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.

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

The number of shares outstanding of the issuer's Common Stock as of May 10,August 9, 2007 was 62,798,55462,874,707 shares.

PhotoMedex, Inc. (and its subsidiaries) (the “Company”) is a medical device and specialty pharmaceutical company focused on facilitating the cost-effective use of technologies for doctors, hospitals and surgery centers to enable their patients to achieve a higher quality of life. The Company operates in five distinct business units, or segments (as described in Note 10): three in Dermatology, - Domestic XTRAC®, International Dermatology Equipment, and Skin Care (ProCyte®); and two in Surgical, - Surgical Services (SIS™) and Surgical Products (SLT®). The segments are distinguished by our management structure, products and services offered, markets served or types of customers.

The Domestic XTRAC segment generally derives revenues from procedures performed by dermatologists in the United States. Under these circumstances, the Company’s XTRAC laser system is placed in a dermatologist’s office without any initial capital cost to the dermatologist, and the Company charges a fee-per-use to treat skin disease. On occasion,At times, however, the Company sells XTRAC lasers to customers, due generally to customer circumstances and preferences. In comparison to the Domestic XTRAC segment, the International Dermatology Equipment segment generates revenues from the sale of equipment to dermatologists outside the United States through a network of distributors. The Skin Care segment generates revenues by selling physician-dispensed skincare products worldwide and by earning royalties on licenses for our patented copper peptide compound.

The Surgical Services segment generates revenues by providing fee-based procedures typically using our mobile surgical laser equipment delivered and operated by a technician at hospitals and surgery centers in the United States. The Surgical Products segment generates revenues by selling laser products and disposables to hospitals and surgery centers both domestically and internationally. The Surgical Products segment also sells other non-laser products (e.g., the ClearESS® II suction-irrigation system).

The Company designed and manufactured the XTRAC laser system to treat psoriasis, vitiligo, atopic dermatitis and leukoderma phototherapeutically. The Company has received clearances from the U.S. Food and Drug Administration (“FDA”) to market the XTRAC laser system for each of these indications. The first XTRAC phototherapy treatment systems were commercially distributed in the United States in August 2000 before any of its procedures had been approved for medical insurance reimbursement. In the last several years, the Company has sought to obtain reimbursement for psoriasis and other inflammatory skin disorders. As a result of initiatives undertaken by the Company and by the physician community, the ability for physicians to process claims efficiently and receive positive payment decisions for use of the XTRAC system improved significantly during the latter part of 2005 and 2006. In March 2007, the Blue Cross Blue Shield Association (“BCBSA”) published a National Reference Policy that now recommends reimbursement coverage for treatment of psoriasis by means of lasers, including the XTRAC, as first-step therapy for moderate to severe psoriasis comprising less than 20% of body surface area. The Company is now seeking adoption of this National Reference Policy by the remaining state Blue Cross- Blue Shield Health Insurance Plans, which currently do not have a positive payment policy for the XTRAC. The XTRAC is approved by Underwriters’ Laboratories; it is also CE-marked, and accordingly a third party regularly audits the Company’s quality system and manufacturing facility. The manufacturing facility for the XTRAC is located in Carlsbad, California.

As of March 31,June 30, 2007, the Company had an accumulated deficit of $89,558,485$91,394,443. Cash and cash and cash equivalents, $12,202,678, including restricted cash of $156,000, as a result of the private placement of the Company’s common stock in November 2006.$117,000, was $10,679,607. The Company has historically financed its operations with cash provided by equity financing and from lines of credit and, more recently but not yet consistently, from positive cash flow generated from operations. The 2007 operating plan reflects increases in per-treatment fee revenues for use of the XTRAC system based on increased utilization of the XTRAC by physicians and on wider insurance coverage in the United States. In addition, the 2007 operating plan reflects increased revenues and profits from the Skin Care business. Management of the Company believes that the Company’s existing cash balance together withoutwith other existing financial resources, including access to lease financing for capital expenditures, and revenues from sales, distribution, licensing and manufacturing relationships, will be sufficient to meet the Company’s operating and capital requirements, at a minimum, beyond the second quarter of 2008.

