreed to these particular legal matters. However,be part of, and be bound by, the possible settlement reached in the future, asUnited States District Court for the cases progress,Eastern District of Pennsylvania against the Company may be required to record a contingent liability or reserve for these matters.and the same two top executives.
Six putative
- 43 -

There were multiple class-action lawsuits were filed in connection with PhotoMedex's proposed acquisition of LCA-Vision, Inc. Two of those suits were filed in the Court of Chancery of the State of Delaware and four were filed in the Court of Common Pleas of Hamilton County, Ohio. All cases assertasserted claims against LCA-Vision, Inc., and a mix of other defendants, including LCA's chief executive officer and directors, PhotoMedex, and Gatorade Acquisition Corp., a wholly owned subsidiary of PhotoMedex. The complaints generally allege that the proposed acquisition undervalued LCA and deprived LCA's shareholders of the opportunity to participate in LCA's long-term financial prospects, that the "go shop" and "deal-protection" provisions of the Merger Agreement were designed to prevent LCA from soliciting or receiving competing offers, that LCA's Board breached its fiduciary duties and failed to maximize that company's stockholder value, and that LCA, PhotoMedex, and Gatorade aided and abetted the LCA defendants' alleged breaches of duty. The complaints seek injunctive relief, unspecified damages, and other relief. The Ohio plaintiffs agreed to consolidate their suits and take the lead on this matter, althoughparties have reached a possible settlement in these suits. On March 23, 2015, the Ohio Court did not formally consolidate the suits until April 24, 2014. The Delaware suits were consolidated on March 25, 2014; on or aroundentered an order preliminarily approving that same date, the parties reached an agreement by which LCA and the other defendants agreed to produce certain discovery to the plaintiffs on an expedited basis. On April 30, 2014, the Ohio plaintiffs (with the Delaware plaintiffs' concurrence) agreed to withdraw their motion for a preliminary injunction and not seek to enjoin the stockholder vote or the consummation of the merger in return for LCA's agreement to make certain supplemental disclosures related to the merger. Those supplemental disclosures were filed by LCA under a Form 8-K on April 30, 2014. This agreement did not affectproposed settlement. Under the terms of settlement, LCA had published certain additional disclosure statements regarding its acquisition by the Merger Agreement orCompany and its financial statements prior to its shareholder vote on the amountacquisition, which was held on May 12, 2014. The settlement also provides for the proposed payment of consideration LCA stockholders will be entitledplaintiffs' counsel's fees and expenses with respect to receive in the merger.action. The Company intendsbelieves that LCA maintains insurance that will help defray the cost of the proposed settlement; the Company will contribute less than $100,000 to continuethe settlement, plus the payment of its legal fees, and does not expect the proposed settlement to vigorously defend itself inhave a material impact on its financial results. The proposed settlement is subject to final approval by the lawsuits if the parties cannot enter into a formal stipulation of settlement. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated, as the cases have only been recently initiated and little discoveryCourt.  A hearing has been conductedscheduled at 8:30 a.m., on June 19, 2015 to determine whether to approve the validitysettlement, whether the settlement provided adequate notice to shareholders, thereafter dismiss the action with prejudice, whether the court should enter a complete bar order regarding this matter, and whether to provide for the payment of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters if the cases cannot be resolved.plaintiffs' counsel's attorney's fees and expenses.
On April 25, 2014, a putative class action lawsuit was filed in the United States District Court for the District of Columbia against the Company's subsidiary, Radiancy, Inc. and Dolev Rafaeli, Radiancy's President. The suit was filed by Jan Mouzon and twelve other customers residing in ten different states who purchased Radiancy's no!no! Hair products. It alleges various violations of state business and consumer protection codes including false and misleading advertising, unfair trade practices, and breach of express and implied warranties. The complaint seeks certification of the putative class, or, alternatively, certification as subclasses of plaintiffs residing in those specific states. The complaint also seeks an unspecified