10-Q

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 June 30, 2014

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 August 11, 2014 was 19,049,582 shares.

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PHOTOMEDEX, INC.

a. INDEX TO FORM 10-Q

Part I. Financial Information:			PAGE
	ITEM 1.  Financial Statements:
		a.Condensed Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	3
		b.Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended June 30, 2014 and 2013 (unaudited)	4
		c.Condensed Consolidated Statements of Comprehensive Income (Loss) for the six months ended June 30, 2014 and 2013 (unaudited)	5
		d.Condensed Consolidated Statement of Changes in Equity for the six months ended June 30, 2014 (unaudited)	6
		e.Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013 (unaudited)	7
		f.Notes to Condensed Consolidated Financial Statements (unaudited)	8
	ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
	ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk		48
	ITEM 4.  Controls and Procedures		49
Part II. Other Information:
	ITEM 1.  Legal Proceedings		49
	ITEM 1A.  Risk Factors		51
	ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds		51
	ITEM 3.  Defaults Upon Senior Securities		52
	ITEM 4.  Mine Safety Disclosures		52
	ITEM 5.   Other Information		52
	ITEM 6.  Exhibits		54
		Signatures	58
		Certifications	E-31.1

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PART I – Financial Information

ITEM 1. Financial Statements

PHOTOMEDEX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	June 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	36,662	$	45,388
Short term bank deposit		-		14,113
Accounts receivable, net of allowance for doubtful accounts of $12,020 and $10,734, respectively		21,374		27,218
Inventories, net		25,618		27,547
Deferred tax asset		14,085		13,041
Prepaid expenses and other current assets		15,296		12,597
Total current assets		113,035		139,904
Property and equipment, net		29,138		10,489
Patents and licensed technologies, net		9,960		10,832
Other intangible assets, net		48,085		9,701
Goodwill		75,010		24,930
Deferred tax asset		24,008		24,039
Other assets		3,322		213
Total assets	$	302,558	$	220,108
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable	$	416	$	838
Current portion of debt		85,185		10,000
Accounts payable		17,461		14,785
Accrued compensation and related expenses		3,974		3,230
Other accrued liabilities		15,967		22,032
Deferred revenues		5,460		5,961
Total current liabilities		128,463		56,846
Long-term liabilities:
Long-term note payable, net of current maturities		53		82
Long-term debt, net of current portion		681		-
Deferred revenues		2,031		2,758
Deferred tax liability		8,909		-
Other liabilities		7,279		61
Total liabilities		147,416		59,747
Commitments and Contingencies (Note 12)
Stockholders’ equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at June 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 June 30, 2014 and December 31, 2013, respectively		190		189
Additional paid-in capital		106,529		104,954
Retained earnings		45,854		53,679
Accumulated other comprehensive income		2,569		1,539
Total stockholders’ equity		155,142		160,361
Total liabilities and stockholders’ equity	$	302,558	$	220,108

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

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PHOTOMEDEX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share amounts)

(Unaudited)

	For the Three Months Ended June 30,
	2014			2013
Revenues:
Product sales	$	33,476		$	54,041
Services		5,501			4,024
Clinic services		13,143			-
		52,120			58,065
Cost of revenues:
Product sales		6,874			9,933
Services		1,895			1,457
Clinic services		8,883			-
		17,652			11,390
Gross profit		34,468			46,675
Operating expenses:
Engineering and product development		723			814
Selling and marketing		30,420			30,468
General and administrative		11,452			6,268
		42,595			37,550
Operating (loss) profit		(8,127	)		9,125
Other loss:
Interest and other financing expense, net		(175	)		(134	)
(Loss) Income before income tax benefit (expense)		(8,302	)		8,991
Income tax benefit (expense)		822			(1,897	)
Net (loss) income	$	(7,480	)	$	7,094
Net (loss) income per share:
Basic	$	( 0.40	)	$	0.34
Diluted	$	( 0.40	)	$	0.34
Shares used in computing net (loss) income per share:
Basic		18,723,484			20,573,048
Diluted		18,723,484			21,033,349
Other comprehensive income :
Foreign currency translation adjustments		693			21
Comprehensive (loss) income	$	(6,787	)	$	7,115

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

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PHOTOMEDEX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share amounts)

(Unaudited)

	For the Six Months Ended June 30,
	2014			2013
Revenues
Product sales	$	79,141		$	108,688
Services		9,911			6,593
Clinic services		13,143			-
		102,195			115,281
Cost of revenues
Product sales		15,482			20,168
Services		3,632			3,088
Clinic services		8,883			-
		27,997			23,256
Gross profit		74,198			92,025
Operating expenses:
Engineering and product development		1,518			1,587
Selling and marketing		62,046			59,794
General and administrative		19,039			11,927
		82,603			73,308
Operating (loss) profit		(8,405	)		18,717
Other loss
Interest and other financing expense, net		(321	)		(3	)
(Loss) income before income tax benefit (expense)		(8,726	)		18,714
Income tax benefit (expense)		901			(4,408	)
Net (loss) income	$	(7,825	)	$	14,306
Net (loss) income per share:
Basic	$	( 0.42	)	$	0.69
Diluted	$	( 0.42	)	$	0.68
Shares used in computing net (loss) income per share:
Basic		18,721,463			20,624,588
Diluted		18,721,463			21,084,889
Other comprehensive income (loss):
Foreign currency translation adjustments		1,030			(1,792	)
Comprehensive (loss) income	$	(6,795	)	$	12,514

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

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PHOTOMEDEX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(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		-		-		2,486			-			-		2,486
Stock options issued to consultants for services		-		-		70			-			-		70
Restricted stock issued, net of payroll taxes paid		146,337		1		(981	)		-			-		(980	)
Other comprehensive income		-		-		-			-			1,030		1,030
Net loss for the six months ended June 30, 2014				-		-			(7,825	)		-		(7,825	)
BALANCE, June 30, 2014		19,049,582	$	190	$	106,529		$	45,854		$	2,569	$	155,142

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

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PHOTOMEDEX, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except share and per share amounts)

(Unaudited)

	For the Six Months Ended June 30,
	2014			2013
Cash Flows From Operating Activities:
Net (loss) income	$	(7,825	)	$	14,306
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		4,186			2,959
Provision for doubtful accounts		3,442			2,125
Deferred income taxes		(31	)		1,982
Stock-based compensation		2,556			2,584
Insurance reserves		(240	)		-
Loss on disposal of property and equipment		(10	)		-
Changes in operating assets and liabilities:
Accounts receivable		6,012			(11,773	)
Inventories		2,050			(457	)
Prepaid expenses and other assets		(2,329	)		3,873
Accounts payable		(7,650	)		311
Accrued compensation and related expenses		(1,329	)		473
Other accrued liabilities		(12,620	)		(7,555	)
Deferred revenues		(1,371	)		592
Net cash (used in) provided by operating activities		(15,159	)		9,420
Cash Flows From Investing Activities:
Purchases of property and equipment		(154	)		(474	)
Investment in (sales of) short term bank deposits		14,113			(3,185	)
Acquisition, net of cash received		(77,510	)		-
Lasers placed in service		(3,624	)		(2,780	)
Proceeds from sales of property and equipment		20			-
Net cash used in investing activities		(67,155	)		(6,439	)
Cash Flows From Financing Activities:
Payments on notes payable		(451	)		(418	)
Repayments of term debt		(131	)		(14	)
Proceeds from credit facilities, net		75,000			-
Proceeds from option exercises		-			23
Repurchase of company stock		-			(5,381	)
Issuance of restricted stock, net of payroll taxes paid		(980	)		-
Net cash provided by (used in) financing activities		73,438			(5,790	)
Effect of exchange rate changes on cash		150			(239	)
Net decrease increase in cash and cash equivalents		(8,726	)		(3,048	)
Cash and cash equivalents, beginning of period		45,388			44,348
Cash and cash equivalents, end of period	$	36,662		$	41,300
Supplemental information:
Cash paid for income taxes	$	812		$	4,381
Cash paid for interest	$	108		$	11

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

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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 Health products and services company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians, ophthalmologists, optometrists, consumers and patients. The Company provides proprietary products and services that address skin diseases and conditions including psoriasis, vitiligo, acne, actinic keratosis photo damage, unwanted hair as well as fixed-site laser vision correction services at our LasikPlus® vision centers.

On May 12, 2014, PhotoMedex, Inc. (the “Company”) entered into an $85 million senior secured credit facilities (“the Facilities”) with the lenders that are parties thereto (collectively, the “Lenders”) and JP Morgan Chase (“Chase”) as Administrative Agent for the Lenders.  The Facilities 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-Vision, Inc. and for working capital and other general corporate purposes.

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 June 30, 2014, the Company failed to meet both financial covenants and is in default of the Facilities. On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and is engaging a third-party independent advisor to assist the Company in negotiating a longer term solution to the current default.  As a result of the default, the Lenders may accelerate the $85 million outstanding under the Facilities.  The Lenders also may increase the applicable interest on loans under the Facilities by 2%.  As of the date of this report, the Lenders have neither accelerated the outstanding amount nor increased the applicable interest but may do so in the future.

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.

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 consumer as dictated by normal product-life-cycle evolution and establishing XTRAC centers of excellence in key markets by acquiring a fully paid infrastructure of existing clinics with established high customer service standards and culture. 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.

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

On May 12, 2014, PhotoMedex completed the acquisition of 100% of the shares of LCA-Vision Inc. (“LCA-Vision” or “LCA”), 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 added an additional operating segment to its organization. The Company plans 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 June 30, 2014 in the PhotoMedex consolidated financial statements. (See Note 2, Acquisition).

Basis of Presentation:

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, 2013 (“fiscal 2013”). 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 six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 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- and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The LCA-Vision results have been included in the financial statements from May 13, 2014, the day following the closing date of the acquisition.

Reclassification

Certain reclassifications from the prior year presentation have been made to conform to the current year presentation. These reclassifications did not have material impact on the Company’s equity, net assets, results of operations or cash flows.

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.

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 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.

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.

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 8).

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 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.

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 $111 or less than 1% of the clinics revenues for the period of May 13, 2014 through June 30, 2014.

For patients that the Company internally finance, the Company charges interest at market rates. Finance and interest charges on patient receivables were $113 for the periods ended June 30, 2014.

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 so it is included in the Company’s consolidated financial statements. As of June 30, 2014, the insurance reserves were $6,111, 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 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) 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, 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. Deferred taxes are not provided on translation adjustments as the earnings of the subsidiaries are considered to be permanently reinvested.

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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:

• 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 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 is estimated to be equal to their fair value due to the short-term nature or commercial terms of these instruments.

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 group 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.

- 12 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 and included in financing income (expenses), net.

At June 30, 2014, the balance of such derivative instruments amounted to approximately $118 in assets and approximately $93 and $183 were recognized as financing income in the Statement of Comprehensive Income during the three and six months ended June 30, 2014, respectively.

The nominal amounts of foreign currency derivatives as of June 30, 2014 consist of forward transactions for the exchange of $5,200 into NIS as of June 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.

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 six months ended June 30, 2014 and 2013 is summarized as follows:

	June 30,
	2014			2013
	(unaudited)			(unaudited)
Accrual at beginning of year	$	1,151		$	1,440
Additions charged to warranty expense		398			691
Expiring warranties		(116	)		(281	)
Claims satisfied		(497	)		(655	)
Total		936			1,195
Less: current portion		(864	)		(1,117	)
Accrued extended warranty	$	72		$	78

For extended warranty on the consumer products, see Revenue Recognition above.

- 13 -

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 June 30,		For the Six Months Ended June 30,
	2014	2013		2014	2013
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding	18,723,484	20,573,048		18,721,463	20,624,588
Dilutive effect of stock options and warrants	-	460,301		-	460,301
Diluted number of common and common stock equivalent shares outstanding	18,723,484	21,033,349		18,721,463	21,084,889

Diluted earnings per share for the three and six months ended June 30, 2014, exclude the impact of common stock options and warrants, totaling 2,550,516 shares, as the effect of their inclusion would be anti-dilutive. Diluted earnings per share for the three and six months ended June 30, 2013, excluded the impact of common stock options and warrants, totaling 2,200,350 shares, as the effect of their inclusion would be anti-dilutive.

Adoption of New Accounting Standards

Effective January 1, 2014, the Company adopted Accounting Standard Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) ("ASU 2013-11").

The amendments in ASU 2013-11 state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction 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").

- 14 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

Note 2

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.

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.

- 15 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 expects that the allocation will be finalized within twelve months after the merger. 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.

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 six months ended June 30, 2014 and 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 June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Net revenues	$	61,170		$	80,674	$	136,776		$	166,194
Net income (loss)		(14,734	)		5,762		(16,747	)		12,579
Net income (loss) per share:
Basic	$	(0.79	)	$	0.28	$	(0.89	)	$	0.61
Diluted	$	(0.79	)	$	0.27	$	(0.89	)	$	0.60
Shares used in calculating net income (loss) per share:
Basic		18,723,484			20,573,048		18,721,463			20,624,588
Diluted		18,723,484			21,033,349		18,721,463			21,084,889

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.

- 16 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Note 3

Inventories, net:

	June 30, 2014		December 31, 2013
	(unaudited)
Raw materials and work in progress	$	10,252	$	12,631
Finished goods		15,366		14,916
Total inventories, net	$	25,618	$	27,547

Work-in-process is immaterial, given the Company’s typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials.

Note 4

Property and Equipment, net:

	June 30, 2014			December 31, 2013
	(unaudited)
Lasers-in-service	$	23,540		$	12,599
Equipment, computer hardware and software		5,725			4,730
Furniture and fixtures		1,343			705
Land and building		2,905			-
Leasehold improvements		5,725			534
		39,238			18,568
Accumulated depreciation and amortization		(10,100	)		(8,079	)
Property and equipment, net	$	29,138		$	10,489

Depreciation and related amortization expense was $2,390 and $1,343 for the six months ended June 30, 2014 and 2013, respectively.

Note 5

Patents and Licensed Technologies, net:

	June 30, 2014			December 31, 2013
	(unaudited)
Gross Amount beginning of period	$	15,648		$	15,411
Additions		98			171
Translation differences		107			66
Gross Amount end of period		15,853			15,648
Accumulated amortization		(5,893	)		(4,816	)
Patents and licensed technologies, net	$	9,960		$	10,832

Related amortization expense was $1,040 and $1,020 for the six months ended June 30, 2014 and 2013, respectively.

- 17 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Estimated amortization expense for amortizable patents and licensed technologies assets for the next five years is as follows:

Last six months of 2014	$	1,062
2015		2,049
2016		2,059
2017		909
2018		899
Thereafter		2,982
Total	$	9,960

Note 6

Goodwill and Other Intangible Assets, net:

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 which was allocated to the activities of LCA-Vision was recognized as a new reportable segment (“Clinics”). Goodwill and the LCA-Vision trademark name have an indefinite useful life and therefore are not amortized as an expense, but is reviewed at least annually for impairment. The goodwill and other identifiable assets of LCA-Vision are subject to change based upon the final allocation of the purchase price. The purchase price intrinsically recognizes the benefits of leveraging under-utilized clinics by establishing XTRAC centers of excellence in key markets.

	Goodwill		Trademarks
Balance at January 1, 2014	$	24,930	$	-
Additions for LCA-Vision acquisition		49,582		29,850
Translation differences		498		-
Balance at June 30, 2014	$	75,010	$	29,850

The Company has no impairment loss on goodwill or indefinite-lived assets as of June 30, 2014.