The financial statements as of March 31,June 30, 2007 and for the three and six months ended March 31,June 30, 2007 and 2006, are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of March 31,June 30, 2007, and the results of operations and cash flows for the three and six months ended March 31,June 30, 2007 and 2006. The results for the three and six months ended March 31,June 30, 2007 are not necessarily indicative of the results to be expected for the entire year. While management of the Company believes that the disclosures presented are adequate to make the information not misleading, these consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2006.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and be based on events different from those assumptions. Future events and their effects cannot be predicted with certainty; estimating, therefore, requires the exercise of judgment. Thus, accounting estimates change as new events occur, as more experience is acquired, or as additional information is obtained.

See “Summary of Significant Accounting Policies” in the Company’s 2006 Annual Report on Form 10-K for a discussion of the estimates and judgments necessary in the Company’s accounting for cash and cash equivalents, accounts receivable, inventories, property, equipment and depreciation, product development costs and fair value of financial instruments.

The Company has two distribution channels for its phototherapy treatment equipment. The Company either (i) sells the laser through a distributor or directly to a physician or (ii) places the laser in a physician’s office (at no charge to the physician) and charges the physician a fee for an agreed upon number of treatments. When the Company sells an XTRAC laser to a distributor or directly to a foreign or domestic physician, revenue is recognized when the following four criteria under Staff Accounting Bulletin No. 104 have been met: (i) the product has been shipped 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; (iv) and collection is probable (the “SAB 104 Criteria”). At times, units are shipped, but revenue is not recognized until all of the SAB 104 criteria have been met, and until that time, the unit is carried on the books of the Company as inventory.

The Company ships most of its products FOB shipping point, although from time to time certain customers, for example governmental customers, will insist upon FOB destination. Among the factors the Company takes into account in determining the proper time at which to recognize revenue are when title to the goods transfers and 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.

Under the terms of the Company’s distributor agreements, distributors do not have a unilateral right to return any unit that they have purchased. However, the Company does allow products to be returned by its distributors for product defects or other claims.

When the Company places a laser in a physician’s office, it recognizes service revenue based on the number of patient treatments performed by the physician. Treatments in the form of random laser-access codes that are sold to a physician, 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 delivered to a patient, this obligation has been satisfied.

In the first quarter of 2003, theThe Company implementedhas a program to support certain physicians in addressing treatments with the XTRAC laser system that may be denied reimbursement by private insurance carriers. The Company recognizes service revenue from the sale of treatment codes to physicians participating in this program only if and to the extent the physician has been reimbursed for the treatments. For the three months ended March 31,June 30, 2007, the Company recognizeddeferred an additional $65,950,$87,925, under this program, as all the SAB 104 Criteria for revenue recognition had not been met. At March 31,June 30, 2007, the Company had net deferred revenues of $123,832$188,437 under this program.

Under this program, the Company may reimburse qualifying doctors for the cost of the Company’s fee but only if they are ultimately denied reimbursement after appeal of their claim with the insurance company. The key components of the program are as follows:

The Company estimates a contingent liability for potential refunds under this program by reviewing the history of denied insurance claims and appeals processed. The Company estimates that approximately 4% of the revenues under this program for the quarterquarters ended March 31,June 30, 2007 are subject to being credited or refunded to the physician. Likewise the Company estimated that 4% of the revenues under this program for the quarter ended March 31,and 2006 wereare subject to being credited or refunded to the physician.

The Company generates revenues from its Skin Care business primarily through three channels. The first is through product sales for skin health, hair care and wound care; the second is through sales in bulk of the copper peptide compound, primarily to Neutrogena Corporation, a Johnson & Johnson company; and the third is through royalties generated by our licenses, principally to Neutrogena. The Company recognizes revenues on the products and copper peptide compound when they are shipped, net of returns and allowances. The Company ships the products FOB shipping point. Royalty revenues are based upon sales generated by our licensees. The Company recognizes royalty revenue at the applicable royalty rate applied to shipments reported by our licensee.

For per-procedure surgical services, the Company recognizes revenue upon the completion of the procedure. Revenue from maintenance service agreements is deferred and recognized on a straight-line basis over the term of the agreements. Revenue from billable services, including repair activity, is recognized when the service is provided.