amount of monetary damages, pre-and post-judgment interest and attorneys' fees, expert witness fees and other costs. Dr. Rafaeli was served with the Complaint on May 5, 2014; to date, Radiancy, has not been served. The Company has filed a motion to dismiss this case; that motion is pending before the Court. A mediation has beenwas scheduled in this matter for November 24, 2014.2014, but no settlement was reached. On March 30, 2015, the Court dismissed this action in its entirety for failure to state a claim. The Court specifically dismissed with prejudice the claims pursuant to New York General Business Law §§349-50 and the implied warranty of fitness for a particular purpose; the other counts against Radiancy were dismissed without prejudice. The Court also granted Dr. Rafaeli's motion to dismiss the actions against him for lack of personal jurisdiction over him by the Court.  The Court denied the plaintiffs request for jurisdictional discovery with respect to Dr. Rafaeli and plaintiffs request to amend the complaint. Radiancy and its officers intend to continue to vigorously defend themselves against any attempts to continue this lawsuit. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or
- 52 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
On June 30, 2014, the Company's subsidiary, Radiancy, Inc., was served with a putative class action lawsuit filed in the Superior Court in the State of California, County of Kern. The suit was filed by April Cantley, who purchased Radiancy's no!no! Hair products. It alleges various violations of state business and consumer protection codes including false and misleading advertising, breach of express and implied warranties and breach of the California Legal Remedies Act. The complaint seeks certification of the putative class, which consists of customers in the State of California who purchased the no!no! Hair devices. The complaint also seeks an unspecified amount of monetary damages, pre-and post-judgment interest and attorneys' fees, expert witness fees and other costs. Radiancy has filed an Answer to this Complaint; the case is now in the discovery phase. Radiancy and its officers intend to vigorously defend themselves against this lawsuit. Discovery has now commenced in this action. At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
The Company was served on July 29, 2014 with an application to certify a class action, filed in Israel District Court for Tel Aviv against the Company and its two top executives, Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer. Under Israeli procedures, an application is filed with the Court, the Company has 90 days to submit its response, and then the Court reviews the application and the response and determines whether to certify the application as a class action. The application, served by a shareholder of the Company, alleges various violations of the Israeli Securities Law 5728-1968, including that the Company and its officers made false and/or misleading statements or failed to disclose material facts in its public reports concerning the Company's business, and therefore influenced the Company's share price. The plaintiff seeks class action status to include all purchasers of the Company's stock between May 3, 2012 and November 6, 2013, specifying an amount in monetary damages of 145 Million New Israeli Shekels or $42,050,000. The plaintiff also seeks pre-and post-judgment interest and attorneys' fees and other costs. The Israeli Court has rejected the service of process by plaintiffs, noting that the agency upon whom service was effected was not authorized to receive service for any of the defendants, and that both Dr. Rafaeli and Mr. McGrath were not residents of Israel for purposes of service of process. The Court also held that the plaintiffs were in violation of key procedural rules governing the filing and prosecution of such matters. Plaintiffs' counsel filed an appeal of the Court's decision on or about October 6, 2014.The Company and its officers are already parties to a lawsuit containing similar allegations filed in the United States District Court for the Eastern District of Pennsylvania on December 20, 2013, and intend to vigorously defend themselves against both actions.  At this time, the amount of any loss, or range of loss, cannot be reasonably estimated as the case has only been initiated and no discovery has been conducted to determine the validity of any claim or claims made and any damages stated by plaintiffs. Therefore, the Company has not recorded any reserve or contingent liability related to these particular legal matters. However, in the future, as the cases progress, the Company may be required to record a contingent liability or reserve for these matters.
- 44 -