Set forth below is a detailed listing of other definite-lived intangible assets:

	June 30, 2014
	(unaudited)
	Trademarks			Customer Relationships			Managed Care Network			Total
Gross Amount beginning of period	$	5,772		$	6,417		$	-		$	12,189
Additions		-			-			9,200			9,200
Translation differences		46			72			-			118
Gross Amount end of period		5,818			6,489			9,200			21,507
Accumulated amortization		(1,479	)		(1,649	)		(144	)		(3,272	)
Net Book Value	$	4,339		$	4,840		$	9,056		$	18,235

- 18 -

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 $756 and $600 for the periods ended June 30, 2014 and 2013, respectively. 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”). 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 six months of 2014	$	1,175
2015		2,350
2016		2,350
2017		2,350
2018		2,350
Thereafter		7,660
Total	$	18,235

Note 7

Accrued Compensation and related expenses:

	June 30, 2014		December 31, 2013
	(unaudited)
Accrued payroll and related taxes	$	1,932	$	707
Accrued vacation		442		290
Accrued commissions and bonus		1,600		2,233
Total accrued compensation and related expense	$	3,974	$	3,230

- 19 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Note 8

Other Accrued Liabilities:

	June 30, 2014		December 31, 2013
	(unaudited)
Accrued warranty, current, see Note 1	$	864	$	1,094
Accrued taxes, net		1,753		1,023
Accrued sales returns (1)		6,547		16,046
Insurance liability reserves, current		805		-
Accrued enhancement expenses, current		836		-
Other accrued liabilities		5,162		3,869
Total other accrued liabilities	$	15,967	$	22,032

(1)   The activity in the sales returns liability account was as follows:

	Six Months Ended June 30,
	2014			2013
	(unaudited)			(unaudited)
Balance at beginning of year	$	16,046		$	11,901
Additions that reduce net sales		18,636			17,156
Deductions from reserves		(28,135	)		(21,117	)
Balance at end of period	$	6,547		$	7,940

Note 9

Long-Term Other Liabilities:

	June 30, 2014		December 31, 2013
	(unaudited)
Long-term insurance liability reserves, net of current portion	$	5,305	$	-
Accrued enhancement expenses, net of current portion		1,140		-
Other liabilities		834		61
Total long-term liabilities	$	7,279	$	61

Note 10

Long-term Debt:

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

	June 30, 2014		December 31, 2013
	(unaudited)
Senior-secured credit facilities, net of unamortized debt discount of $606	$	84,394	$	-
Term note		-		10,000
Third-party debt		1,472		-
Sub-total		85,866		10,000
Less: current portion		85,185		10,000
Long-term debt	$	681	$	-

- 20 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Senior Secured Credit Facilities

On May 12, 2014, PhotoMedex, Inc. (the “Company”) entered into an $85 million senior secured credit facilities (“the Facilities”) with the lenders that are parties thereto (collectively, the “Lenders”) and JP Morgan Chase (“Chase”) as Administrative Agent for the Lenders.  The Facilities 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-Vision, Inc. and for working capital and other general corporate purposes.

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 June 30, 2014, the Company failed to meet both financial covenants and is in default of the Facilities. On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and is engaging a third-party independent advisor to assist the Company in negotiating a longer term solution to the current default.  As a result of the default, the Lenders may accelerate the $85 million outstanding under the Facilities.  The Lenders also may increase the applicable interest on loans under the Facilities by 2%.  As of the date of this report, the Lenders have neither accelerated the outstanding amount nor increased the applicable interest butmay do so in the future.

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 six months of 2014	$	7,892
2015		17,405
2016		19,025
2017		20,900
2018		21,250
Total minimum payments		86,472
Less: unamortized discount		(606	)
Present value of total minimum obligations	$	85,866

- 21 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Note 11

Income Taxes:

The Company's effective tax rate is dependent upon the geographic distribution of its earnings or losses (mainly between US and Israel).

The difference between the Company's effective tax rates for the three and six month periods ended June 30, 2014 and the U.S. Federal statutory rate (34%) resulted primarily from Pre-merged PhotoMedex current operations which have generated losses, which reduced 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. In addition, the Israeli and UK subsidiaries’ earnings are taxed at rates lower than the federal statutory rate (Israel 16% preferred income tax rate, 26.5% standard corporation tax rate and in the UK 20%).

The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and can be ambiguous; the Company is, therefore, obliged to make many subjective assumptions and judgments regarding the application of such laws and regulations to 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.

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 $19,456, with $5,910 due less than 1 year; $9,149 due between 1 to 3 years; $3,693 due 3 to 5 years and $704 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 Company’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 June 30, 2014 could differ from the amounts recorded. At June 30, 2014, the Company maintained insurance reserves of $6,111 of which $805 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 $4,383 to $12,758 at June 30, 2104. Any adjustments to these estimates are recorded in the period determined.

- 22 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

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. 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. The Court also appointed a Special Master to oversee discovery. As of August 9, 2014, the case remains in the discovery phase of the litigation. Radiancy, and PhotoMedex, had moved to dismiss PhotoMedex from the case, and to dismiss the counterclaims and affirmative defenses asserted by Viatek. 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 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. 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 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.

- 23 -

PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Six putative 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 assert 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, although the Ohio Court did not formally consolidate the suits until April 24, 2014. The Delaware suits were consolidated on March 25, 2014; on or around 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 affect the terms of the Merger Agreement or the amount of consideration LCA stockholders will be entitled to receive in the merger. The Company intends to continue to vigorously defend itself in 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 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 if the cases cannot be resolved.

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. Radiancy and its officers intend to vigorously defend themselves against 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

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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 and its officers intend to vigorously defend themselves against 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.

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 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. 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 previous Non-Employee Director Stock Option Plan of PhotoMedex (the acquired entity) was adopted by the group. This plan has authorized 120,000 shares; of which 7,000 shares had been issued or were reserved for issuance as awards of shares of common stock, and 14,578 shares were reserved for outstanding stock options. On July 31, 2014, the shareholders approved an increase in the authorized shares to 370,000 shares under the stock based benefit plan.

In addition, following the closing of the December 2011 reverse acquisition, the previous 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 3,000,000 shares, of which 867,432 shares had been issued or were reserved for issuance as awards of shares of common stock, and 1,293,601 shares were reserved for outstanding options. On July 31, 2014, the shareholders approved an increase in the authorized shares to 6,000,000 shares under the stock based benefit plan.

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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 six months ended June 30, 2014 was as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding, January 1, 2014		1,132,678		$	16.51
Granted		180,500			14.11
Exercised		-			-
Cancelled		(4,999	)		58.63
Outstanding, June 30, 2014		1,308,179		$	16.02
Options exercisable at June 30, 2014		517,179		$	16.45

At June 30, 2014, there was $9,693 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 2.8 years. The intrinsic value of options outstanding and exercisable at June 30, 2014 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 six months ended June 30, 2014, 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.

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

	Three Months Ended June 30, 2014	Six Months Ended June 30, 2014
Risk-free interest rate	2.21%	2.17%
Volatility	76.61%	78.41%
Expected dividend yield	0%	0%
Expected life	5.5 years	5.5 years
Estimated forfeiture rate	0%	0%

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, 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 141,337 restricted stock units to three LCA employees as part of their respective employment agreements related to the acquisition. These 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-year period. The Company determined the fair value of the awards to be the fair value of the Company’s common stock on the date of issuance less the value paid for the award. 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 the options granted was $975.

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

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.

Total stock based compensation expense was $2,556 and $2,584 for the six months ended June 30, 2014 and 2013, including amounts relating to consultants.

Note 14

Business Segments and Geographic Data:

Following the acquisition of LCA-Vision, the Company’s business was aligned into four operating segments 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.

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Unallocated assets include cash and cash equivalents, prepaid expenses and deposits.

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

Three Months Ended June 30, 2014 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics			Total
Revenues	$	28,453		$	8,607		$	1,917		$	13,143		$	52,120
Costs of revenues		3,983			3,425			1,361			8,883			17,652
Gross profit		24,470			5,182			556			4,260			34,468
Gross profit %		86.0	%		60.2	%		29.0	%		32.4	%		66.1	%
Allocated operating expenses:
Engineering and product development		305			257			161			-			723
Selling and marketing expenses		23,223			4,268			274			2,655			30,420
Unallocated operating expenses		-			-			-			-			11,452
		23,528			4,525			435			2,655			42,595
Income (loss) from operations		942			657			121			1,605			(8,127	)
Interest  and other financing expense, net		-			-			-			-			(175	)
Net income (loss) before taxes	$	942		$	657		$	121		$	1,605		$	( 8,302	)

Three Months Ended June 30, 2013 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics		Total
Revenues	$	48,673		$	7,376		$	2,016		$	-	$	58,065
Costs of revenues		7,174			3,014			1,202			-		11,390
Gross profit		41,499			4,362			814			-		46,675
Gross profit %		85.3	%		59.1	%		40.4	%		N/A		80.4	%
Allocated operating expenses:
Engineering and product development		279			317			218			-		814
Selling and marketing expenses		26,703			3,233			532			-		30,468
Unallocated operating expenses		-			-			-			-		6,268
		26,982			3,550			750			-		37,550
Income from operations		14,517			812			64			-		9,125
Interest and other financing expense, net		-			-			-			-		(134	)
Net income before taxes	$	14,517		$	812		$	64		$	-	$	8,991

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PHOTOMEDEX, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

Six Months Ended June 30, 2014 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics			Total
Revenues	$	69,323		$	15,826		$	3,903		$	13,143		$	102,195
Costs of revenues		10,233			6,255			2,626			8,883			27,997
Gross profit		59,090			9,571			1,277			4,260			74,198
Gross profit %		85.2	%		60.5	%		32.7	%		32.4	%		72.6	%
Allocated operating expenses:
Engineering and product development		592			567			359			-			1,518
Selling and marketing expenses		50,381			8,279			731			2,655			62,046
Unallocated operating expenses		-			-			-			-			19,039
		50,973			8,846			1,090			2,655			82,603
Income from operations		8,117			725			187			1,605			(8,405	)
Interest and other financing expense, net		-			-			-			-			(321	)
Net income (loss)before taxes	$	8,117		$	725		$	187		$	1,605		$	(8,726	)

Six Months Ended June 30, 2013 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics		Total
Revenues	$	97,733			13,331		$	4,217		$	-	$	115,281
Costs of revenues		14,691			5,945			2,620			-		23,256
Gross profit		83,042			7,386			1,597			-		92,025
Gross profit %		85.0	%		55.4	%		37.9	%		N/A		79.8	%
Allocated operating expenses:
Engineering and product development		497			641			449			-		1,587
Selling and marketing expenses		52,334			6,407			1,053			-		59,794
Unallocated operating expenses		-			-			-			-		11,927
		52,831			7,048			1,502			-		73,308
Income from operations		30,211			338			95			-		18,717
Interest  and other financing expense, net		-			-			-			-		(3	)
Net income before taxes	$	30,211		$	338		$	95		$	-	$	18,714

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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 three and six months ended June 30, 2014 and 2013 (unaudited), net revenues by geographic area were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
North America 1	$	41,803	$	42,033	$	81,776	$	86,932
Asia Pacific 2		2,638		9,440		5,015		15,202
Europe (including Israel)		7,084		5,861		14,492		11,494
South America		595		731		912		1,653
	$	52,120	$	58,065	$	102,195	$	115,281
1 United States	$	38,612	$	37,329	$	73,379	$	75,336
1 Canada	$	3,191	$	4,704	$	8,397	$	11,596
2  Japan	$	290	$	7,452	$	988	$	11,715

As of June 30, 2014 and December 31, 2013, long-lived assets by geographic area were as follows:

	June 30, 2014		December 31, 2013
	(unaudited)
North America	$	27,859	$	9,119
Asia Pacific		4		-
Europe (including Israel)		1,270		1,370
South America		5		-
	$	29,138	$	10,489

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 customer was more than 10% of total company revenues for the three and six months ended June 30, 2014. For the three and six months ended June 30, 2013, there were two customers more than 10% of revenues.

	Three Months Ended June 30, 2013	Six Months Ended June 30, 2013
Customer A	11%	11%
Customer B	12%	9%

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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. 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 is built upon 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 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.

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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• 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-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 visioncorrection 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 June 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. 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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Consumer

The global consumer market is our largest business unit due to our success 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 types of creative, languages, and media formats – print, online, radio, and TV) to effectively reach the large population groups where we have expanded our sales efforts, 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.

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 $21 million and $35 million for the three months ended June 30, 2014 and 2013, respectively. Our consumer distribution segment in North America had sales of approximately $54 million and $74 million for the six months ended June 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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International (excluding North America). In the international consumer segment, sales were approximately $8 million and $13 million for the three months ended June 30, 2014 and 2013, respectively. In the international consumer segment, sales were approximately $16 million and $23 million for the six months ended June 30, 2014 and 2013, respectively. We utilize various sales and marketing methods including those focused on direct-to-consumer sales, customers of retailers and home shopping channels as well as supporting our third-party distributor partners in certain countries. Our main international markets are Asia, Europe, Australia and South America.

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.

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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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 June 30, 2014, our sales and marketing personnel consisted of 97 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.

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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.

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, there have been no additional changes to our critical accounting policies and estimates in the three and six months ended June 30, 2014. 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.

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 four business segments for the periods indicated below:

	For the Three Months Ended June 30, 2014								For the Three Months Ended June 30, 2013
	Product Sales		Services		Clinic Services		Total		Product Sales		Services		Clinic Services		Total
Consumer	$	28,453	$	-	$	-	$	28,453	$	48,673	$	-	$	-	$	48,673
Physician Recurring		3,106		5,501		-		8,607		3,352		4,024		-		7,376
Professional		1,917		-		-		1,917		2,016		-		-		2,016
Clinics		-		-		13,143		13,143		-		-		-		-
Total Revenues	$	33,476	$	5,501	$	13,143	$	52,120	$	54,041	$	4,024	$	-	$	58,065

	For the Six Months Ended June 30, 2014								For the Six Months Ended June 30, 2013
	Product Sales		Services		Clinic Services		Total		Product Sales		Services		Clinic Services		Total
Consumer	$	69,323	$	-	$	-	$	69,323	$	97,733	$	-	$	-	$	97,733
Physician Recurring		5,915		9,911		-		15,826		6,738		6,593		-		13,331
Professional		3,903		-		-		3,903		4,217		-		-		4,217
Clinics		-		-		13,143		13,143		-		-		-		-
Total Revenues	$	79,141	$	9,911	$	13,143	$	102,195	$	108,688	$	6,593	$	-	$	115,281

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 June 30, 2014. There are no corresponding revenues for the three and six months ended June 30, 2013.

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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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
Direct-to-consumer	$	21,846	$	30,320	$	52,632	$	62,042
Distributors		711		8,435		1,339		13,726
Retailers and home shopping channels		5,896		9,918		15,352		21,965
Total Consumer Revenues	$	28,453	$	48,673	$	69,323	$	97,733

For the three months ended June 30, 2014, consumer products revenues were $28,453 compared to $48,673 in the three months ended June 30, 2013. For the six months ended June 30, 2014, consumer products revenues were $69,323 compared to $97,733 in the six months ended June 30, 2013. The decreases of 41.5% and 29.1% during the periods, respectively was mainly due to the following reasons:

• Direct to Consumer. Revenues for the three months ended June 30, 2014 were $21,846 compared to $30,320 for the same period in 2013. Revenues for the six months ended June 30, 2014 were $52,632 compared to $62,042 for the same period in 2013. The decreases in revenues of 28% and 15%, respectively, were 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. The decrease in revenue also has an impact on the total amount of sales returns liability as reflected in Note 8 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 June 30, 2014 were $5,896 compared to $9,918 for the same period in 2013. Revenues for the six months ended June 30, 2014 were $15,352 compared to $21,965 for the same period in 2013. The decreases of 41% and 30%, respectively, were mainly due to the timing of specials on the various home shopping channel customers, mainly in the United States (“US”) and the UK.

• Distributors Channels. Revenues for the three months ended June 30, 2014 were $711 compared to $8,435 for the same period in 2013. Revenues for the six months ended June 30, 2014 were $1,339 compared to $13,726 for the same period in 2013. The decreases in revenues of 92% and 90% were due to our distributor 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 revenues from our Japan distributor to decrease to $11 and $161 for the three and six months ended June 30, 2014, respectively. For the three and six months ended June 30, 2013, the revenues from our Japan distributor were $6,983 and $10,868, respectively. During the fourth quarter of 2013, we terminated our distribution agreement with the Japan distributor.

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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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
North America	$	20,564	$	35,042	$	53,734	$	74,267
International		7,889		13,631		15,589		23,466
Total Consumer Revenues	$	28,453	$	48,673	$	69,323	$	97,733

•   International revenues, excluding the decrease in Japan, increased by $1,241 and $2,991 for the three and six month periods, which was partially due to our expansion in new international markets including Brazil, Germany, Hong Kong and Columbia.