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, long-lived assets, such as property and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or the fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposed group would be classified as held for sale and would be presented separately in the appropriate asset and liability sections of the balance sheet. As of March 31,June 30, 2007 and during 2006, no such impairment existed.

Costs incurred to obtain or defend patents and licensed technologies are capitalized and amortized over the shorter of the remaining estimated useful lives or 8 to 12 years. Developed technology was recorded in connection with the purchase in August 2000 of the minority interest of Acculase, a former subsidiary of the Company, and is being amortized on a straight-line basis over seven years. Developed technology was also recorded in connection with the acquisition of the skincare business (ProCyte) in March 2005 and is being amortized on a straight-line basis over seven years.

Other intangible assets were recorded in connection with the acquisition of ProCyte in March 2005. The assets are being amortized on a straight-line basis over 5 to 10 years.

Management evaluates the recoverability of such other intangible assets based on estimates of undiscounted future cash flows over the remaining useful life of the asset. If the amount of such estimated undiscounted future cash flows is less than the net book value of the asset, the asset is written down to fair value. As of March 31,June 30, 2007, no such write-down was required.

Goodwill was recorded in connection with the acquisition of ProCyte in March 2005 and the acquisition of Acculase in August 2000.

Management evaluates the recoverability of such goodwill based on estimates of undiscounted future cash flows over the remaining useful life of the asset. If the amount of such estimated undiscounted future cash flows is less than the net book value of the asset, the asset is written down to fair value. As of March 31,June 30, 2007 and during 2006, no such write-down was required.

The Company offers a warranty on product sales generally for a one to two-year period. In some cases, however, the Company offers longer periods in order to meet competition. The Company provides for the estimated future warranty claims on the date the product is sold. The activity in the warranty accrual during the threesix months ended March 31,June 30, 2007 is summarized as follows:

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under SFAS No. 109, the liability method is used for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse.

The Company’s deferred tax asset has been fully reserved under a valuation allowance, reflecting the uncertainties as to realization evidenced by the Company’s historical results and restrictions on the usage of the net operating loss carryforwards. Consistent with the rules of purchase accounting, the historical deferred tax asset of ProCyte was written off when the Company acquired ProCyte. If and when components of that asset are realized in the future, the acquired goodwill of ProCyte will be reduced. With reference

Utilization of the Company’s net operating loss carryforwards is subject to FASBvarious limitations of the Internal Revenue Code, of which the principal constraint is Section 382. Loss carryforwards from previous acquisitions (e.g. SLT, ProCyte) have already been constrained by this provision. If the Company undergoes a change of ownership in the future, the utilization of the Company’s loss carryforwards may be further materially constrained.

Effective January 1, 2007, the Company adopted Financial Interpretation (“FIN”) No. 48, “AccountingAccounting for Uncertainty in Income Taxes - anAn Interpretation of FASB Statement No. 109”, the Company does not believe that its historical or expected tax reporting positions, when considered before application of the valuation allowance, have had or will have a material impact on its consolidated109. This financial statements.

The Company computes net loss per share in accordance with SFAS No. 128, “Earnings per Share.” In accordance with SFAS No. 128, basic net loss per share is calculated by dividing net loss available to common stockholders by the weighted average of common shares outstanding for the period. Diluted net loss per share reflects the potential dilution from the conversion or exercise into common stock of securities such as stock options and warrants.

In these consolidated financial statements, diluted net loss per share is the same as basic net loss per share. No additional shares for the potential dilution from the conversion or exercise of securities into common stock are included in the denominator, since the result would be anti-dilutive. Common stock options and warrants of 11,232,97211,120,797 and 8,373,0008,301,392 as of March 31,June 30, 2007 and 2006, respectively, were excluded from the calculation of fully diluted earnings per share since their inclusion would have been anti-dilutive.