From time to time in the ordinary course of our business, we and certain of our subsidiaries are involved in certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, and claims regarding false advertising and product efficacy against the no!no! Hair products which were already raised and reviewed in the Tria litigation. We believe, based on discussions with legal counsel, that these other litigations and claims will likely be resolved without a material effect on our consolidated financial position, results of operations or liquidity. However, litigation is inherently unpredictable, and excessive verdicts can result from litigation. Although we believe we have substantial defenses in these matters, we may, in the future, incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in a particular period.
ITEM 1A. Risk Factors
Due to the completion of our acquisition of LCA-Vision on May 12, 2014, the risk factors described in Item 1A of the Form 10-K filed by LCA-Vision on March 12, 2014 are incorporated into this 10-Q by reference.
As of September 30, 2014,March 31, 2015, our other risk factors have not changed materially from the risk factors previously disclosed onin our Annual Report on Form 10-K for the year ended December 31, 2013, with the exception identified in ITEM 3 below.2014.
- 53 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


ITEM 2. Unregistered sales of equity securities and use of proceeds
None.
ITEM 3. Defaults upon senior securities.
On May 12, 2014, the Company entered into an $85 million senior secured credit facilities ("the Facilities") with JP Morgan Chase ("Chase") which included a $10 million revolving credit facility and a $75 million four-year term loan. The facilities were utilized to refinance the existing term debt with Chase, fund the acquisition of LCA and for working capital and other general corporate purposes.None.
Interest is determined at Eurodollar plus a margin between 3.25% and 4.50%. The margin is updated quarterly based on the then-current leverage ratio. The facilities are secured by a first priority security interest in and lien on all assets of the Company. All current and future subsidiaries are guarantors on the facilities.
There are financial covenants including a maximum leverage covenant and a minimum fixed charge covenant, which the Company must maintain. These covenants will be determined quarterly based on a rolling past four quarters of financial data. As of September 30, 2014, the Company continued to fail to meet both financial covenants and is in default of the credit facilities.
On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and engaged a third-party independent advisor to assist the Company in negotiating a longer term solution to the defaults. The parties had entered into an initial Forbearance Agreement (the "Initial Forbearance Agreement") on August 25, 2014. On November 4, 2014, the Company entered into an Amended and Restated Forbearance Agreement (the "Amended Forbearance Agreement") with the lenders that are parties to the Credit Agreement and with Chase, as Administrative Agent for the Lenders.
Pursuant to the terms of the Amended Forbearance Agreement, the Lenders have agreed to forbear from exercising their rights and remedies with respect to the Specified Events of Default from August 25, 2014 until February 28, 2015, or earlier if an event of default occurs (the "Forbearance Period"). The Company agreed to make prepayments on the term loan of $938 each on November 1 and December 1, 2014, and on January 1 and February 1, 2015, which will be applied in direct order of maturity. The Company also agreed that on or before the second business day after certain dates set forth in the Amended Forbearance Agreement, the Company would pay against the revolving loans an amount equal to 75% of cash-on-hand that exceeded $18 million. In addition, the Company will make a payment of $1.5 million toward the revolving loans on or before February 16, 2015. The interest rates on the Loans under the Credit Agreement is increased beginning November 1, 2014 to the CB Floating Rate plus 4.00%; an additional 2.00% will be added to that rate upon the occurrence and continuance of any Default or Event of Default (other than a specified event of default).
The Company has retained the services of both Getzler Henrich, a third-party independent business advisor, as well as Canaccord Genuity, a banking and financial services company. During the Forbearance Period, the Company and these advisors will prepare and distribute offering memoranda and other marketing materials to prospective lenders with regard to seeking a new credit facility for the Company, the proceeds of which would be in an amount sufficient to repay in full the Company's obligations under the Credit Agreement. The closing of such a proposed Refinancing would occur no later than the end of the Forbearance Period. Furthermore, the Company will evaluate all strategic alternatives as part of its engagement with its investment banking advisors.
The Company agreed to limit certain capital expenditures to $575, except for those involving the Company's XTRAC or VTRAC medical devices, and will not make investments or acquire any other interests in affiliated companies except as agreed to by the Lenders. The Company also agreed to execute certain documents pledging 64,896 shares of Radiancy (Israel) Ltd. and 13,000 shares of PhotoMedex Korea Ltd., as well as a Subordination Agreement in favor of the Administrative Agent and the Lenders with respect to the Company's secured loan to its subsidiary, PhotoMedex Technology, Inc.
The Amended Forbearance Agreement is also subject to customary covenants, including limitations on the incurrence of or payments on indebtedness to other persons or entities and requirements that the Company provide periodic financial information and information regarding the status of outstanding litigation involving the Company and its subsidiaries to the Lenders.
- 54 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)