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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
XTRAC Treatments	$	5,501	$	4,024	$	9,911	$	6,593
Neova skincare		1,888		2,142		3,815		4,368
Surgical products		489		482		885		1,002
Other		729		728		1,215		1,368
Total Physician Recurring Revenues	$	8,607	$	7,376	$	15,826	$	13,331

XTRAC Treatments

Recognized treatment revenue for the three months ended June 30, 2014 was $5,501, which approximates 79,000 treatments, with prices between $65 to $95 per treatment, compared to recognized treatment revenues for the three months ended June 30, 2013 was $4,024, which approximates 57,000 treatments with prices between $65 to $85 per treatment. Recognized treatment revenue for the six months ended June 30, 2014 was $9,911, which approximates 142,000 treatments, with prices between $65 to $95 per treatment, compared to recognized treatment revenues for the three months ended June 30, 2013 was $6,593, which approximates 94,000 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 June 30, 2014, we recognized net revenues of $26 under this approach compared to deferred net revenues of $72 for the three months ended June 30, 2013. For the six months ended June 30, 2014, we deferred net revenues of $55 under this approach compared to deferred net revenues of $217 for the six months ended June 30, 2013.

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NEOVA skincare

For the three months ended June 30, 2014, revenues were $1,888 compared to $2,142 for the three months ended June 30, 2013. For the six months ended June 30, 2014, revenues were $3,815 compared to 4,368 for the six months ended June 30, 2013. These revenues are generated from the sale of various skin, hair, and wound care products to physicians 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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
North America	$	7,695	$	6,599	$	14,084	$	11,761
International		912		777		1,742		1,570
Total Physicians Recurring Revenues	$	8,607	$	7,376	$	15,826	$	13,331

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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
Dermatology equipment	$	978	$	1,042	$	2,193	$	2,119
LHE equipment		486		624		956		1,402
Other equipment		453		350		754		696
Total Professional Revenues	$	1,917	$	2,016	$	3,903	$	4,217

Dermatology equipment

For the three months ended June 30, 2014 and 2013, dermatology equipment revenues were $978 and $1,042, respectively. For the six months ended June 30, 2014 and 2013, dermatology equipment revenues were $2,193 and $2,119, respectively. There were no domestic XTRAC laser sales for the three and six months ended June 30, 2014 and 2013. 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 nineteen systems for the three months ended June 30, 2014, six 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. We sold thirty-one systems for the three months ended June 30, 2013, eighteen of which were VTRAC systems. We sold fifty-two systems for the six months ended June 30, 2014, twenty-six of which were VTRAC systems. We sold sixty-four systems for the six months ended June 30, 2013, thirty-eight 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 June 30, 2014 and 2013, LHE® brand products revenues were $486 and $624, respectively. For the six months ended June 30, 2014 and 2013, LHE® brand products revenues were $956 and $1,402, respectively.

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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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
North America	$	421	$	465	$	834	$	985
International		1,496		1,551		3,069		3,232
Total Professional Revenues	$	1,917	$	2,016	$	3,903	$	4,217

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 June 30,				For the Six Months Ended June 30,
	2014		2013		2014		2013
Clinics revenues	$	13,143	$	-	$	13,143	$	-
Amortization of prior deferred revenues		-		-		-		-
Total Clinics Revenues	$	13,143	$	-	$	13,143	$	-

The procedure volume for the period ended June 30 2014 was 7,549. 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 June 30, 2014. There are no corresponding revenues for the three and six months ended June 30, 2013.

Cost of Revenues: all segments

The following table presents revenues from our four business segments for the periods indicated below:

	For the Three Months Ended June 30, 2014								For the Three Months Ended June 30, 2013
	Product Sales		Services		Clinic Services		Total		Product Sales		Services		Clinic Services		Total
Consumer	$	3,983	$	-	$	-	$	3,983	$	7,174	$	-	$	-	$	7,174
Physician Recurring		1,530		1,895		-		3,425		1,557		1,457		-		3,014
Professional		1,361		-		-		1,361		1,202		-		-		1,202
Clinics		-		-		8,883		8,883		-		-		-		-
Total Revenues	$	6,874	$	1,895	$	8,883	$	17,652	$	9,933	$	1,457	$	-	$	11,390

	For the Six Months Ended June 30, 2014								For the Six Months Ended June 30, 2013
	Product Sales		Services		Clinic Services		Total		Product Sales		Services		Clinic Services		Total
Consumer	$	10,233	$	-	$	-	$	10,233	$	14,691	$	-	$	-	$	14,691
Physician Recurring		2,623		3,632		-		6,255		2,857		3,088		-		5,945
Professional		2,626		-		-		2,626		2,620		-		-		2,620
Clinics		-		-		8,883		8,883		-		-		-		-
Total Revenues	$	15,482	$	3,632	$	8,883	$	27,997	$	20,168	$	3,088	$	-	$	23,256

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Overall, excluding the clinics cost of revenues, cost of revenues has decreased due to the related decreases 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 June 30, 2014. There are no corresponding cost of revenues for the three and six months ended June 30, 2013.

Gross Profit Analysis

Gross profit decreased to $34,468 for the three months ended June 30, 2014 from $46,675 during the same period in 2013. As a percentage of revenues, the gross margin was 66.1% for the three months ended June 30, 2014 and from 80.4% for the same period in 2013.

Gross profit decreased to $74,198 for the six months ended June 30, 2014 from 92,025 during the same period in 2013. As a percentage of revenues, the gross margin was 72.6% for the six months ended June 30, 2014 and from 79.8% for the same period in 2013.

The following table analyzes changes in our gross margin for the periods presented below:

Company Profit Analysis	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	52,120		$	58,065		$	102,195		$	115,281
Percent decrease		(10.2	%)					(11.4	%)
Cost of revenues		17,652			11,390			27,997			23,256
Percent increase		55.0	%					20.4	%
Gross profit	$	34,468		$	46,675		$	74,198		$	92,025
Gross margin percentage		66.1	%		80.4	%		72.6	%		79.8	%

The primary reasons for the changes in gross profit for the three and six months ended June 30, 2014, compared to the same period in 2013, were due mainly to decreases in consumer revenues. Offsetting this, the Physician Recurring segment, which has a lower margin than the Consumer segment, had 37% and 50% greater revenues than the prior year periods, respectively, 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 June 30, 2014. There is no corresponding activity in the three and six months ended June 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 June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	28,453		$	48,673		$	69,323		$	97,733
Percent decrease		(41.5	%)					(29.1	%)
Cost of revenues		3,983			7,174			10,233			14,691
Percent decrease		(44.5	%)					(30.3	%)
Gross profit	$	24,470		$	41,499		$	59,090		$	83,042
Gross margin percentage		86.0	%		85.3	%		85.2	%		85.0	%

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Gross profit for the three and six months ended June 30, 2014 decreased by $17,029 and $23,952, respectively, from the comparable periods in 2013. The key factors for these decreases were due to the following:

• The Consumer segment had decreases in revenues in the three and six months ended June 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.

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 June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	8,607		$	7,376		$	15,826		$	13,331
Percent increase		16.7	%					18.7	%
Cost of revenues		3,425			3,014			6,255			5,945
Percent increase		13.6	%					5.2	%
Gross profit	$	5,182		$	4,362		$	9,571		$	7,386
Gross margin percentage		60.2	%		59.1	%		60.5	%		55.4	%

Gross profit for the three and six months ended June 30, 2014 increased by $820 and $2,185, respectively, from the comparable periods in 2013. The primary reason for the increased gross margins 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.

The following table analyzes the gross profit for our Professional segment for the periods presented below:

Professional Segment	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues	$	1,917		$	2,016		$	3,903		$	4,217
Percent decrease		(4.9	%)					(7.4	%)
Cost of revenues		1,361			1,202			2,626			2,620
Percent increase		13.2	%					(0.2	%)
Gross profit	$	556		$	814		$	1,277		$	1,597
Gross margin percentage		29.0	%		40.4	%		32.7	%		37.9	%

Gross profit for the three and six months ended June 30, 2014 decreased by $258 and $320, respectively, from the comparable periods in 2013. The key factor for the decreases was the decreases in revenues for each product type.

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The following table analyzes the gross profit for our Clinics segment for the periods presented below:

Clinics Segment	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2014			2013		2014			2013
Revenues	$	13,143		$	-	$	13,143		$	-
Percent decrease		100.0	%				100.0	%
Cost of revenues		8,883			-		8,883			-
Percent increase		100.0	%				100.0	%
Gross profit	$	4,260		$	-	$	4,260		$	-
Gross margin percentage		32.4	%		N/A		32.4	%		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 June 30, 2014. There is no corresponding activities in the three and six months ended June 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 June 30, 2014 decreased to $723 from $814 for the three months ended June 30, 2013. Engineering and product development expenses for the six months ended June 30, 2014 decreased to $1,518 from $1,587 for the six months ended June 30, 2013. 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.

Selling and Marketing Expenses

For the three months ended June 30, 2014, selling and marketing expenses decreased to $30,420 from $30,468 for the three months ended June 30, 2013. The decrease was primarily for the following reasons:

• We decreased no!no! Hair Removal direct to consumer advertising by approximately $3,775 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.

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• Offsetting the above decrease, media buying and advertising expenses in the three months ended June 30, 2014 were 36.3% of total revenues compared to 29.5% of total revenues in the three months ended June 30, 2013. There was change in mix of revenues particularly as a result of the decrease in revenues from our Japan distributor. These distributor revenues require substantially less sales and marketing costs than what is required in the direct channel. Direct to consumer revenues are 41.9% of total revenues for the three months ended June 30, 2014 compared to 52.2% of total revenues for the three months ended June 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 $2,930 compared to $1,131 for the three months ended June 30, 2013.  

•   In addition, there was an increase of approximately $2,655 in costs from LCA-Vision reflecting activities from the acquisition date thru June 30, 2014. Consequently, there were no corresponding sales and marketing expenses related to LCA-Vision for the period ended June 30, 2013.

For the six months ended June 30, 2014, selling and marketing expenses increased to $62,046 from $59,794 for the six months ended June 30, 2013. The increase was primarily for the following reasons:

• We increased no!no! Hair Removal, Neova, no!no! skin and Kyrobak direct to consumer activities in North America, 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 six months ended June 30, 2014 were 36.9% of total revenues compared to 27.9% of total revenues in the six months ended June 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. These distributor revenues require substantially less sales and marketing costs than what is required in the direct channel. Direct to consumer revenues 51.5% of total revenues for the six months ended June 30, 2014 compared to 53.8% of total revenues for the six months ended June 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 $5,268 compared to $1,664 for the six months ended June 30, 2013.

•   In addition, there was an increase of approximately $2,655 in costs from LCA-Vision reflecting activities from the acquisition date thru June 30, 2014. Consequently, there were no corresponding sales and marketing expenses related to LCA-Vision for the period ended June 30, 2013.

General and Administrative Expenses

For the three months ended June 30, 2014, general and administrative expenses increased to $11,452 from $6,268 for the three months ended June 30, 2013. The increase was due to the following reasons:

•   We have recorded $1,959 in costs related to the acquisition of LCA Vision.  

•   We have had an increase in bad debt expenses related to both the Canada and Germany markets of approximately $1,632.  

•   We have recorded $501 in costs related to the various litigations.  

•   There was an increase of $1,382 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 June 30, 2014. There were no corresponding expenses in our financial statements for the three months ended June 30, 2104.

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For the six months ended June 30, 2014, general and administrative expenses increased to $19,039 from $11,927 for the six months ended June 30, 2013. The increase was due to the following reasons:

•   We have recorded $2,865 in costs related to the acquisition of LCA Vision.  

•   We have had an increase in bad debt expenses related to both the Canada and Germany markets of approximately $1,632.  

•   We have recorded $1,394 in costs related to the various litigations.  

•   There was an increase of $1,382 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 June 30, 2014. There were no corresponding expenses in our financial statements for the three months ended June 30, 2104.

Interest and Other Financing Expense, Net

Net interest and other financing expense for the three months ended June 30, 2014 increased to $175, as compared to $134 for the three months ended June 30, 2013. Net interest and other financing expense for the six months ended June 30, 2014 increased to $321, as compared to $3 for the six months ended June 30, 2013. The increase is partially due to an increase in interest expense of $505 and $547, respectively, for the three and six months ended June 30, 2014. The interest expense related to the long term debt and the amortization of the related debt costs that was entered into in May 2014. 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 June 30, 2014, the net taxes on income amounted to a benefit of $822 as compared to an expense of $1,897 for the three months ended June 30, 2013. For the six months ended June 30, 2014, the net taxes on income amounted to a benefit of $901 as compared to an expense of $4,408 for the six months ended June 30, 2013.

Net Income

The factors described above resulted in net loss of $7,480 during the three months ended June 30, 2014, as compared to net income of $7,094 during the three months ended June 30, 2013, a decrease of 205%. The factors described above resulted in net loss of $7,825 during the six months ended June 30, 2014, as compared to net income of $14,306 during the six months ended June 30, 2013, a decrease of 155%.

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 June 30,
	2014			2013		Change
Net income	$	( 7,480	)	$	7,094	$	(14,574	)
Adjustments:
Depreciation and amortization		2,550			1,516		1,034
Interest expense, net		509			4		505
Income tax expense (benefit)		(822	)		1,897		(2,719	)
EBITDA		(5,243	)		10,511		(15,754	)
Stock-based compensation expense		1,294			1,294		-
Acquisition costs		1,959			-		1,959
Major litigation		501			-		501
Extraordinary items		1,632			-		1,632
Non-GAAP adjusted income	$	143		$	11,805	$	( 11,662	)

	For the Six Months ended June 30,
	2014			2013		Change
Net income	$	( 7,825	)	$	14,306	$	(22,131	)
Adjustments:
Depreciation and amortization		4,186			2,959		1,227
Interest expense, net		556			9		547
Income tax expense (benefit)		(901	)		4,408		(5,309	)
EBITDA		(3,984	)		21,682		(25,666	)
Stock-based compensation expense		2,556			2,584		(28	)
Acquisition costs		2.865			-		2,865
Major litigation		1,394			-		1,394
Non-GAAP adjusted income	$	2,831		$	24,266	$	( 21,435	)

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Liquidity and Capital Resources

At June 30, 2014, our current ratio was 0.88 compared to 2.46 at December 31, 2013. As of June 30, 2014 we had ($15,428) of working capital compared to $83,058 as of December 31, 2013. Cash and cash equivalents were $36,662 as of June 30, 2014, as compared to $45,388 as of December 31, 2013. In addition, we had $14,113 in short term bank deposits as of December 31, 2013.

On May 12, 2014, PhotoMedex, Inc. (the “Company”) entered into an $85 million senior secured credit facilities (“the Facilities”) with the lenders that are parties thereto (collectively, the “Lenders”) and JP Morgan Chase (“Chase”) as Administrative Agent for the Lenders.  The Facilities 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-Vision, Inc. and for working capital and other general corporate purposes.

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 June 30, 2014, the Company failed to meet both financial covenants and is in default of the Facilities. On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and is engaging a third-party independent advisor to assist the Company in negotiating a longer term solution to the current default.  As a result of the default, the Lenders may accelerate the $85 million outstanding under the Facilities.  The Lenders also may increase the applicable interest on loans under the Facilities by 2%.  As of the date of this report, the Lenders have neither accelerated the outstanding amount nor increased the applicable interest but may do so in the future.

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, 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 and other liquidity requirements associated with our existing operations through and beyond the third quarter of 2015.

Net cash and cash equivalents used in operating activities was $15,159 for the six months ended June 30, 2014 compared to cash provided by of $9,521 for the six months ended June 30, 2013.

Net cash and cash equivalents used in investing activities was $67,155 for the six months ended June 30, 2014 compared to $6,539 for the six months ended June 30, 2013. This was primarily due to the acquisition of LCA-Vision, net of cash received and the increase in the placement of lasers into service for the six months ended June 30, 2014. These decreases were partially offset by the sales of short-term investments.

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 used by financing activities was $73,439 for the six months ended June 30, 2014 compared to $5,790 for the six months ended June 30, 2013. In the six months ended June 30, 2014, we had net receipts on credit facilities of $75,000 on term debt and $451 for certain notes payable.

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Commitments and Contingencies

With the LCA-Vision acquisition, we have acquired additional operating lease obligations. See the following table:

	Total		Less than 1 year		1 -3 years		3 – 5 years		More than 5 years
Operating lease obligations	$	19,456	$	5,910	$	9,149	$	3,693	$	704

There were no additional items, then noted above, that significantly impacted our commitments and contingencies as discussed in the notes to our 2013 annual financial statements included in our Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

At June 30, 2014, 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.

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, 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 six months ended June 30, 2014, 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.

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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 June 30, 2014. 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.

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.

As of May 12, 2014, the case remains in the discovery phase of the litigation. 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. 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. The Court also appointed a Special Master to oversee discovery. 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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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 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. 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 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.