On January 1, 2006, The Company adopted SFAS No. 123R, “Share-Based Payment,” which requires all companies to measure and recognize compensation expense at fair value for all stock-based payments to employees and directors. SFAS No. 123R is being applied on the modified prospective basis. Prior to the adoption of SFAS No. 123R, the Company accounted for its stock-based compensation plans for employees and directors under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations, and accordingly, the Company recognized no compensation expense related to the stock-based plans for grants to employees or directors. Grants to consultants under the plans were recorded under SFAS No. 123.

Under the modified prospective approach, SFAS No. 123R applies to new grants of options and awards of stock as well as to grants of options that were outstanding on January 1, 2006 and that may subsequently be repurchased, cancelled or materially modified. Under the modified prospective approach, compensation cost recognized for the three and six months ended March 31,June 30, 2007 and 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested on, January 1, 2006, based on fair value as of the prior grant-date and estimated in accordance with the provisions of SFAS No. 123R. Prior periods were not required to be restated to reflect the impact of adopting the new standard.

SFAS No. 123R also requires companies to calculate an initial "pool" of excess tax benefits available at the adoption date to absorb any tax deficiencies that may be recognized under SFAS No. 123R. The pool includes the net excess tax benefits that would have been recognized if the Company had adopted SFAS No. 123 for recognition purposes on its effective date. The Company has elected to calculate the pool of excess tax benefits under the alternative transition method described in FASB Staff Position ("FSP") No. FAS 123(R)-3, "Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards," which also specifies the method to calculate excess tax benefits reported on the statement of cash flows. The Company is in a net operating loss position; therefore, no excess tax benefits from share-based payment arrangements have been recognized for the three and six months ended March 31,June 30, 2007.

The Company uses the Black-Scholes option-pricing model to estimate fair value of grants of stock options with the following weighted average assumptions:

The Company calculates expected volatility for a share-based grant based on historic daily stock price observations of our common stock during the period immediately preceding the grant that is equal in length to the expected term of the grant. For estimating the expected term of share-based grants made in the three and six months ended March 31,June 30, 2007, the Company has adopted the simplified method authorized in Staff Accounting Bulletin No. 107. SFAS No. 123R also requires that estimated forfeitures be included as a part of the estimate of expense as of the grant date. The Company has used historical data to estimate expected employee behaviors related to option exercises and forfeitures.

With respect to both grants of options and awards of restricted stock, the risk-free rate of interest is based on the U.S. Treasury rates appropriate for the expected term of the grant or award.

The Company calculated expected volatility for restricted stock based on historica mirror approach, where the daily stock price observations of our common stock during the three-yearseven-year period immediately after the grant will be the mirror of the historic daily stock price of our common stock during the seven-year period immediately preceding the grant.

There was $301,149 and $78,544 of compensationCompensation expense related to stock options granted and restricted stock awarded, respectively, infor the three months ended March 31, 2007. ForJune 30, 2007 included $266,045 from stock options grants and $94,218 from restricted stock awards. Compensation expense for the three months ended March 31,June 30, 2006 there was $311,624included $336,410 from stock options grants and $78,544 of compensationfrom restricted stock awards.

Compensation expense related tofor the six months ended June 30, 2007 included $551,578 from stock options grantedgrants and $172,762 from restricted stock awarded, respectively. Thisawards. Compensation expense for the six months ended June 30, 2006 included $648,034 from stock options grants and $157,088 from restricted stock awards.

Compensation expense is recognized inpresented as part of the operating results in selling, general and administrative expenses. For stock options granted to consultants, an additional selling, general, and administrative expense in the amount of $46,626$15,508 and $77,751 was recognized during the three and six months ended March 31,June 30, 2007, respectively. For stock options granted to consultants an additional selling, general, and administrative expense in the amount of $76,622$16,814 and $93,437 was recognized during the three and six months ended March 31, 2006.June 30, 2006, respectively.

During the threesix months ended March 31,June 30, 2007, the Company financed certain credit facility costs for $36,840, financed insurance policies through notes payable for $606,180 and issued warrants to a leasing credit facility which are valued at $28,011, and which offset the carrying value of debt. In addition, the Company financed vehicle purchases of $71,941 under capital leases.