If, by the end of the Forbearance Period, the Company and its Lenders have not entered into another Forbearance Agreement or otherwise reached an agreement regarding the Credit Agreement and the Facilities, the Lenders have the right to declare all of the obligations under the Credit Agreement and Facilities due and payable, including principal and interest, as authorized by the Credit Agreement, and to enforce additional obligations under the Forbearance Agreement. Such a result would have a material adverse effect on the Company and its financial condition.
As consideration for the Lender's entry into the Forbearance Agreement, the Company paid the Lender a fee of $196.
ITEM 4. Mine Safety Disclosures
None.
ITEM 5. Other Information
None.
ITEM 6.  Exhibits
2.1  2.1Amended and Restated Agreement and Plan of Merger, dated as of October 31, 2011, by and among Radiancy, Inc., PhotoMedex, Inc. and PHMD Merger Sub, Inc., including the Form of Warrant. (23)
2.2  2.2Agreement and Plan of Merger by and among PhotoMedex, Inc., Gatorade Acquisition Corp. and LCA-Vision Inc., dated as of February 13, 2014 (34)
3.1  2.3Stock Purchase Agreement, dated January 31, 2015, by and among PhotoMedex, Inc., LCA-Vision Inc. and Vision Acquisition, LLC (42)
  3.1Amended and Restated Articles of Incorporation of PhotoMedex, Inc. a Nevada corporation, filed on December 12, 2011 with the Secretary of State for the State of Nevada. (23)
3.2  3.2Bylaws of PhotoMedex, Inc. (a Nevada corporation), adopted December 28, 2010 (18)
4.1  4.1Form of Warrant to Purchase Shares of Common Stock of PhotoMedex (19)
4.2  4.2Term Loan and Security Agreement, dated as of March 19, 2010 between PhotoMedex, Inc. and Clutterbuck Funds LLC (26) (Exhibit 4.12 therein)
4.3  4.3Term Note, dated March 19, 2010, between PhotoMedex, Inc. and Clutterbuck Funds, LLC (26) (Exhibit 4.13 therein)
4.4  4.4Amendment No. 1 to Term Loan and Security Agreement, dated April 30, 2010 (27) (Exhibit 4.20 therein)
4.5  4.5Amendment No. 2 to Term Loan and Security Agreement, dated March 28, 2011 (27) (Exhibit 4.21 therein)
4.6  4.6Credit Agreement, dated December 27, 2013, between Radiancy, Inc. and JP Morgan Chase Bank, N.A. (35)
10.1Lease Agreement dated May 29, 1996, between Surgical Laser Technologies, Inc. and Nappen & Associates (Montgomeryville, Pennsylvania) (2)
10.2Lease Renewal Agreement, dated January 18, 2001, between Surgical Laser Technologies, Inc. and Nappen & Associates (2)
10.3Lease Agreement, dated July 10, 2006, PhotoMedex, Inc. and Nappen & Associates (3)
10.4Standard Industrial/Commercial Multi-Tenant Lease - Net, dated July 30, 2008 (additional facility at Carlsbad, California) (15)
10.5Standard Industrial/Commercial Multi-Tenant Lease  Net, dated March 17, 2005 (Carlsbad, California) (5)
- 45 -
10.6License and Development Agreement, dated May 22, 2002, between Surgical Laser Technologies, Inc. and Reliant Technologies, Inc. (2)
10.7Settlement Agreement and Release, dated November 11, 2008, by and among Allergan, Inc., Murray A. Johnstone, MD, PhotoMedex, Inc. and ProCyte Corporation. (15)
10.8Master Asset Purchase Agreement, dated September 7, 2004, between PhotoMedex, Inc. and Stern Laser, srl (6)
10.9License Agreement, dated March 31, 2006, and effective April 1, 2006, between the Mount Sinai School of Medicine and PhotoMedex, Inc. (7)
10.102005 Equity Compensation Plan, approved December 28, 2005 (8)
10.11Amended and Restated 2000 Non-Employee Director Stock Option Plan (1)
10.12Amended and Restated 2000 Stock Option Plan (1)
- 55 -