Six putative 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 assert 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, although the Ohio Court did not formally consolidate the suits until April 24, 2014. The Delaware suits were consolidated on March 25, 2014; on or around 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 affect the terms of the Merger Agreement or the amount of consideration LCA stockholders will be entitled to receive in the merger. The Company intends to continue to vigorously defend itself in 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 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 if the cases cannot be resolved.

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. Radiancy and its officers intend to vigorously defend themselves against 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.

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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 and its officers intend to vigorously defend themselves against 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.

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 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.

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.

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 June 30, 2014, our other risk factors have not changed materially from the risk factors previously disclosed on our Annual Report on Form 10-K for the year ended December 31, 2013, with the exception identified in ITEM 3 below.

ITEM 2. Unregistered sales of equity securities and use of proceeds

None.

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ITEM 3. Defaults upon senior securities.

On May 12, 2014, PhotoMedex, Inc. (the “Company”) entered into an $85 million senior secured credit facilities (“the Facilities”) with the lenders that are parties thereto (collectively, the “Lenders”) and JP Morgan Chase (“Chase”) as Administrative Agent for the Lenders.  The Facilities 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-Vision, Inc. and for working capital and other general corporate purposes.

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 June 30, 2014, the Company failed to meet both financial covenants and is in default of the Facilities. On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and is engaging a third-party independent advisor to assist the Company in negotiating a longer term solution to the current default.  As a result of the default, the Lenders may accelerate the $85 million outstanding under the Facilities.  The Lenders also may increase the applicable interest on loans under the Facilities by 2%.  As of the date of this report, the Lenders have neither accelerated the outstanding amount nor increased the applicable interest but may do so in the future.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

On August 5, 2014, each of Dr. Dolev Rafaeli, Chief Executive Officer, and Dennis M. McGrath, President and Chief Financial Officer, entered into Amended and Restated Employment Agreements with the Company. The previous amended and restated employment agreements for both executives were due to expire on December 13, 2014 and required the Board to provide notice to the executives on or before October 1, 2014 of its intent in dealing with the expiring contracts. The new Agreements, which are restatements of the 2011 employment agreements, take effect on the date of signing and expire December 31, 2018. 

Under the new Agreements, the annual base salaries for Dr. Rafaeli and Mr. McGrath will be $495,000 and $395,000, respectively. 

During his employment, Dr. Rafaeli will be eligible to receive a quarterly cash bonus (the “1st Tier Cash Bonus”) equal to 1% of the Company’s sales during that quarter, provided that the total 1st Tier Cash Bonuses payable to Dr. Rafaeli for any year may not exceed $1,000,000 less any other “applicable employee remuneration” within the meaning of Internal Revenue Section 162(m)(4)(C) payable to Dr. Rafaeli for such year.   Dr. Rafaeli will also continue to be eligible to receive a quarterly cash bonus (the “2nd Tier Cash Bonus”) equal to 1% of the Company’s U.S. GAAP sales for that quarter in excess of a target threshold amount set by the Compensation Committee of the Board. The 2nd Tier Cash Bonus program for Dr. Rafaeli was approved by the Company’s shareholders in 2011 at the December 12, 2011 annual meeting of stockholders.  Under the new Agreements, the Compensation Committee may elect to pay all or a portion of Dr. Rafaeli’s 2nd Tier Cash Bonus in the form of Company common stock.

During his employment, Mr. McGrath will be eligible to receive an annual bonus for each fiscal year of the Company up to eighty percent (80%) of his base salary, based on the attainment of certain individual and corporate performance goals and targets determined by the Board at the beginning of each fiscal year. 

Both executives will also be eligible to participate in the Company’s annual and long-term equity incentive plans and programs as well as the Company’s (or Radiancy’s if applicable) benefits programs.

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Pursuant to the terms of their employment agreements, should (1) the Company terminate Dr, Rafaeli’s or Mr. McGrath’s employment without cause (as defined in the respective agreement), including as a result of the failure to renew or extend the employment agreements upon the expiration of the scheduled term, or (2) Dr. Rafaeli or Mr. McGrath resigns for good reason (as defined in the respective agreement), then the executive will become entitled to the following benefits upon his timely execution and delivery (without revocation) of a release to the Company in the form attached to his respective employment agreement:

(i)   continued payment of his annual base salary in effect at the time of such termination for the remainder of the scheduled employment term, payable in installments in accordance with the Company’s payroll practices;

(ii)   for Dr. Rafaeli, continued payment of his quarterly bonuses based on actual sales, for the remainder of the scheduled employment term, and for Mr. McGrath, continued payment of bonuses for the remainder of the scheduled employment term based on the highest annual bonus paid during his employment;

(iii)   a pro-rated annual bonus for the year in which such termination occurs based on actual performance;

(iv)   payment or reimbursement of COBRA premiums for an 18-month period following such termination;

(v)   a monthly payment equal to the monthly premiums for long-term and short-term disability coverage and life insurance coverage in effect on the date of termination for the remainder of the scheduled employment term; and

(vi)   full acceleration of all outstanding equity awards held by the executive at the time of such termination, with any outstanding options remaining exercisable until the earlier of the 60-month anniversary of termination and the applicable option expiration date.

If the executive does not timely execute and deliver a release, then in lieu of the foregoing payments and benefits, he will only be entitled to any payments and benefits then available under the Company’s then current severance pay plan or arrangement for employees which are not conditioned upon his execution and delivery of a release.

In addition, the event the Agreement with Dr. Rafaeli is terminated for any reason other than cause, the Company will pay for certain expenses for Dr. Rafaeli’s relocation back to Israel. 

Under the new employment agreements, the amount of payments or benefits that the executive has a right to receive that would constitute parachute payments subject to the excise tax under Internal Revenue Code Section 49999 will be reduced to the maximum amount that the executive could receive without being subject to the tax, unless the executive would be placed in a better after-tax position without such reduction. In that case, the executive would be permitted to retain all payments.

Each of the executives is subject to certain non-competition, non-solicitation and other restrictions during their employment and for a period of one year thereafter (or two years in the case of a termination by the Company for cause or by the executive without good reason).

Copies of the new employment agreements are attached as exhibits to this quarterly report.

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ITEM 6.  Exhibits

2.1	Amended 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	Agreement 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	Amended 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	Bylaws of PhotoMedex, Inc. (a Nevada corporation), adopted December 28, 2010 (18)
4.1	Form of Warrant to Purchase Shares of Common Stock of PhotoMedex (19)
4.2	Term Loan and Security Agreement, dated as of March 19, 2010 between PhotoMedex, Inc. and Clutterbuck Funds LLC (26) (Exhibit 4.12 therein)
4.3	Term Note, dated March 19, 2010, between PhotoMedex, Inc. and Clutterbuck Funds, LLC (26) (Exhibit 4.13 therein)
4.4	Amendment No. 1 to Term Loan and Security Agreement, dated April 30, 2010 (27) (Exhibit 4.20 therein)
4.5	Amendment No. 2 to Term Loan and Security Agreement, dated March 28, 2011 (27) (Exhibit 4.21 therein)
4.6	Credit Agreement, dated December 27, 2013, between Radiancy, Inc. and JP Morgan Chase Bank, N.A. (35)
10.1	Lease Agreement dated May 29, 1996, between Surgical Laser Technologies, Inc. and Nappen & Associates (Montgomeryville, Pennsylvania) (2)
10.2	Lease Renewal Agreement, dated January 18, 2001, between Surgical Laser Technologies, Inc. and Nappen & Associates (2)
10.3	Lease Agreement, dated July 10, 2006, PhotoMedex, Inc. and Nappen & Associates (3)
10.4	Standard Industrial/Commercial Multi-Tenant Lease - Net, dated July 30, 2008 (additional facility at Carlsbad, California) (15)
10.5	Standard Industrial/Commercial Multi-Tenant Lease  Net, dated March 17, 2005 (Carlsbad, California) (5)
10.6	License and Development Agreement, dated May 22, 2002, between Surgical Laser Technologies, Inc. and Reliant Technologies, Inc. (2)
10.7	Settlement Agreement and Release, dated November 11, 2008, by and among Allergan, Inc., Murray A. Johnstone, MD, PhotoMedex, Inc. and ProCyte Corporation. (15)
10.8	Master Asset Purchase Agreement, dated September 7, 2004, between PhotoMedex, Inc. and Stern Laser, srl (6)
10.9	License Agreement, dated March 31, 2006, and effective April 1, 2006, between the Mount Sinai School of Medicine and PhotoMedex, Inc. (7)
10.10	2005 Equity Compensation Plan, approved December 28, 2005 (8)
10.11	Amended and Restated 2000 Non-Employee Director Stock Option Plan (1)
10.12	Amended and Restated 2000 Stock Option Plan (1)
10.13	1996 Stock Option Plan, assumed from ProCyte (9)
10.14	Amended and Restated Employment Agreement with Dennis M. McGrath, dated September 1, 2007 (12)
10.15	Amended and Restated Employment Agreement of Michael R. Stewart, dated September 1, 2007 (12)
10.16	Restricted Stock Purchase Agreement of Dennis M. McGrath, dated January 15, 2006 (5)
10.17	Consulting Agreement dated January 21, 1998 between the Company and R. Rox Anderson, M.D. (4)
10.18	Restricted Stock Purchase Agreement of Dennis M. McGrath, dated May 1, 2007 (10)
10.19	Restricted Stock Purchase Agreement of Michael R. Stewart, dated May 1, 2007 (10)
10.20	Restricted Stock Purchase Agreement of Michael R. Stewart, dated August 13, 2007 (11)
10.21	Amended and Restated 2000 Non-Employee Director Stock Option Plan, dated as of June 26, 2007 (24)
10.22	Amended and Restated 2005 Equity Compensation Plan, dated as of June 26, 2007, as amended on October 28, 2008 (14)
10.23	Form of Indemnification Agreement for directors and executive officers of PhotoMedex, Inc. (13)
10.24	Restricted Stock Purchase Agreement of Dennis M. McGrath, dated June 15, 2009 (16)
10.25	Restricted Stock Purchase Agreement of Michael R. Stewart, dated June 15, 2009 (16)

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10.26	Co-Promotion Agreement, dated as of January 7, 2010, between PhotoMedex, Inc. and Galderma Laboratories, L.P. (17)
10.27	Amended and Restated 2000 Non-Employee Director Stock Option Plan, dated as of August 3, 2010 (18)
10.28	Amended and Restated 2005 Equity Compensation Plan, dated as of August 3, 2010. (18)
10.29	Restricted Stock Agreement of Dennis M. McGrath, dated March 30, 2011 (18)
10.32	Amended and Restated Employment agreement, entered into by and between PhotoMedex, Inc. and Dennis McGrath on July 4, 2011. (19)
10.33	Amended and Restated Restricted Stock Agreement, entered into as of August 11, 2011, by and between PhotoMedex, Inc. and Dennis McGrath. (20)
10.34	Restricted Stock Agreement, entered into as of July 4, 2011, by and between PhotoMedex, Inc. and Dennis McGrath. (19)
10.35	Non-Qualified Stock Option Agreement, entered into as of July 4, 2011, by and between PhotoMedex, Inc. and Dennis McGrath. (19)
10.40	Amended and Restated Employment Agreement entered into by and between PhotoMedex, Inc. and Dolev Rafaeli on August 9, 2011. (21)
10.41	Distribution Agreement by and between Radiancy, Inc. and Ya-Man Ltd., dated October 17, 2008. (21)
10.42	Distribution Agreement Extension by and between Radiancy, Inc. and Ya-Man Ltd., dated August 12, 2010. (21)
10.43	First Amendment to the Nonqualified Stock Option Agreement, dated as of October 31, 2011, by and between PhotoMedex, Inc. and Dennis McGrath (22)
10.45	Lease Renewal Agreement, dated February 22, 2012, PhotoMedex, Inc. and FR National Life LLC (28)
10.46	Lease Agreement dated September 1, 2010, by and between 30 Ramland Road, LLC and Radiancy, Inc. (Orangeburg). (25)
10.47	Unprotected Tenancy Agreement dated September 7, 2008 by and between S.A.I. Yarak Buildings and Investments Ltd. and Radiancy (Israel) Ltd. (Hod Hasharon) (25)
10.48	Annex 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)
10.49	Exclusive 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)
10.50	Non-Qualified Stock Option Agreement dated March 18, 2012 between PhotoMedex, Inc. and Dolev Rafaeli (25)
10.51	Non-Qualified Stock Option Agreement dated March 18, 2012 between PhotoMedex, Inc. and Dennis McGrath (25)
10.52	Warrant issued March 1, 2012 to Crystal Research Associates LLC. (29)
10.53	Lease Agreement dated August 24, 2012, by and between 30 Ramland Road, LLC and Radiancy, Inc. (Orangeburg). (30)
10.54	Non-Qualified Stock Option Agreement dated February 28, 2013 between PhotoMedex, Inc. and Dolev Rafaeli (31)
10.55	Non-Qualified Stock Option Agreement dated February 28, 2013 between PhotoMedex, Inc. and Dennis McGrath (31)
10.56	Quota Purchase and Sale Agreement dated May 7, 2013 by and Among Radiancy, Inc., Leo Klinger and Intervening Parties (32)
10.57	Lease Agreement dated June 3, 2013 by and between Maestro Properties Limited and Photo Therapeutics, Ltd. (UK) (32)
10.58	Lease Agreement dated September 23, 2013 by and between Liberty Property Limited Partnership and PhotoMedex, Inc. (33)
10.59	Credit 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)
10.60	Amended and Restated Employment Agreement entered into by and between PhotoMedex, Inc. and Dolev Rafaeli on August 5, 2014. (37)
10.61	Amended and Restated Employment agreement, entered into by and between PhotoMedex, Inc. and Dennis McGrath on August 5, 2014. (37)
31.1	Rule 13a-14(a) Certificate of Chief Executive Officer

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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.

(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.

(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.

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(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 this Form 10-Q filing.

*

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.

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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   August 11, 2014	By:	/s/ Dolev Rafaeli
		Name  Dolev Rafaeli
		Title    Chief Executive Officer

Date   August 11, 2014	By:	/s/ Dennis M. McGrath
		Name  Dennis M. McGrath
		Title    President & Chief Financial Officer

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EX-10.60

EXHIBIT 10.60

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and between PhotoMedex, Inc., a Nevada corporation (the “Company”) and Dolev Rafaeli (the “Executive”) on August 5, 2014 (the “Effective Date”), to become effective immediately.

WHEREAS, the Company and the Executive are party to an amended and restated employment agreement entered into on July 4, 2011 and effective as of December 13, 2011 (the “Prior Agreement”);

WHEREAS, in connection with the pending expiration of the Prior Agreement and the consummation of the LCA-Vision, Inc. merger (the “Closing”), the Company and the Executive wish to amend and restate the Prior Agreement to provide for the Executive’s continued employment as the Company’s Chief Executive Officer and President and Chief Executive Officer of Radiancy Inc. and, following the Closing, as the Chairman of the Board of Directors of LCA-Vision; and

WHEREAS, this Agreement amends and supersedes the Prior Agreement and any other agreement between the Executive and the Company with respect to the matters contained herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Company and the Executive hereby agree as follows:

1.Employment.

(a)Term. The term of this Agreement shall begin on the Effective Date and shall continue until December 31, 2018 (the “Scheduled Term”), unless sooner terminated by either party as hereinafter provided.    The period commencing on the Effective Date and ending on the date on which the term of the Executive’s employment under the Agreement terminates is referred to herein as the “Employment Term.”  Except as the Company and the Executive otherwise agree in writing, in the event that the parties fail to reach a mutual written agreement to renew or extend this Agreement on or prior to the end of the Scheduled Term, the Executive’s employment with the Company shall terminate upon expiration of the Scheduled Term (“Non-Renewal”), and such Non-Renewal shall be treated as a termination of the Executive’s employment by the Company without Cause under Section 7(a).

(b)Duties.

(1)The Executive shall serve as the Chief Executive Officer of the Company, as President and Chief Executive Officer of Radiancy Inc. and, following the Closing, as Chairman of the Board of Directors of LCA-Vision with duties, responsibilities and authority commensurate therewith and shall report to the Board of Directors of the Company (the “Board”). The Executive shall perform all duties and accept all responsibilities incident to such position as may be reasonably assigned to him by the Board, consistent with his positions.  In addition, during the Employment Term, without compensation other than that herein provided, the Executive shall also serve and continue to serve, if and when elected and re-elected, as a member of the Board.