During the threesix months ended March 31,June 30, 2006, the Company financed insurance policies through notes payable for $143,775.$763,982, financed certain credit facility costs for $82,043, financed a license agreement with a note payable of $77,876 and issued warrants to a leasing credit facility which are valued at $54,401, and which offset the carrying value of debt. During the threesix months ended March 31,June 30, 2006, the Company issued 101,010 shares of its restricted common stock to Stern Laser srl (“Stern”) due underupon achievement of another milestonesmilestone under the Master Purchase; thePurchase Agreement. The cost associated with this issuance is included in the license from Stern, which is found in patents and licensed technologies. TheIn March 2006, the Company also issued 200,000 shares of its restricted common stock to AzurTec, Inc. (“AzurTec”) as part of an investment in the capital stock of AzurTec as well as for a license agreement on AzurTec technology, both existing and to be developed in the future.

For the threesix months ended March 31,June 30, 2007 and 2006, the Company paid interest of $202,662$463,655 and $138,144,$296,990, respectively. Income taxes paid in the threesix months ended March 31,June 30, 2007 and 2006 were immaterial.

In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities." This Statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will become effective for usthe Company beginning with the first quarter of 2008. The Company hasWe have not yet determined the impact of the adoption of SFAS No. 159 on our financial statements and footnote disclosures. It is not expected that the adoption of this Statement will have a material effect on the Company's consolidated financial statements.

Set forth below is a detailed listing of inventories:

Work-in-process is immaterial, given the Company’s typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials. As of March 31,June 30, 2007 and December 31, 2006, the Company carried specific reserves for excess and obsolete stocks against its inventories of $1,352,148$1,383,744 and $1,354,444, respectively.

Set forth below is a detailed listing of property and equipment:

Depreciation expense was $831,841$1,697,199 and $710,036$1,430,093 for the threesix months ended March 31,June 30, 2007 and 2006, respectively. At March 31,June 30, 2007 and December 31, 2006, net property and equipment included $338,325$325,400 and $380,875, respectively, of assets recorded under capitalized lease arrangements, of which $100,317$154,794 and $122,717 was included in long-term debt at March 31,June 30, 2007 and December 31, 2006, respectively (see Note 8).

Related amortization expense was $84,859$169,716 and $74,559$159,418 for the threesix months ended March 31,June 30, 2007 and 2006, respectively. Included in other licensed and developed technologies is $200,000 in developed technologies acquired from ProCyte and $114,982 for the license with AzurTec (see Note 1).AzurTec. On March 31, 2006, the Company closed the transaction provided for in the License Agreement with Mount Sinai School of Medicine of New York University (“Mount Sinai”). Pursuant to the license agreement, the Company must reimburse $77,876 to Mount Sinai, over the first 18 months of the license term and at no interest, for patent prosecution costs incurred. The Company is also obligated to pay Mount Sinai a royalty on a combined base of domestic sales of XTRAC treatment codes used for psoriasis as well as for vitiligo. In the first four years of the license, however, Mount Sinai may elect to be paid royalties on an alternate base, comprised simply of treatments for vitiligo, but at a higher royalty rate than the rate applicable to the combined base. This technology is for the laser treatment of vitiligo and is included in other licensed or developed technologies.

Related amortization expense was $232,500$465,000 and $232,500$465,000 for the threesix months ended March 31,June 30, 2007 and 2006, respectively. Under the Neutrogena Agreement, the Company licenses to Neutrogena rights to its copper peptide technology for which the Company receives royalties. Customer Relationships embody the value to the Company of relationships that ProCyte had formed with its customers. Tradename includes the name of “ProCyte” and various other trademarks associated with ProCyte’s products.

Set forth below is a detailed listing of other accrued liabilities:

Set forth below is a detailed listing of notes payable. The stated interest rate approximates the effective cost of funds from the notes:

In the following table is a summary of the Company’s long-term debt.