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


10.131996 Stock Option Plan, assumed from ProCyte (9)
10.14Amended and Restated Employment Agreement with Dennis M. McGrath, dated September 1, 2007 (12)
10.15Amended and Restated Employment Agreement of Michael R. Stewart, dated September 1, 2007 (12)
10.16Restricted Stock Purchase Agreement of Dennis M. McGrath, dated January 15, 2006 (5) 
10.17Consulting Agreement dated January 21, 1998 between the Company and R. Rox Anderson, M.D. (4)
10.18Restricted Stock Purchase Agreement of Dennis M. McGrath, dated May 1, 2007 (10)
 10.19Restricted Stock Purchase Agreement of Michael R. Stewart, dated May 1, 2007 (10)
10.20Restricted Stock Purchase Agreement of Michael R. Stewart, dated August 13, 2007 (11)
10.21Amended and Restated 2000 Non-Employee Director Stock Option Plan, dated as of June 26, 2007 (24)
10.22Amended and Restated 2005 Equity Compensation Plan, dated as of June 26, 2007, as amended on October 28, 2008 (14)
10.23Form of Indemnification Agreement for directors and executive officers of PhotoMedex, Inc. (13)
10.24Restricted Stock Purchase Agreement of Dennis M. McGrath, dated June 15, 2009 (16)
 10.25Restricted Stock Purchase Agreement of Michael R. Stewart, dated June 15, 2009 (16)
10.26Co-Promotion Agreement, dated as of January 7, 2010, between PhotoMedex, Inc. and Galderma Laboratories, L.P. (17)
10.27Amended and Restated 2000 Non-Employee Director Stock Option Plan, dated as of August 3, 2010 (18)
10.28Amended and Restated 2005 Equity Compensation Plan, dated as of August 3, 2010. (18)
10.29Restricted Stock Agreement of Dennis M. McGrath, dated March 30, 2011 (18)
10.32Amended and Restated Employment agreement, entered into by and between PhotoMedex, Inc. and Dennis McGrath on July 4, 2011. (19)
10.33Amended and Restated Restricted Stock Agreement, entered into as of August 11, 2011, by and between PhotoMedex, Inc. and Dennis McGrath. (20)
10.34Restricted Stock Agreement, entered into as of July 4, 2011, by and between PhotoMedex, Inc. and Dennis McGrath. (19)
10.35Non-Qualified Stock Option Agreement, entered into as of July 4, 2011, by and between PhotoMedex, Inc. and Dennis McGrath. (19)
10.40Amended and Restated Employment Agreement entered into by and between PhotoMedex, Inc. and Dolev Rafaeli on August 9, 2011. (21)
10.41Distribution Agreement by and between Radiancy, Inc. and Ya-Man Ltd., dated October 17, 2008. (21)
10.42Distribution Agreement Extension by and between Radiancy, Inc. and Ya-Man Ltd., dated August 12, 2010. (21)
10.43First Amendment to the Nonqualified Stock Option Agreement, dated as of October 31, 2011, by and between PhotoMedex, Inc. and Dennis McGrath (22)
10.45Lease Renewal Agreement, dated February 22, 2012, PhotoMedex, Inc. and FR National Life LLC (28)
10.46Lease Agreement dated September 1, 2010, by and between 30 Ramland Road, LLC and Radiancy, Inc. (Orangeburg). (25)
10.47Unprotected Tenancy Agreement dated September 7, 2008 by and between S.A.I. Yarak Buildings and Investments Ltd. and Radiancy (Israel) Ltd. (Hod Hasharon) (25)
10.48Annex to S.A.I. Radiancy Unprotected Tenancy Lease, dated as of January 20, 2008, by and between S.A.I. Yarak Buildings and Investments Ltd. and Radiancy (Israel) Ltd. (25)
10.49Exclusive License Agreement for Methods of Treating Diseased Tissue, dated April 1, 2012, by and between the Regents of the University of California and PhotoMedex, Inc. (25)
10.50Non-Qualified Stock Option Agreement dated March 18, 2012 between PhotoMedex, Inc. and Dolev Rafaeli (25)
10.51Non-Qualified Stock Option Agreement dated March 18, 2012 between PhotoMedex, Inc. and Dennis McGrath (25)
10.52Warrant issued March 1, 2012 to Crystal Research Associates LLC. (29)
10.53Lease Agreement dated August 24, 2012, by and between 30 Ramland Road, LLC and Radiancy, Inc. (Orangeburg). (30)
10.54Non-Qualified Stock Option Agreement dated February 28, 2013 between PhotoMedex, Inc. and Dolev Rafaeli (31)
 