(2)The Executive represents to the Company that he is not subject to or a party to any employment agreement, non-competition covenant, understanding or restriction which would be breached by or prohibit the Executive from executing this Agreement and performing fully his duties and responsibilities hereunder.

(c)Best Efforts. During the Employment Term, the Executive shall devote his best efforts and full time and attention to promote the business and affairs of the Company and its affiliated entities, and shall be engaged in other business activities only to the extent that such activities do not materially interfere or conflict with his obligations to the Company hereunder. In no event shall the Executive’s other business activities violate his obligations under Section 13 below. The foregoing also shall not be construed as preventing the Executive from (1) serving on civic, educational, philanthropic or charitable boards or committees, or, with the prior written consent of the Board, in its sole discretion, on corporate boards, and (2) managing personal investments, so long as such activities are permitted under the Company’s Code of Conduct and employment policies. The Executive acknowledges and agrees that Schedule A represents a complete list of all corporate boards on which the Executive serves as of the Effective Date. Notwithstanding any provision of this Section 1 of the Agreement to the contrary, in no event shall the Executive invest in any business competitive with the Company or that would otherwise violate the provisions of Section 13 below.

2.Base Salary and Cash Bonuses.

(a)During the Employment Term, for all of the services rendered by the Executive hereunder, the Company shall pay the Executive a base salary (“Base Salary”), at the annual rate of $495,000 payable in semi-monthly installments at such times as the Company customarily pays its other employees. The Executive’s Base Salary shall be reviewed periodically by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.

(b)During the Employment Term, as a bonus for success in sales, the Executive shall be entitled to a quarterly cash bonus (the “1st Tier Cash Bonus”) equal to 1% of the quarterly sales of the Company (calculated as 1% of recognized US GAAP sales reported in the Company’s consolidated quarterly financial reports presented to the Board) for each quarter during the Employment Term.  Payments of the 1st Tier Cash Bonus will be made to the order of the Executive no later than 45 days after the presentation of the financial reports to the Board for the applicable quarter; provided, that all 1st Tier Cash Bonuses to which the Executive shall be entitled during a taxable year of the Company, when combined with all other “applicable employee remuneration” (within the meaning of Code section 162(m)(4)) payable to the Executive for such taxable year, shall not exceed $1,000,000.

(c)In addition to the 1st  Tier Cash Bonus, the Executive shall also be entitled to a quarterly cash bonus (the “2nd Tier Cash Bonus”) equal to 1% of the sales of the Company (calculated as 1% of recognized US GAAP sales reported in the Company’s consolidated quarterly financial reports presented to the Board) for each quarter during the Employment Term in excess of such target threshold amount as the compensation committee of the Board (which committee shall be comprised solely of two or more outside directors (the “Compensation Committee”)) shall determine.  Payments of the 2nd Tier Cash Bonus will be made to the order of

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the Executive no later than 45 days after the presentation of the financial reports to the Board for the applicable quarter.  It is the express intent of the parties that the 2nd Tier Cash Bonus shall constitute “other performance-based compensation” (within the meaning of Code section 162(m)(4)(C)).  Notwithstanding anything herein to the contrary, in the sole discretion of (and subject to the approval of) the Compensation Committee, all or any portion of Executive’s 2nd Tier Cash Bonus may be paid in the form of shares of common stock of the Company under the Company’s Amended and Restated 2005 Equity Compensation Plan, as amended and/or restated from time to time, or any successor shareholder-approved Company equity compensation plan, with the number of shares equal to quotient of (x) the portion of such 2nd Tier Cash Bonus that is not paid in cash divided by (y) the closing price per share of common stock on the principal national securities exchange in the United States on which such shares are then traded on the fourth trading day the following the release of the Company’s quarterly financial reports for the applicable quarter, as reported in The Wall Street Journal or such other source as the Compensation Committee deems reliable; provided, however, that, (1) if the shares are regularly quoted by a recognized securities dealer but are not traded on a national securities exchange in the United States, then the foregoing clause (y) shall instead be the mean between the high bid and low asked prices for the shares on the fourth trading day the following the release of the Company’s quarterly financial reports for the applicable quarter, as reported in The Wall Street Journal or such other source as the Compensation Committee deems reliable; and (2) if the shares are neither traded on a national securities exchange in the United States nor quoted by a recognized securities dealer, then the foregoing clause (y) shall instead be the value of a share as determined by the Compensation Committee based upon the reasonable application of a reasonable valuation method as outlined under Code Section 409A.

For removal of doubt and without limitation on (but subject to) Section 7(c), should the Company furnish the Executive with a notice of termination of Executive’s employment for any reason other than for Cause (as defined in section 11(a)), the Executive shall be entitled to the Cash Bonuses as described in this Section 2(b) and (c) through the end of the Scheduled Term, as applicable, in accordance with this Section 2 as if the Company had not furnished Executive with such notice of termination.

The 1st Tier Cash Bonus and the 2nd Tier Cash Bonus are referred to collectively herein as the “Cash Bonuses.” Executive’s Cash Bonuses shall be adjusted according to any restatement of US GAAP sales, provided that a downward revision of US GAAP sales shall not require Executive to return any portion of the 1st Tier Cash Bonus, and such adjustment shall instead be set off against the next applicable 1st Tier Cash Bonus. Notwithstanding the forgoing, if a downward adjustment is made to US GAAP sales following Executive’s final 1st Tier Cash Bonus or Executive’s termination of employment with the Company for any reason, Executive shall reimburse the Company accordingly.

The Cash Bonuses shall be paid to the Executive no later than 45 days after the presentation of the financial reports to the Board for the applicable quarter, but in no event later than March 15 of the year immediately following the fiscal year to which they relate.  Any bonus other than the Cash Bonuses shall be paid to the Executive no later than March 15 of the year following the end of the fiscal year to which it relates, under the same conditions as other executives of the Company.

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3.Equity Incentive Programs. The Executive shall be eligible to participate in the Company’s annual and long-term equity incentive plans and programs in accordance with the terms of such plans and programs as in effect for other similarly situated employees of the Company generally, at levels determined by the Board (or a committee of the Board) in its sole discretion, commensurate with the Executive’s position.

4.Retirement and Welfare Benefits. The Executive shall be eligible to continue to participate in the Company’s (or Radiancy Inc.’s where relevant) health, life insurance, long and short-term disability, dental, retirement, savings and medical programs, if any, pursuant to their respective terms and conditions. In addition, the Executive shall continue to be eligible to participate in any long-term equity incentive programs established by the Company for its senior level executives generally, at levels determined by the Board in its sole discretion, commensurate with the Executive’s position as Chief Executive Officer. Nothing in this Agreement shall preclude the Company or any affiliate of the Company from terminating or amending any employee benefit plan or program from time to time after the Effective Date.

5.Vacation.

The Executive shall be entitled to annual vacation of 24 days plus ten established holiday days per full calendar year of his employment with the Company hereunder. Any unused vacation in one accrued calendar year may not be carried over to any subsequent calendar year. The Company shall, however, pay the Employee (based on the Employee’s annual salary) for any such unused vacation days within 30 days of the end of any such calendar year.

The Executive shall be entitled to an annual medical executives’ checkup at the expense of the Company.

The Executive shall be entitled to a fully paid sick leave until the end of the waiting period for coverage against disability or incapacity as defined in the Executive medical insurance policy.

6.Expenses; Car Allowance; Phone and Cellular Phone; Relocation costs; Family annual leave.  The Company shall reimburse the Executive for all necessary and reasonable travel and other business expenses incurred by the Executive in the performance of his duties hereunder in accordance with the Company’s policies in effect from time to time with respect to business expenses, subject to such reasonable accounting procedures as the Company may adopt generally from time to time for executives. In addition, the Executive shall be entitled to an automobile allowance of $1,000 per month, in accordance with the Company’s policies in effect from time to time.

Company shall provide Executive with a Cellular Phone and shall order a land line at the Executive’s residence, for Executive’s use in the course of performing his obligations under his position. The Company shall bear and pay all the expenses related to the Cellular Phone and the land line and their use thereof.

Upon termination of this Agreement for any reason, Company shall pay for the household relocation costs including the packing, shipping, insurance and unpacking of the goods of the

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Executive between the US and Israel. Company will reimburse the Executive for all reasonable out of pocket relocation expenses. Additionally, Company shall pay for the equivalent of economy class airfare tickets of all family members between the US and Israel. Company shall pay for the equivalent of economy round trip airfare tickets for all family members for an annual home leave between the US and Israel.

All expense reimbursements under this Agreement shall be made no later than 90 days from when expenses are incurred and submitted for reimbursement, in accordance with the Company’s policies in effect from time to time with respect to business expenses.

7.Termination Without Cause; Resignation for Good Reason. If the Executive’s employment is terminated by the Company without Cause (as defined in Section 11) or if the Executive resigns for Good Reason (as defined in Section 11), the provisions of this Section 7 shall apply.

(a)The Company may terminate the Executive’s employment with the Company at any time without Cause upon not less than 30 days’ prior written notice to the Executive; provided that, in the event that such notice is given, the Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment. In addition, the Executive may initiate a termination of employment by resigning under this Section 7 for Good Reason. The Executive shall give the Company not less than 30 days’ prior written notice of such resignation. On the date of termination or resignation, as applicable, specified in such notice, the Executive agrees to resign all positions, including as an officer and, if applicable, as a director or member of the Board, related to the Company and its parents, subsidiaries and affiliates.

(b)Unless the Executive complies with the provisions of Section 7(c) below, upon termination or resignation under Section 7(a) above, the Executive shall be entitled to receive only the amount due to the Executive under the Company’s then current severance pay plan or arrangement for employees, if any, but only to the extent not conditioned on the execution of a release by the Executive. No other payments or benefits shall be due under this Agreement to the Executive, but the Executive shall be entitled to receive any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, in each case, subject to and in accordance with the terms thereof.

(c)Notwithstanding the provisions of Section 7(b), upon termination or resignation, as applicable, under Section 7(a) above (including a termination due to Non-Renewal), if, within sixty (60) days following the termination of the Executive’s employment, the Executive timely executes and delivers to the Company (without revocation) a fully effective written release of any and all claims against the Company and all related parties with respect to all matters arising out of the Executive’s employment by the Company or the termination thereof (other than claims for any entitlements under the terms of this Agreement), in substantially the form set forth in Exhibit A hereto (the “Release”), the Executive shall be entitled to receive, in lieu of the payment described in Section 7(b) and any other payments due under any severance plan or program for employees or executives, the following payments and benefits:

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(1)From the date of termination through the balance of the Scheduled Term (if any) (collectively, the “Severance Period”), the Executive shall continue to receive his Base Salary (at the rate in effect immediately before the Executive’s termination or resignation, as applicable), and Cash Bonuses.  The Base Salary continuation shall be paid in installments during the Severance Period in accordance with the Company’s normal payroll practices.  The 1st Tier Cash Bonus contemplated in this sub-section (1) shall be equal to 1% of the sales of the Company (calculated as 1% of recognized US GAAP sales reported in the Company’s consolidated quarterly financial reports presented to the Board) during the Severance Period; provided, however, that if the Executive is not a “covered employee” (within the meaning of Code section 162(m)(3) in the year for which any such 1st Tier Cash Bonus is payable, the amount of such 1st Tier Cash Bonus during the Severance Period shall be determined and paid without respect to any limitations intended to make it tax-deductible under Code section 162(m) and the next sentence herein shall not apply; provided, further, that if the proviso clause in the preceding sentence does not apply, the 2nd Tier Cash Bonus during the Severance Period shall be equal to 1% of the sales of the Company (calculated as 1% of recognized US GAAP sales reported in the Company’s consolidated quarterly financial reports presented to the Board) in excess of such target threshold amount as the Compensation Committee shall determine.  Payment of Cash Bonuses during the Severance Period will be made to the order of the Executive no later than 45 days after the presentation of the quarterly financial reports to the Board for the fiscal quarter to which such Cash Bonuses relate (but not later than March 15 of the year following the end of the fiscal year to which such Cash Bonuses relate).

(2)To the extent the Executive timely elects to receive continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), the Company shall pay or reimburse the Executive, on a monthly basis, an amount equal to the full monthly premium for such coverage, from the date of termination until the date eighteen (18) months following the date of termination.  The COBRA health care continuation coverage period under Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code") shall run concurrently with the foregoing period.

(3)Beginning on the 60th day following the effective date of the Executive’s termination or resignation, and on the first payroll date of each month thereafter during the remainder of the Scheduled Term (if any), a monthly payment equal to the premium cost for the long and short-term disability coverage that was in effect for the Executive under plans of the Company immediately before his termination or resignation.  To the extent requested by the Executive within 30 days following the date of termination, the Company shall take all action necessary, if any, to facilitate the Executive’s exercise of all conversion and/or portability privileges, if any, under such long and short-term disability coverage.

(4)Beginning on the 60th day following the effective date of the Executive’s termination or resignation, and on the first payroll date of each month thereafter during the remainder of the Scheduled Term (if any), a monthly payment equal to the full cost of any Company life insurance coverages in effect for the Executive immediately before his termination or resignation to maintain life insurance coverage.  To the extent requested by the Executive within 30 days following the date of termination, the Company shall take all action necessary, if

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any, to facilitate the Executive’s exercise of all conversion privileges, if any, under such life insurance program or policy.

(5)Notwithstanding any provision to the contrary in any applicable plan, program or agreement, all outstanding equity awards held by the Executive as of the date of his termination or resignation, as applicable, shall become fully vested and exercisable as of such date.  In addition, any outstanding stock options held by the Executive, including any stock options that previously became exercisable and have not expired or been exercised, shall remain exercisable, notwithstanding any provision to the contrary in any other agreement governing such options, for the shorter of (i) the 60-month period following the date of the Executive’s termination or resignation, as applicable, and (ii) the then remaining term of such stock option.

(6)Any other amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof.

(7)Any Cash Bonus payable for the fiscal year of termination or resignation, based on actual performance for the full fiscal year, but pro-rated based on the number of days the Executive was employed during such fiscal year of termination, payable at the same time as otherwise payable in accordance with Section 2, but not later than March 15 of the year following the end of the fiscal year of termination or resignation (the “Pro Rata Bonus”).

(d)To the extent that the payment of any amount or provision of any benefit under Section 7 is conditioned upon the Release and is otherwise scheduled to occur prior to the sixtieth (60th) day following the date of Executive’s termination of employment hereunder, but for the condition on executing the Release as set forth herein, shall not be made until the first regularly scheduled payroll date following such sixtieth (60th) day, after which any remaining payments shall thereafter be provided to Executive according to the applicable schedule set forth herein.

8.Termination for Cause; Resignation without Good Reason.  The Company may terminate the Executive immediately for Cause.  In addition, the Executive may voluntarily terminate his employment for any reason upon 30 days’ prior written notice. In either such event, after the effective date of such termination no payments shall be due under this Agreement, except that the Executive shall be entitled to any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof.

9.Disability. If the Executive incurs a Disability (as defined below), the Company may terminate the Executive’s employment on account of Disability subject to the requirements of applicable law. If the Company terminates the Executive’s employment on account of his Disability, the Executive shall be entitled to receive any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof. In addition, if the Company terminates the Executive’s employment on account of his Disability, the Executive shall be entitled to receive the Pro Rata Bonus.  For

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purposes of this Agreement, the term “Disability” shall have the same meaning as under the Company’s long-term disability plan.

10.Death. If the Executive dies while employed by the Company, the Executive’s employment shall terminate on the date of death and the Company shall pay to the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof. In addition, if the Executive dies while employed by the Company, the Executive shall be entitled to receive the Pro Rata Bonus.  Otherwise, the Company shall have no further liability or obligation under this Agreement to the Executive’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through the Executive.

11.Definitions.

(a)Cause. For purposes of this Agreement, “Cause” shall mean any of the following grounds for termination of the Executive’s employment:

(1)The Executive’s breach of any of the restrictive covenants set forth in Section 13.

(2)The Executive’s conviction of a felony or a crime involving moral turpitude.

(3)The Executive’s material violation of any written Company policy or the material terms of this Agreement.

(4)The Executive’s failure to follow a lawful direction of the Board.

(5)Drug or alcohol abuse by the Executive, but only if the Executive fails to seek appropriate counseling or fails to complete a prescribed counseling program.