The long-term debt is comprised largely of borrowings under a leasing credit facility whichthat the Company entered into with GE Capital Corporation (“GE”) on June 25, 2004. The credit facility has a commitment term of three years, which is set to expireexpired on June 25, 2007. For each year of the term various parameters are set or re-set. The Company accounts for each draw as a collateralized borrowing,funded indebtedness taking the form of a capital lease, with equitable ownership in the lasers remaining with the Company andCompany. GE retainingretains title as security for the borrowings. The Company depreciates the lasers generally over their remaining useful lives, as established when originally placed into service. Each draw against the credit facility has a self-amortizing repayment period of three years and is secured by specified lasers, which the Company has sold to GE and leased back for continued deployment in the field. The Company does not plan on any future draws from GE; the Company will continue to pay down the outstanding indebtedness to GE.

Each drawDraws under the credit facility has beenwere set at an interest rate, which in the first year of the term were set atranged from 577 basis points above the three-year Treasury note rate and byin the thirdfirst year were set atof the term to 400 basis points above the three-year Treasury rate.rate in the third year of the term. Each draw in the first year of the term was discounted 7.75%; draws made by the second and third yearyears were discounted 3.5%. The monthly payment set for a draw is self-amortizing. The first monthly payment is applied against principal.  

The following table summarizes the monthlyfuture minimum payments that the Company expects to make for the 11 draws made under the credit facility:

Furthermore, withWith each draw, the Company has issued warrants to purchase shares of the Company’s common stock equal towhich ranged from a high of 5%, now of the draw in the first year to 3% in the third year to 3%, of the draw.year. The number of warrants is determined by dividing either 3% or 5% of the draw by the average closing price of the Company’s common stock for the ten days preceding the date of the draw. The warrants have a five-year term from the date of each issuance and bear an exercise price set at 10% over the average closing price of the Company’s common stock for the ten days preceding the date of the draw. Taking the above factors into account, each draw has an effective interest rate. The effective interest rates are within the range of 17.79% andrate that ranges from17.79% to 12.62%.

For reporting purposes, the carrying value of the liability is reduced at the time of each draw by the value ascribed to the warrants. This reduction will be amortized at the effective interest rate to interest expense over the term of the draw.  The Company has accounted for these warrants as equity instruments in accordance with EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" since there is no option for cash or net-cash settlement when the warrants are exercised. Future exercises and forfeitures will reduce the amount of warrants outstanding. Exercises will increase the amount of common stock outstanding and additional paid in capital.

The obligations under capital leases are at fixed interest rates and are collateralized by the related property and equipment (see Note 3).

The Company has three active, stock-based compensation plans available to grant, among other things, incentive and non-incentive stock options to employees, directors and third-party service-providers as well as restricted stock to key employees. As of June 26, 2007, the stockholders approved an increase in the number of shares reserved to the 2005 Equity Compensation Plan and to the Outside Director Plan. Under the 2005 Equity Compensation Plan, a maximum of 3,160,0006,160,000 shares of the Company’s common stock were reserved for issuance. At March 31,June 30, 2007, 421,0003,154,800 shares were available for future grants under this Plan. Under the Outside Director Plan and under the 2005 Investment Plan, 286,250931,250 shares and 388,000 shares, respectively, were available for issuance as of March 31,June 30, 2007. The other stock options plans are frozen and no further grants will be made from them.

Stock option activity under all of the Company’s share-based compensation plans for the threesix months ended March 31,June 30, 2007 was as follows:

At March 31,June 30, 2007, there was $4,289,175$4,145,082 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 2.132.70 years. The intrinsic value of options outstanding and exercisable at March 31,June 30, 2007 was not significant.

Segments are distinguished by the Company’s management structure, products and services offered, markets served and types of customers. The Domestic XTRAC business derives its primary revenues from procedures performed by dermatologists in the United States. The International Dermatology Equipment segment, in comparison, generates revenues from the sale of equipment to dermatologists outside the United States through a network of distributors. The Skin Care (ProCyte) segment generates revenues by selling skincare products and by earning royalties on licenses for the Company’s patented copper peptide compound. The Surgical Services segment generates revenues by providing fee-based procedures typically using the Company’s mobile surgical laser equipment delivered and operated by a technician at hospitals and surgery centers in the United States. The Surgical Products segment generates revenues by selling laser products and disposables to hospitals and surgery centers on both a domestic and international basis. For the three and six months ended March 31,June 30, 2007 and 2006, the Company did not have material revenues from any individual customer.

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