- 46 -
10.55Non-Qualified Stock Option Agreement dated February 28, 2013 between PhotoMedex, Inc. and Dennis McGrath (31)

56

PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


 
10.56Quota Purchase and Sale Agreement dated May 7, 2013 by and Among Radiancy, Inc., Leo Klinger and Intervening Parties (32)
10.57Lease Agreement dated June 3, 2013 by and between Maestro Properties Limited and Photo Therapeutics, Ltd. (UK) (32)
10.58Lease Agreement dated September 23, 2013 by and between Liberty Property Limited Partnership and PhotoMedex, Inc. (33)
10.59Credit Agreement, dated as of May 12, 2014, by and among PhotoMedex, Inc., JPMorgan Chase Bank, N.A. as Administrative Agent, First Niagara Bank, N.A. and PNC Bank, National Association as Co-Syndication Agents; J.P. Morgan Securities LLC, as Lead Arranger and book runner, and the Lenders (36)
10.60Amended and Restated Employment Agreement entered into by and between PhotoMedex, Inc. and Dolev Rafaeli on August 5, 2014. (37)
10.61Amended and Restated Employment agreement, entered into by and between PhotoMedex, Inc. and Dennis McGrath on August 5, 2014. (37)
10.62Forbearance Agreement dated August 25,2014, by and among PhotoMedex, Inc., JPMorgan Chase Bank, N.A. as Administrative Agent, First Niagara Bank, N.A. and PNC Bank, National Association as Co-Syndication Agents; J.P. Morgan Securities LLC, as Lead Arranger and book runner, and the Lenders (38)
10.63Amended and Restated Forbearance Agreement dated November 4,2014, by and among PhotoMedex, Inc., JPMorgan Chase Bank, N.A. as Administrative Agent, First Niagara Bank, N.A. and PNC Bank, National Association as Co-Syndication Agents; J.P. Morgan Securities LLC, as Lead Arranger and book runner, and the Lenders (39)
10.64Second Amended and Restated Forbearance Agreement dated February 28, 2015, by and among PhotoMedex, Inc., JPMorgan Chase Bank, N.A. as Administrative Agent, First Niagara Bank, N.A. and PNC Bank, National Association as Co-Syndication Agents; J.P. Morgan Securities LLC, as Lead Arranger and book runner, and the Lenders (40)Restricted Stock
10.65Amended and Restated Employment Agreement entered into as of November 7, 2014,by and between PhotoMedex, Inc. and Dolev Rafaeli on March 10, 2015. (41)
10.66Amended and Restated Employment agreement, entered into by and between PhotoMedex, Inc. and Dennis McGrath. (40)McGrath on March 10, 2015. (41)
10.6510.67Contingency Escrow Agreement, dated January 31, 2015, by and among PhotoMedex, Inc., Vision Acquisition, LLC and Fifth Third Bank (42)
Restricted Stock10.68XTRAC Exclusivity Agreement, entered into as of November 7, 2014,dated January 31, 2015, by and between PhotoMedex, Inc. and Dolev Rafaeli. (40)LCA-Vision Inc. (42)
10.69Transition Services Agreement, dated January 31, 2015 by and between LCA-Vision Inc. and PhotoMedex, Inc. (42)
10.70Lease Amendment Agreement, dated April 30, 2015, PhotoMedex, Inc. and FR National Life LLC (43)
31.1  Rule 13a-14(a) Certificate of Chief Executive Officer
31.2  Rule 13a-14(a) Certificate of Chief Financial Officer
32.1*Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†XBRL Instance Document
101.SCH†XBRL Taxonomy Schema
101.CAL†XBRL Taxonomy Calculation Linkbase
101.DEF†XBRL Taxonomy Definition Linkbase
101.LAB†XBRL Taxonomy Label Linkbase
101.PRE†XBRL Taxonomy Presentation Linkbase
 