With respect to Items (3) and (4), a termination for Cause shall only be effective if the violation or failure is not cured by the Executive within the 20-day period following written notice from the Board of the specific grounds that could result in a termination for “Cause;” provided that the Executive shall only have an opportunity to cure a failure to the extent the failure is curable, as determined by the Board in its sole discretion.

(b)Change of Control. As used herein, a “Change of Control” shall be deemed to have occurred if:

(1)Any “person,” as such term is used in sections 13(d) and 14(d) of Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than a person who is a stockholder of the Company on the effective date of the Plan) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a

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transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors; or

(2)The consummation of (i) a merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors, (ii) a sale or other disposition of all or substantially all of the assets of the Company, or (iii) a liquidation or dissolution of the Company.

(c)Good Reason. The occurrence of one or more of the following actions; provided, however, that the Executive shall give the Company not less than 30 days’ prior written notice of such resignation setting forth in reasonable specificity the event that constitutes Good Reason, which written notice, to be effective, must be provided to the Company within thirty (30) business days following initial notification of its occurrence or proposed occurrence, and during such thirty (30) day notice period, the Company shall have a cure right (if curable), and if not cured within such period and which action is not then rescinded within 30 days after delivery of such notice, the Executive's termination will be effective upon the expiration of such cure period:

(1)A change of the principal office or work place assigned to the Executive to a location more than 35 miles distant from its location immediately prior to such change.

(2)A material reduction by the Company of the Executive’s title, duties, responsibilities, authority, status, reporting relationship or the Executive’s position.

(3)A material reduction of the Executive’s base salary or bonus opportunity, unless pursuant to a reduction in such items applicable proportionally to all senior management and board members.

(4)Any reason or no reason following a Change of Control, provided that the Executive’s notice of resignation under this subsection 11(c)(4) is provided to the surviving entity following the Change of Control, within the 30-day period following the six-month anniversary of such Change of Control.

12.Section 409A. It is intended that this Agreement will comply with, or be exempt from, Section 409A of the Code and any regulations and guidelines promulgated thereunder, to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent.  Notwithstanding any provision in this Agreement to the contrary—

(a)the payment (or commencement of a series of payments) hereunder of any nonqualified deferred compensation (within the meaning of Section 409A of the Code) upon a termination of employment shall be delayed until such time as the Executive has also undergone a “separation from service” as defined in Treas. Reg. 1.409A-1(h), at which time such

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nonqualified deferred compensation (calculated as of the date of Executive’s termination of employment hereunder) shall be paid (or commence to be paid) to the Executive on the schedule set forth in this Agreement as if the Executive had undergone such termination of employment (under the same circumstances) on the date of his ultimate “separation from service.”

(b)if the Executive is a “specified employee” of the Company under Section 409A of the Code at the time of his separation from service and if payment of any amount under this Agreement is required to be delayed for a period of six months after separation from service to meet the requirements of Section 409A(a)(2)(B)(i) of the Code, payment of such amount shall be delayed as required by Section 409A, and the accumulated postponed amount shall be paid in a lump sum payment within 10 days after the end of the six-month period.  If the Executive dies during the postponement period prior to the payment of postponed amount, the amounts withheld on account of section 409A shall be paid to the personal representative of the Executive’s estate within 60 days after the date of the Executive’s death.  The determination of whether Executive is a specified employee, including the number and identity of persons considered key employees and the identification date, shall be made by the Board in accordance with the provisions of Sections 416(i) and 409A of the Code and the regulations issued thereunder.

(c)For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments, and each payment made under the Agreement shall be treated as a separate payment for purposes of 409A of the Code.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may the Executive, directly or indirectly, designate the calendar year of payment.

(d)All reimbursements and in kind benefits, if any, provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a fiscal year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other fiscal year; provided,that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect, (iii) the reimbursement of an eligible expense will be made on or before the last day of the fiscal year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.  Any tax gross-up payment provided for under this Agreement shall in no event be paid to the Executive later than December 31 of the calendar year following the calendar year in which such taxes are remitted by the Executive.

13.Property Rights and Obligations of the Executive.

(a)Trade Secrets. For purposes of this Agreement, “trade secrets” shall include without limitation any and all financial, cost and pricing information and any and all information

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contained in any drawings, designs, plans, proposals, customer lists, records of any kind, data, formulas, specifications, concepts or ideas, where such information is reasonably related to the business of the Company, has been divulged to or learned by the Executive during the term of his employment by the Company, and has not previously been publicly released by duly authorized representatives of the Company or otherwise lawfully entered the public domain.

(b)Preservation of Trade Secrets. The Executive will preserve as confidential all trade secrets pertaining to the Company’s business that have been obtained or learned by him by reason of his employment. The Executive will not, without the prior written consent of the Company, either use for his own benefit or purposes or disclose or permit disclosure to any third parties, either during the term of his employment hereunder or thereafter (except as required in fulfilling the duties of his employment), any trade secret connected with the business of the Company.

(c)Trade Secrets of Others. The Executive agrees that he will not disclose to the Company or induce the Company to use any trade secrets belonging to any third party.

(d)Property of Employer. The Executive agrees that all documents, reports, files, analyses, drawings, designs, tools, equipment, plans (including, without limitation, marketing and sales plans), proposals, customer lists, computer software or hardware, and similar materials that are made by him or come into his possession by reason of and during the term of his employment with the Company are the property of the Company and shall not be used by him in any way adverse to the Company’s interests. The Executive will not allow any such documents or things, or any copies, reproductions or summaries thereof to be delivered to or used by any third party without the specific consent of the Company. The Executive agrees to deliver to the Board or its designee, upon demand, and in any event upon the termination of the Executive’s employment, all of such documents and things which are in the Executive’s possession or under his control.

(e)Non-Competition and Non-Solicitation by the Executive.

(1)General. The Executive agrees during the Term, for the remainder of the Scheduled Term following termination of the Executive’s employment and for the one (1) year period thereafter or, in the event of a termination for Cause or a resignation by the Executive pursuant to Section 8, for the two (2) year period following such termination (as the case may be, the “Restricted Period”), not to recruit, engage in passive efforts, solicit or induce any person or entity who, during such one year period, or within one year prior to the termination of the Executive’s employment with the Company, was an employee, agent, representative or sales person of the Company or any of its affiliates (the “Company Group”) to leave or cease his employment or other relationship with the Company Group for any reason whatsoever or hire or engage the services of such person for the Executive in any business substantially similar to or competitive with that in which the Company Group was engaged during the Executive’s employment.

(2)Non-Solicitation of Customers. The Executive acknowledges that in the course of his employment, he has learned and will continue to learn about the Company Group’s business, services, materials, programs and products and the manner in which they are

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developed, marketed, served and provided. The Executive knows and acknowledges that the Company Group has invested considerable time and money in developing its programs, agreements, offices, representatives, services, products and marketing techniques and that they are unique and original. The Executive further acknowledges that the Company Group must keep secret all pertinent information divulged to the Executive about the Company Group’s business concepts, ideas, programs, plans and processes, so as not to aid the Company Group’s competitors. Accordingly, the Company Group is entitled to the following protection, which the Executive agrees is reasonable:

(i)The Executive agrees that during the Term and thereafter during the Restricted Period, he will not, on his own behalf or on behalf of any person, firm, partnership, association, corporation, or other business organization, entity or enterprise, knowingly solicit, call upon, or initiate communication or contact with any person or entity or any representative of any person or entity, with whom the Executive had contact during his employment, with a view to the sale or the providing of any product, equipment or service sold or provided or under development by the Company Group during the period of two years immediately preceding the date of the Executive’s termination. The restrictions set forth in this Section shall apply only to persons or entities with whom the Executive had actual contact during the two years prior to termination of his employment with a view toward the sale or providing of any product, equipment or service sold or provided or under development by the Company Group.

(3)Non-Competition. The Executive acknowledges that he will be a “high impact” person in the Company Group’s business who is in possession of selective and specialized skills, learning abilities, customer contacts, and customer information as a result of his relationship with the Company Group and prior experience, and agrees that the Company Group has a substantial business interest in the covenant described below. The Executive, therefore, agrees that during the Term and thereafter during the Restricted Period, not to, either directly, whether as an employee, sole proprietor, partner stockholder, joint venture or the like, in the same or similar capacity in which he worked for the Company Group, compete with the Company Group in any field in which the Company Group has entered into, enters into during the Executive’s employment with the Company Group or is considering entering into at the time of the Executive’s termination of employment, provided the Executive has actual knowledge of such field. The territory in which this non-competition covenant shall apply will be limited to the area commensurate with the territory in which the Executive marketed, sold or provided products or services for the Company Group during the two years preceding termination of employment.

(4)Survival Provisions. Unless otherwise agreed to in writing between the parties hereto, the provisions of this Section 13 shall survive the termination of this Agreement. The covenants in this Section 13 shall be construed as separate covenants and to the extent any covenant shall be judicially unenforceable, it shall not affect the enforcement of any other covenant.

14.Legal and Equitable Remedies. Because the Executive’s services are personal and unique and the Executive has had and will continue to have access to and has become and will continue to become acquainted with the proprietary information of the Company, and because any breach by the Executive of any of the restrictive covenants contained in Section 13 would

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result in irreparable injury and damage for which money damages would not provide an adequate remedy, the Company shall have the right to enforce Section 13 and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach, or threatened breach, of the restrictive covenants set forth in Section 13. The Executive agrees that in any action in which the Company seeks injunction, specific performance or other equitable relief, the Executive will not assert or contend that any of the provisions of Section 13 are unreasonable or otherwise unenforceable. The Executive irrevocably and unconditionally (a) agrees that any legal proceeding arising out of this paragraph may be brought in the United States District Court for the Eastern District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia, Pennsylvania, (b) consents to the non-exclusive jurisdiction of such court in any such proceeding, and (c) waives any objection to the laying of venue of any such proceeding in any such court. The Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers.

15.Arbitration; Expenses. In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Philadelphia, Pennsylvania in accordance with the Employment Arbitration Rules and Mediation Procedures then in effect of the American Arbitration Association, before an arbitrator agreed to by both parties. If the parties cannot agree upon the choice of arbitrator, the Company and the Executive will each choose an arbitrator. The two arbitrators will then select a third arbitrator who will serve as the actual arbitrator for the dispute, controversy or claim. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. Each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys’ fees and expenses) and shall share the fees of the American Arbitration Association.

16.Attorneys’ Fees. Except as provided in Section 14 above, in any action at law or in equity to enforce or construe any provisions or rights under this Agreement, the unsuccessful party or parties to such litigation, as determined by the courts pursuant to a final judgment or decree, shall pay the successful party or parties all costs, expenses, and reasonable attorneys’ fees incurred by such successful party or parties (including, without limitation, such costs, expenses, and fees on any appeals), and if such successful party or parties shall recover judgment in any such action or proceedings, such costs, expenses, and attorneys’ fees shall be included as part of such judgment.

17.Indemnification and Liability Insurance.  The Company will indemnify and hold harmless, to the fullest extent permitted by applicable law and the Company’s bylaws, the Executive if the Executive is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the Executive is a director or officer of the Company, against all liability or loss

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suffered (including attorneys’ fees) reasonably incurred by the Executive. The Company shall cover the Executive under directors’ and officers’ liability insurance both during and, while potential liability exists, after the term of this Agreement on terms no less favorable and to the same extent as the Company covers its active officers and directors.

18.Code Section 280G/4999. Notwithstanding anything in this Agreement to the contrary, if any of the payment or payments or other benefit to the Executive (prior to any reduction below) provided for in this Agreement, together with any other payment or payments or other benefit which the Executive has the right to receive from the Company or any corporation which is a member of an “affiliated group” as defined in Section 1504(a) of the Code, without regard to Section 1504(b) of the Code, of which the Company is a member (the “Payments”) would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), and if the Safe Harbor Amount (defined below) is greater than the Taxed Amount (defined below), then the total amount of such Payments shall be reduced to the Safe Harbor Amount. The “Safe Harbor Amount” is the largest portion of the Payments that would result in no portion of the Payments being subject to the excise tax set forth at Section 4999 of the Code (“Excise Tax”). The “Taxed Amount” is the total amount of the Payments (prior to any reduction, above) notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. Solely for the purpose of comparing which of the Safe Harbor Amount and the Taxed Amount is greater, the determination of each such amount, shall be made on an after-tax basis, taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all of which shall be computed at the highest applicable marginal rate). If a reduction of the Payments to the Safe Harbor Amount is necessary, then the reduction shall occur in the following order unless the Executive elects in writing a different order (provided, however, that such election shall be subject to approval of the Company if made on or after the date on which the event that triggers the Payments occurs): (i) reduction of cash payments; then (ii) cancellation of accelerated vesting of stock or stock option awards; and then (iii) reduction of the Executive’s benefits. In the event that acceleration of vesting of stock or stock option award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Executive’s stock awards.

19.Survival. The respective rights and obligations of the parties hereunder shall survive the termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

20.No Mitigation or Set Off. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced, regardless of whether the Executive obtains other employment. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

21.Notices. All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be

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deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:	PhotoMedex, Inc
	100 Lakeside Dr
	Suite 100
	Horsham, Pennsylvania 19044
	Fax: (215) 619-3209

With a copy to:	Proskauer Rose LLP
	11 Times Square
	New York, NY 10036
	Attention: Paul I. Rachlin, Esq.
	Fax: (212) 969-2900

If to Executive:	At the address shown on the records of the
	Company

22.Withholding. All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation. The Executive shall bear all expense of, and be solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.

23.Remedies Cumulative; No Waiver. No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

24.Assignment. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Executive under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by the Executive.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation,

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reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place and the Executive acknowledges that in such event the obligations of the Executive hereunder, including but not limited to those under Section 13, will continue to apply in favor of the successor. The obligations to Executive required to be performed by a successor entity (or by the Company, if the Company so elects in the case of a sale of assets)

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shall include but not be limited to the obligation to pay the Cash Bonuses to the extent payable hereunder.

25.Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto and supersedes any and all prior agreements and understandings concerning the Executive’s employment by the Company, including, without limitation, the Prior Agreement. This Agreement may be changed only by a written document signed by the Executive and the Company.

26.Severability. If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction. If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

27.Choice of Law and Forum. Except as expressly provided otherwise in this Agreement, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, and both parties consent to the jurisdiction of the courts of the State of Delaware with respect thereto.

28.Counterparts. This Agreement may be executed in any number of counterparts (including facsimile counterparts), each of which shall be an original, but all of which together shall constitute one instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of August 5, 2014, to become effective immediately.

PHOTOMEDEX, INC.
By:	/s/ Lewis C. Pell
Name:	Lewis C. Pell
Title:	Chairman of the Board of Directors

EXECUTIVE
By:	/s/ Dolev Rafaeli
Name:	Dolev Rafaeli

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SCHEDULE A

CORPORATE BOARDS

Executive is a member of the following corporate boards as of the Effective Date:

·   Radiancy Inc.

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EXHIBIT A

GENERAL RELEASE OF CLAIMS

For and in consideration of the promises set forth in the Amended and Restated Employment Agreement, agreement dated August 4, 2014 (the “Agreement”), between Dolev Rafaeli (“Executive”) and PhotoMedex, Inc. (the “Company”), including the benefits and other valuable consideration as set forth therein, and in consideration for the promises set forth in this General Release of Claims (this “Release”), the parties agree as follows:

1.Executive, for himself, his heirs, administrators, representatives, executors, successors, assigns, and all other individuals and entities claiming through him, if any (collectively, the “Releasors”), hereby releases, waives, and forever discharges the Company and each of its affiliates, related organizations, and their successors and assigns, and each of its and their employees, officers, directors, members, agents, trustees, attorneys, successors, and assigns in their capacities as such (collectively, “Releasees”) from, and does fully waive any obligations of Releasees to Releasors for, any and all liability, actions, charges, causes of action, demands, damages, or claims for relief, remuneration, sums of money, accounts or expenses of any kind whatsoever, whether known or unknown or contingent or absolute, which heretofore has been or which hereafter may be suffered or sustained, directly or indirectly, by Releasors, including, without limitation, any obligations of Releasees in consequence of, arising out of, or in any way relating to: (i) Executive’ service with the Company (whether as an employee or a consultant); (ii) the separation or termination of Executive’ service to the Company (whether as an employee or a consultant); or (iii) any events, acts, or omissions occurring on or prior to the date of this Release (collectively, “Claims”).  The foregoing release, discharge and waiver includes, but is not limited to, all waivable Claims and any obligations, liabilities or causes of action arising from such Claims under common law, including, but not limited to, wrongful or retaliatory discharge, breach of contract, libel, slander, defamation or intentional infliction of emotional distress; and further includes, but is not limited to, any claims under any federal, state or local statute, ordinance, or regulation, including, but not limited to, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act (“OWBPA”), the Civil Rights Act of 1991, the Equal Pay Act, the Immigration and Reform Control Act, the Uniform Services Employment and Re-Employment Act, the Rehabilitation Act of 1973, Executive Order 11246, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Title VII of the Civil Rights Act of 1964, other civil rights statutes including, without limitation 42 U.S.C. § 1981, 42 U.S.C. § 1982, and 42 U.S.C. § 1985, the National Labor Relations Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, the Family and Medical Leave Act, the Sarbanes-Oxley Act, the Occupational Safety and Health Act, the Immigration Reform and Control Act, the Pennsylvania Human Relations Act, the Pennsylvania Equal Pay Law, the Pennsylvania Whistleblower Law or any other applicable state or local labor or human rights laws, as such laws have been amended, or the discrimination or employment laws of any state or municipality, and/or any claims under any express or implied contract which Releasors may claim existed with Releasees.  This also includes a release of any claims for wrongful discharge and all claims for alleged physical or personal injury, emotional distress, damages, attorneys or experts fees, interest and penalties relating to or arising out of Executive’ service to the Company or any of its affiliates or related organizations (whether as an employee or an independent contractor) or the separation or termination of such service, and any claims under the Worker Adjustment and Retraining Notification Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions.

2.           Notwithstanding anything contained in Section 1 above to the contrary, nothing contained herein will constitute a release by Releasors of any of his rights or remedies available to him, at law or in equity,

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related to, on account of, in connection with or in any way pertaining to the enforcement of: (i) any rights to the receipt of employee benefits or other payments which were earned and vested on or prior to the date of this Release; (ii) any claims that cannot be waived by applicable law, including but not limited to the right to participate in an investigation conducted by certain government agencies (provided, however, that Executive does waive his right to, and will not accept, any monetary payment should any government agency (such as the Equal Employment Opportunity Commission or Department of Labor) pursue any claims on his behalf); or (iii) the Agreement or any of its terms or conditions.

3.           Executive understands that he will have at least [twenty one (21)][forty five (45)]1 days from the date of receipt of this Release to consider the terms and conditions of this Release.  Executive may accept this Release by signing it and returning it to the Company.  After executing this Release, Executive will have seven (7) days (the “Revocation Period”) to revoke this Release by indicating his desire to do so in writing delivered to the Company by no later than the seventh (7th) day after the date he signs this Release.  The effective date of this Release will be the eighth (8th) day after Executive signs this Release.  If the last day of the Revocation Period falls on a Saturday, Sunday or holiday, the last day of the Revocation Period will be deemed to be the next business day.  In the event Executive does not accept this Release as set forth above, or in the event he revokes this Release during the Revocation Period, this Release, including but not limited to the obligation of the Company to provide the payments and benefits provided in the Agreement, will be deemed automatically null and void.

4.           Executive acknowledges that he: (a) has carefully read this Release in its entirety; (b) has had an opportunity to consider for at least [twenty one (21)][forty five (45)] days the terms of this Release; (c) is hereby advised by the Company, in this writing, to consult with an attorney of his choice before signing this Release; (d) fully understands the significance of all of the terms and conditions of this Release and has discussed them with an attorney of his choice, or has had a reasonable opportunity to do so; and (e) is signing this Release voluntarily and of his own free will and agrees to abide by all the terms and conditions contained herein.

5.           This Release will not affect Executive’ rights under the Older Workers Benefit Protection Act to have a judicial determination of the validity of this Release and does not purport to limit any right that Executive may have to file a charge under the Age Discrimination in Employment Act or other civil rights statute or to participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission or other investigative agency.  This Release does, however, waive and release any right to recover damages under the Age Discrimination in Employment Act or other civil rights statute.

[SIGNATURE PAGE FOLLOWS]

 

1 Note – 21- or 45-day period dependent on circumstances required for ADEA/OWBPA purposes - consideration period of 45 days generally required if the waiver relates to a group or class termination.

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IN WITNESS WHEREOF, the parties hereto have executed this Release as of the dates set forth below.

PHOTOMEDEX, INC.
By:	/s/ Lewis C. Pell
Name	Lewis C. Pell
Title	Chairman of the Board of Directors

EXECUTIVE
By:	/s/ Dolev Rafaeli
Name	Dolev Rafaeli

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EX-10.61

EXHIBIT 10.61

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and between PhotoMedex, Inc., a Nevada corporation (the “Company”) and Dennis McGrath (the “Executive”) on August 5, 2014 (the “Effective Date”), to become effective immediately.

WHEREAS, the Company and the Executive are party to an amended and restated employment agreement entered into on July 4, 2011 and effective as of December 13, 2011 (the “Prior Agreement”);

WHEREAS, in connection with the pending expiration of the Prior Agreement and the consummation of the LCA-Vision, Inc. merger, the Company and the Executive wish to amend and restate the Prior Agreement to provide for the Executive’s continued employment as the Company’s President and Chief Financial Officer; and

WHEREAS, this Agreement amends and supersedes the Prior Agreement and any other agreement between the Executive and the Company with respect to the matters contained herein.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Company and the Executive hereby agree as follows:

1.Employment.

(a)Term.  The term of this Agreement shall begin on the Effective Date and shall continue until December 31, 2018 (the “Scheduled Term”), unless sooner terminated by either party as hereinafter provided.    The period commencing on the Effective Date and ending on the date on which the term of the Executive’s employment under the Agreement terminates is referred to herein as the “Employment Term.”  Except as the Company and the Executive otherwise agree in writing, in the event that the parties fail to reach a mutual written agreement to renew or extend this Agreement on or prior to the end of the Scheduled Term, the Executive’s employment with the Company shall terminate upon expiration of the Scheduled Term (“Non-Renewal”), and such Non-Renewal shall be treated as a termination of the Executive’s employment by the Company without Cause under Section 7(a).

(b)Duties.

(1)The Executive shall serve as the President and Chief Financial Officer of the Company with duties, responsibilities and authority commensurate therewith and shall report to the Chief Executive Officer (the “CEO”) and the Board of Directors of the Company (the “Board”).  The Executive shall perform all duties and accept all responsibilities incident to such position as may be reasonably assigned to him by the CEO and Board, consistent with his position as the President and Chief Financial Officer.  In addition, during the Term, without compensation other than that herein provided, the Executive shall also serve and continue to serve, if and when elected and re-elected, as a member of the Board.

(2)The Executive represents to the Company that he is not subject to or a party to any employment agreement, non-competition covenant, understanding or restriction

which would be breached by or prohibit the Executive from executing this Agreement and performing fully his duties and responsibilities hereunder.

(c)Best Efforts.  During the Employment Term, the Executive shall devote his best efforts and full time and attention to promote the business and affairs of the Company and its affiliated entities, and shall be engaged in other business activities only to the extent that such activities do not materially interfere or conflict with his obligations to the Company hereunder.  In no event shall the Executive’s other business activities violate his obligations under Section 13 below.  The foregoing also shall not be construed as preventing the Executive from (1) serving on civic, educational, philanthropic or charitable boards or committees, or, with the prior written consent of the Board, in its sole discretion, on corporate boards, and (2) managing personal investments, so long as such activities are permitted under the Company’s Code of Conduct and employment policies.  The Executive acknowledges and agrees that Schedule A represents a complete list of all corporate boards on which the Executive serves as of the Effective Date.  Notwithstanding any provision of this Section 1 of the Agreement to the contrary, in no event shall the Executive invest in any business competitive with the Company or that would otherwise violate the provisions of Section 13 below.

2.Base Salary and Bonus.  During the Employment Term, for all of the services rendered by the Executive hereunder, the Company shall pay the Executive a base salary (“Base Salary”), at the annual rate of $395,000 payable in semi-monthly installments at such times as the Company customarily pays its other employees.  The Executive’s Base Salary shall be reviewed periodically by the Board (or a committee of the Board) pursuant to the Board’s normal performance review policies for senior level executives.  For each fiscal year during the Employment Term, the Executive shall be eligible to receive a bonus up to eighty percent (80%) of Base Salary based on the attainment of certain individual and corporate performance goals and targets, as determined and set by the Board, in its sole discretion, as of the beginning of each such fiscal year.  Promptly after the Board’s receipt of the financial information on which the performance goals are based after the end of the fiscal year, the Board shall review actual performance against the applicable performance goals and targets and shall notify the Executive of the amount of his bonus, if any.  The Executive’s bonus shall be paid to him not later than March 15 of the year following the end of the fiscal year to which it relates, under the same conditions as other executives of the Company.

3.Equity Incentive Programs.  The Executive shall be eligible to participate in the Company’s annual and long-term equity incentive plans and programs in accordance with the terms of such plans and programs as in effect for other similarly situated employees of the Company generally, at levels determined by the Board (or a committee of the Board) in its sole discretion, commensurate with the Executive’s position.

4.Retirement and Welfare Benefits.  The Executive shall be eligible to continue to participate in the Company’s health, life insurance, long and short-term disability, dental, retirement, savings and medical programs, if any, pursuant to their respective terms and conditions.  In addition, the Executive shall continue to be eligible to participate in any long-term equity incentive programs established by the Company for its senior level executives generally, at levels determined by the Board in its sole discretion, commensurate with the Executive’s position as President and Chief Financial Officer.  Nothing in this Agreement shall preclude the

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Company or any affiliate of the Company from terminating or amending any employee benefit plan or program from time to time after the Effective Date.

5.Vacation.  The Executive shall be entitled to vacation, holiday and sick leave at levels commensurate with those provided to other senior executive officers of the Company, in accordance with the Company’s vacation, holiday and other pay for time not worked policies.

6.Expenses; Car Allowance.  The Company shall reimburse the Executive for all necessary and reasonable travel and other business expenses incurred by the Executive in the performance of his duties hereunder in accordance with the Company’s policies in effect from time to time with respect to business expenses, subject to such reasonable accounting procedures as the Company may adopt generally from time to time for executives.  In addition, the Executive shall be entitled to an automobile allowance of $1,000 per month. in accordance with the Company’s policies in effect from time to time.

7.Termination Without Cause;  Resignation for Good Reason.  If the Executive’s employment is terminated by the Company without Cause (as defined in Section 11) or if the Executive resigns for Good Reason (as defined in Section 11), the provisions of this Section 7 shall apply.

(a)The Company may terminate the Executive’s employment with the Company at any time without Cause upon not less than 30 days’ prior written notice to the Executive; provided that, in the event that such notice is given, the Executive shall be under no obligation to render any additional services to the Company and shall be allowed to seek other employment.  In addition, the Executive may initiate a termination of employment by resigning under this Section 7 for Good Reason.  The Executive shall give the Company not less than 30 days’ prior written notice of such resignation.  On the date of termination or resignation, as applicable, specified in such notice, the Executive agrees to resign all positions, including as an officer and, if applicable, as a director or member of the Board, related to the Company and its parents, subsidiaries and affiliates.

(b)Unless the Executive complies with the provisions of Section 7(c) below, upon termination or resignation under Section 7(a) above, the Executive shall be entitled to receive only the amount due to the Executive under the Company’s then current severance pay plan or arrangement for employees, if any, but only to the extent not conditioned on the execution of a release by the Executive.  No other payments or benefits shall be due under this Agreement to the Executive, but the Executive shall be entitled to receive any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, in each case, subject to and in accordance with the terms thereof.

(c)Notwithstanding the provisions of Section 7(b), upon termination or resignation, as applicable, under Section 7(a) above (including a termination due to Non-Renewal), if, within sixty (60) days following the termination of the Executive’s employment, the Executive timely executes and delivers to the Company (without revocation) a fully effective written release of any and all claims against the Company and all related parties with respect to all matters arising out of the Executive’s employment by the Company, or the termination thereof (other than claims for any entitlements under the terms of this Agreement), in substantially the form set forth in Exhibit A hereto (the “Release”), the Executive shall be entitled to receive, in lieu of the

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payment described in Section 7(b) and any other payments due under any severance plan or program for employees or executives, the following payments and benefits:

(1)From the date of termination through the balance of the Scheduled Term (if any) (the “Severance Period”), the Executive shall continue to receive (i) his Base Salary (at the rate in effect immediately before the Executive’s termination or resignation, as applicable) in installments in accordance with the Company’s normal payroll practices, plus (ii) a bonus for each fiscal year during the Severance Period, at a rate that is not less than the highest annual bonus paid during any of the preceding years covered by this Agreement or the Prior Agreement (but prorated for any partial fiscal year during the Severance Period), payable at the same time other employees of the Company are paid pursuant to the terms of the Company’s annual bonus plan, but not later than March 15 of the year following the end of the fiscal year to which the bonus relates.

(2)To the extent the Executive timely elects to receive continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), the Company shall pay or reimburse the Executive, on a monthly basis, an amount equal to the full monthly premium for such coverage, from the date of termination until the date eighteen (18) months following the date of termination.  The COBRA health care continuation coverage period under Section 4980B of the Internal Revenue Code of 1986, as amended (the "Code") shall run concurrently with the foregoing period.

(3)Beginning on the 60th day following the effective date of the Executive’s termination or resignation, and on the first payroll date of each month thereafter during the remainder of the Scheduled Term (if any), a monthly payment equal to the premium cost for the long and short-term disability coverage that was in effect for the Executive under plans of the Company immediately before his termination or resignation.  To the extent requested by the Executive within 30 days following the date of termination, the Company shall take all action necessary, if any, to facilitate the Executive’s exercise of all conversion and/or portability privileges, if any, under such long and short-term disability coverage.

(4)Beginning on the 60th day following the effective date of the Executive’s termination or resignation, and on the first payroll date of each month thereafter during the remainder of the Scheduled Term (if any), a monthly payment equal to the full cost of any Company life insurance coverages in effect for the Executive immediately before his termination or resignation to maintain life insurance coverage.  To the extent requested by the Executive within 30 days following the date of termination, the Company shall take all action necessary, if any, to facilitate the Executive’s exercise of all conversion privileges, if any, under such life insurance program or policy.

(5)Notwithstanding any provision to the contrary in any applicable plan, program or agreement, all outstanding equity awards held by the Executive as of the date of his termination or resignation, as applicable, shall become fully vested and exercisable as of such date.  In addition, any outstanding stock options held by the Executive, including any stock options that previously became exercisable and have not expired or been exercised, shall remain exercisable, notwithstanding any provision to the contrary in any other agreement governing such options, for the shorter of (i) the 60-month period following the date of the Executive’s termination or resignation, as applicable, and (ii) the then remaining term of such stock option.

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(6)Any other amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof.

(7)An annual bonus for the fiscal year of termination or resignation, based on actual performance through the full fiscal year but pro-rated based on the number of days the Executive was employed during such fiscal year of termination, payable at the same time other employees of the Company are paid pursuant to the terms of the Company’s annual bonus plan, but not later than March 15 of the year following the end of the fiscal year to which the bonus relates (the “Pro Rata Bonus”).

(d)To the extent that the payment of any amount or provision of any benefit under Section 7 is conditioned upon the Release and is otherwise scheduled to occur prior to the sixtieth (60th) day following the date of Executive's termination of employment hereunder, but for the condition on executing the Release as set forth herein, shall not be made until the first regularly scheduled payroll date following such sixtieth (60th) day, after which any remaining payments shall thereafter be provided to Executive according to the applicable schedule set forth herein.

8.Termination for Cause; Resignation without Good Reason.  The Company may terminate the Executive immediately for Cause.  In addition, the Executive may voluntarily terminate his employment for any reason upon 30 days’ prior written notice.  In either such event, after the effective date of such termination no payments shall be due under this Agreement, except that the Executive shall be entitled to any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof.

9.Disability.  If the Executive incurs a Disability (as defined below), the Company may terminate the Executive’s employment on account of Disability subject to the requirements of applicable law.  If the Company terminates the Executive’s employment on account of his Disability, the Executive shall be entitled to receive any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof.  In addition, if the Company terminates the Executive’s employment on account of his Disability, the Executive shall be entitled to receive the Pro Rata Bonus.  For purposes of this Agreement, the term “Disability” shall have the same meaning as under the Company’s long-term disability plan.