(1)  Filed as part of our Registration Statement on Form S-4, on October 18, 2002, and as amended.
 
(2)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2002.
 
(3)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2006.
 
(4)  Filed as part of our Registration Statement on Form S-1/A, on August 5, 1999.

- 47 -
 
(5)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2005.
 
(6)  Filed as part of our Current Report on Form 8-K, on September 13, 2004.
 
(7)  Filed as part of our Current Report on Form 8-K, on April 10, 2006.
 
(8)  Filed as part of our Definitive Proxy Statement on Schedule 14A, on November 15, 2005.
 
(9)  Filed as part of our Registration Statement on Form S-8, on April 13, 2005.
 
(10)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
 
57

(11)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.
(12)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2007.
(13)  Filed as part of our Current Report on Form 8-K on March 5, 2009.
 
(14)  Filed as part of our Definitive Proxy Statement on Schedule 14A on December 18, 2008.
(15)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2008.
 
(16)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
 
(17)  Filed as part of our Current Report on Form 8-K on January 11, 2010.
 
(18)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2010.
 
(19)   Filed as part of our Current Report on Form 8-K on July 8, 2011.
 
(20)   Filed as part of our Registration Statement on Form S-4, on August 12, 2011.
 
(21)  Filed as part of our Registration Statement on Form S-4/A, on October 5, 2011.
 
(22)  Filed as part of our Registration Statement on Form S-4/A, on November 2, 2011.
 
(23)  Filed as part of our Current Report on Form 8-K on December 16, 2011.
 
(24)  Filed as part of our Current Report on Form 8-K on July 2, 2007.

(25)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2011.

(26)  Filed as part of our Current Report on form 8-K on March 23, 2010.

(27)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2010.

(28)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
  
(29)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.
  
(30)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.
  
(31)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.
  
(32)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
  
(33)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.
  
(34)  Filed as part of LCA Vision, Inc.'s Current Report on Form 8-K on February 13, 2014.
  
(35)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2013.
  
(36)  Filed as part of our Current Report on Form 8-K on May 12, 2014.
  
(37)  Filed as part of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
- 48 -
(38)  Filed as part of our Current Report on Form 8-K on August 25, 2014.
  
(39)  Filed as part of our Current Report on Form 8-K on November 4, 2014.
58
(40)  Filed as part of our Current Report on Form 8-K on March 3, 2015.
(41)  Filed as part of our Annual Report on Form 10-K for the year ended December 31, 2014.
(42)  Filed as part of Current Report on Form 8-K on February 5, 2015.
(43)  Filed as part of this Form 10-Q filing.10-Q.

*
The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed "filed" by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
†
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended (the "Securities Act"), are deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise not subject to liability under those sections. This exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates this exhibit by reference.
 


59




PHOTOMEDEX, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)


SIGNATURES

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


 
 PHOTOMEDEX, INC.
 
    
Date   November 10, 2014May 11, 2015By:/s/ Dolev Rafaeli 
  Name  Dolev Rafaeli 
  Title    Chief Executive Officer 
 
Date   November 10, 2014May 11, 2015By:/s/ Dennis M. McGrath 
  Name  Dennis M. McGrath 
  Title    President & Chief Financial Officer 



 


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