10.Death.  If the Executive dies while employed by the Company, the Executive’s employment shall terminate on the date of death and the Company shall pay to the Executive’s executor, legal representative, administrator or designated beneficiary, as applicable, any amounts earned, accrued and owing but not yet paid under Section 2 above and any benefits accrued and due under any applicable benefit plans and programs of the Company, payable in accordance with the terms and conditions thereof.  In addition, if the Executive dies while employed by the Company, the Executive shall be entitled to receive the Pro Rata Bonus.  Otherwise, the Company shall have no further liability or obligation under this Agreement to the

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Executive’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through the Executive.

11.Definitions.

(a)Cause.  For purposes of this Agreement, “Cause” shall mean any of the following grounds for termination of the Executive’s employment:

(1)The Executive’s breach of any of the restrictive covenants set forth in Section 13.

(2)The Executive’s conviction of a felony or a crime involving moral turpitude.

(3)The Executive’s material violation of any written Company policy or the material terms of this Agreement.

(4)The Executive’s failure to follow a lawful direction of the Board.

(5)Drug or alcohol abuse by the Executive, but only if the Executive fails to seek appropriate counseling or fails to complete a prescribed counseling program.

With respect to Items (3) and (4), a termination for Cause shall only be effective if the violation or failure is not cured by the Executive within the 20-day period following written notice from the Board of the specific grounds that could result in a termination for “Cause;” provided that the Executive shall only have an opportunity to cure a failure to the extent the failure is curable, as determined by the Board in its sole discretion.

(b)Change of Control.  As used herein, a “Change of Control” shall be deemed to have occurred if:

(1)Any “person,” as such term is used in sections 13(d) and 14(d) of Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than a person who is a stockholder of the Company on the effective date of the Plan) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation would be entitled in the election of directors; or

(2)The consummation of (i) a merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors, (ii) a sale or other disposition

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of all or substantially all of the assets of the Company, or (iii) a liquidation or dissolution of the Company.

(c)Good Reason.  The occurrence of one or more of the following actions; provided, however, that the Executive shall give the Company not less than 30 days' prior written notice of such resignation setting forth in reasonable specificity the event that constitutes Good Reason, which written notice, to be effective, must be provided to the Company within thirty (30) business days following initial notification of its occurrence or proposed occurrence, and during such thirty (30) day notice period, the Company shall have a cure right (if curable), and if not cured within such period and which action is not then rescinded within 30 days after delivery of such notice, the Executive's termination will be effective upon the expiration of such cure period:

(1)A change of the principal office or work place assigned to the Executive to a location more than 35 miles distant from its location immediately prior to such change.

(2)A material reduction by the Company of the Executive’s title, duties, responsibilities, authority, status, reporting relationship or the Executive’s position.

(3)A material reduction of the Executive’s base salary or bonus opportunity, unless pursuant to a reduction in such items applicable proportionally to all senior management and board members.

(4)Any reason or no reason following a Change of Control, provided that the Executive’s notice of resignation under this subsection 11(c)(4) is provided to the surviving entity following the Change of Control, within the 30-day period following the six-month anniversary of such Change of Control.

12.Section 409A.  It is intended that this Agreement will comply with, or be exempt from, Section 409A of the Code and any regulations and guidelines promulgated thereunder, to the extent the Agreement is subject thereto, and the Agreement shall be interpreted on a basis consistent with such intent.  Notwithstanding any provision in this Agreement to the contrary—

(a)the payment (or commencement of a series of payments) hereunder of any nonqualified deferred compensation (within the meaning of Section 409A of the Code) upon a termination of employment shall be delayed until such time as the Executive has also undergone a “separation from service” as defined in Treas. Reg. 1.409A-1(h), at which time such nonqualified deferred compensation (calculated as of the date of Executive’s termination of employment hereunder) shall be paid (or commence to be paid) to the Executive on the schedule set forth in this Agreement as if the Executive had undergone such termination of employment (under the same circumstances) on the date of his ultimate “separation from service.”

(b)if the Executive is a “specified employee” of the Company under Section 409A of the Code at the time of his separation from service and if payment of any amount under this Agreement is required to be delayed for a period of six months after separation from service to meet the requirements of Section 409A(a)(2)(B)(i) of the Code, payment of such amount shall be delayed as required by Section 409A, and the accumulated postponed amount shall be paid in a lump sum payment within 10 days after the end of the six-month period.  If the Executive dies during the postponement period prior to the payment of postponed amount, the amounts withheld on account of section 409A shall be paid to the personal representative of the Executive’s estate

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within 60 days after the date of the Executive’s death.  The determination of whether Executive is a specified employee, including the number and identity of persons considered key employees and the identification date, shall be made by the Board in accordance with the provisions of Sections 416(i) and 409A of the Code and the regulations issued thereunder.

(c)For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments, and each payment made under the Agreement shall be treated as a separate payment for purposes of 409A of the Code.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.  In no event may the Executive, directly or indirectly, designate the calendar year of payment.

(d)All reimbursements and in kind benefits, if any, provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a fiscal year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other fiscal year; provided,that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect, (iii) the reimbursement of an eligible expense will be made on or before the last day of the fiscal year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.  Any tax gross-up payment provided for under this Agreement shall in no event be paid to the Executive later than December 31 of the calendar year following the calendar year in which such taxes are remitted by the Executive.

13.Property Rights and Obligations of the Executive.

(a)Trade Secrets.  For purposes of this Agreement, “trade secrets” shall include without limitation any and all financial, cost and pricing information and any and all information contained in any drawings, designs, plans, proposals, customer lists, records of any kind, data, formulas, specifications, concepts or ideas, where such information is reasonably related to the business of the Company, has been divulged to or learned by the Executive during the term of his employment by the Company, and has not previously been publicly released by duly authorized representatives of the Company or otherwise lawfully entered the public domain.

(b)Preservation of Trade Secrets.  The Executive will preserve as confidential all trade secrets pertaining to the Company’s business that have been obtained or learned by him by reason of his employment.  The Executive will not, without the prior written consent of the Company, either use for his own benefit or purposes or disclose or permit disclosure to any third parties, either during the term of his employment hereunder or thereafter (except as required in fulfilling the duties of his employment), any trade secret connected with the business of the Company.

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(c)Trade Secrets of Others.  The Executive agrees that he will not disclose to the Company or induce the Company to use any trade secrets belonging to any third party.

(d)Property of Employer.  The Executive agrees that all documents, reports, files, analyses, drawings, designs, tools, equipment, plans (including, without limitation, marketing and sales plans), proposals, customer lists, computer software or hardware, and similar materials that are made by him or come into his possession by reason of and during the term of his employment with the Company are the property of the Company and shall not be used by him in any way adverse to the Company’s interests.  The Executive will not allow any such documents or things, or any copies, reproductions or summaries thereof to be delivered to or used by any third party without the specific consent of the Company.  The Executive agrees to deliver to the Board or its designee, upon demand, and in any event upon the termination of the Executive’s employment, all of such documents and things which are in the Executive’s possession or under his control.

(e)Non-Competition and Non-Solicitation by the Executive.

(1)General.  The Executive agrees during the Term, for the remainder of the Scheduled Term following termination of the Executive’s employment and for the one (1) year period thereafter or, in the event of a termination for Cause or a resignation by the Executive pursuant to Section 8, for the two (2) year period following such termination (as the case may be, the “Restricted Period”), not to recruit, engage in passive efforts, solicit or induce any person or entity who, during such one year period, or within one year prior to the termination of the Executive’s employment with the Company, was an employee, agent, representative or sales person of the Company or any of its affiliates (the “Company Group”) to leave or cease his employment or other relationship with the Company Group for any reason whatsoever or hire or engage the services of such person for the Executive in any business substantially similar to or competitive with that in which the Company Group was engaged during the Executive’s employment.

(2)Non-Solicitation of Customers.  The Executive acknowledges that in the course of his employment, he has learned and will continue to learn about the Company Group’s business, services, materials, programs and products and the manner in which they are developed, marketed, served and provided.  The Executive knows and acknowledges that the Company Group has invested considerable time and money in developing its programs, agreements, offices, representatives, services, products and marketing techniques and that they are unique and original.  The Executive further acknowledges that the Company Group must keep secret all pertinent information divulged to the Executive about the Company Group’s business concepts, ideas, programs, plans and processes, so as not to aid the Company Group’s competitors.  Accordingly, the Company Group is entitled to the following protection, which the Executive agrees is reasonable:

(i)The Executive agrees that during the Term and thereafter during the Restricted Period, he will not, on his own behalf or on behalf of any person, firm, partnership, association, corporation, or other business organization, entity or enterprise, knowingly solicit, call upon, or initiate communication or contact with any person or entity or any representative of any person or entity, with whom the Executive had contact during his employment, with a view to the sale or the providing of any product, equipment or service sold

- 9 -

or provided or under development by the Company Group during the period of two years immediately preceding the date of the Executive’s termination.  The restrictions set forth in this Section shall apply only to persons or entities with whom the Executive had actual contact during the two years prior to termination of his employment with a view toward the sale or providing of any product, equipment or service sold or provided or under development by the Company Group.

(3)Non-Competition.  The Executive acknowledges that he will be a “high impact” person in the Company Group’s business who is in possession of selective and specialized skills, learning abilities, customer contacts, and customer information as a result of his relationship with the Company Group and prior experience, and agrees that the Company Group has a substantial business interest in the covenant described below.  The Executive, therefore, agrees that during the Term and thereafter during the Restricted Period, not to, either directly, whether as an employee, sole proprietor, partner stockholder, joint venture or the like, in the same or similar capacity in which he worked for the Company Group, compete with the Company Group in any field in which the Company Group has entered into, enters into during the Executive’s employment with the Company Group or is considering entering into at the time of the Executive’s termination of employment, provided the Executive has actual knowledge of such field.  The territory in which this non-competition covenant shall apply will be limited to the area commensurate with the territory in which the Executive marketed, sold or provided products or services for the Company Group during the two years preceding termination of employment.

(4)Survival Provisions.  Unless otherwise agreed to in writing between the parties hereto, the provisions of this Section 13 shall survive the termination of this Agreement.  The covenants in this Section 13 shall be construed as separate covenants and to the extent any covenant shall be judicially unenforceable, it shall not affect the enforcement of any other covenant.

14.Legal and Equitable Remedies.  Because the Executive’s services are personal and unique and the Executive has had and will continue to have access to and has become and will continue to become acquainted with the proprietary information of the Company, and because any breach by the Executive of any of the restrictive covenants contained in Section 13 would result in irreparable injury and damage for which money damages would not provide an adequate remedy, the Company shall have the right to enforce Section 13 and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach, or threatened breach, of the restrictive covenants set forth in Section 13.  The Executive agrees that in any action in which the Company seeks injunction, specific performance or other equitable relief, the Executive will not assert or contend that any of the provisions of Section 13 are unreasonable or otherwise unenforceable.  The Executive irrevocably and unconditionally (a) agrees that any legal proceeding arising out of this paragraph may be brought in the United States District Court for the Eastern District of Pennsylvania, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Philadelphia, Pennsylvania, (b) consents to the non-exclusive jurisdiction of such court in any such proceeding, and (c) waives any objection to the laying of venue of any such proceeding in any such court.  The Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers.

- 10 -

15.Arbitration; Expenses.  In the event of any dispute under the provisions of this Agreement, other than a dispute in which the primary relief sought is an equitable remedy such as an injunction, the parties shall be required to have the dispute, controversy or claim settled by arbitration in Philadelphia, Pennsylvania in accordance with the Employment Arbitration Rules and Mediation Procedures then in effect of the American Arbitration Association, before an arbitrator agreed to by both parties.  If the parties cannot agree upon the choice of arbitrator, the Company and the Executive will each choose an arbitrator.  The two arbitrators will then select a third arbitrator who will serve as the actual arbitrator for the dispute, controversy or claim.  Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction.  This arbitration provision shall be specifically enforceable.  The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement.  Each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys’ fees and expenses) and shall share the fees of the American Arbitration Association.

16.Attorneys’ Fees.  Except as provided in Section 14 above, in any action at law or in equity to enforce or construe any provisions or rights under this Agreement, the unsuccessful party or parties to such litigation, as determined by the courts pursuant to a final judgment or decree, shall pay the successful party or parties all costs, expenses, and reasonable attorneys’ fees incurred by such successful party or parties (including, without limitation, such costs, expenses, and fees on any appeals), and if such successful party or parties shall recover judgment in any such action or proceedings, such costs, expenses, and attorneys’ fees shall be included as part of such judgment.

17.Indemnification and Liability Insurance.  The Company will indemnify and hold harmless, to the fullest extent permitted by applicable law and the Company’s bylaws, the Executive if the Executive is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the Executive is a director or officer of the Company, against all liability or loss suffered (including attorneys’ fees) reasonably incurred by the Executive. The Company shall cover the Executive under directors’ and officers’ liability insurance both during and, while potential liability exists, after the term of this Agreement on terms no less favorable and to the same extent as the Company covers its active officers and directors.

18.Code Section 280G/4999. Notwithstanding anything in this Agreement to the contrary, if any of the payment or payments or other benefit to the Executive (prior to any reduction below) provided for in this Agreement, together with any other payment or payments or other benefit which the Executive has the right to receive from the Company or any corporation which is a member of an “affiliated group” as defined in Section 1504(a) of the Code, without regard to Section 1504(b) of the Code, of which the Company is a member (the “Payments”) would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), and if the Safe Harbor Amount (defined below) is greater than the Taxed Amount (defined below), then the total amount of such Payments shall be reduced to the Safe Harbor Amount. The “Safe Harbor Amount” is the largest portion of the Payments that would result in no portion of the Payments being subject to the excise tax set forth at Section 4999 of the Code (“Excise Tax”). The “Taxed Amount” is the total amount of the Payments (prior to any

- 11 -

reduction, above) notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. Solely for the purpose of comparing which of the Safe Harbor Amount and the Taxed Amount is greater, the determination of each such amount, shall be made on an after-tax basis, taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all of which shall be computed at the highest applicable marginal rate). If a reduction of the Payments to the Safe Harbor Amount is necessary, then the reduction shall occur in the following order unless the Executive elects in writing a different order (provided, however, that such election shall be subject to approval of the Company if made on or after the date on which the event that triggers the Payments occurs): (i) reduction of cash payments; then (ii) cancellation of accelerated vesting of stock or stock option awards; and then (iii) reduction of the Executive’s benefits. In the event that acceleration of vesting of stock or stock option award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Executive’s stock awards.

19.Survival.  The respective rights and obligations of the parties hereunder shall survive the termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

20.No Mitigation or Set Off.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced, regardless of whether the Executive obtains other employment.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

21.Notices.  All notices and other communications required or permitted under this Agreement or necessary or convenient in connection herewith shall be in writing and shall be deemed to have been given when hand delivered or mailed by registered or certified mail, as follows (provided that notice of change of address shall be deemed given only when received):

1.follows (provided that notice of change of address shall be deemed given only when received):

If to the Company, to:	PhotoMedex, Inc
	100 Lakeside Dr Suite 100
	Horsham, Pennsylvania 19044
	Fax:  (215) 619-3209

With a copy to:	Proskauer Rose LLP
	11 Times Square
	New York, NY 10036
	Attention: Paul I. Rachlin, Esq
	Fax: (212) 969-2900

If to Executive::	At the address shown on the records of the
	Company

22.Withholding.  All payments under this Agreement shall be made subject to applicable tax withholding, and the Company shall withhold from any payments under this Agreement all federal, state and local taxes as the Company is required to withhold pursuant to any law or governmental rule or regulation.  The Executive shall bear all expense of, and be

- 12 -

solely responsible for, all federal, state and local taxes due with respect to any payment received under this Agreement.

23.Remedies Cumulative; No Waiver.  No remedy conferred upon a party by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given under this Agreement or now or hereafter existing at law or in equity.  No delay or omission by a party in exercising any right, remedy or power under this Agreement or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by such party from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

24.Assignment.  All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, executors, administrators, legal representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Executive under this Agreement are of a personal nature and shall not be assignable or delegable in whole or in part by the Executive.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, within 15 days of such succession, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place and the Executive acknowledges that in such event the obligations of the Executive hereunder, including but not limited to those under Section 13, will continue to apply in favor of the successor.

25.Entire Agreement.  This Agreement sets forth the entire agreement of the parties hereto and supersedes any and all prior agreements and understandings concerning the Executive’s employment by the Company, including, without limitation, the Prior Agreement.  This Agreement may be changed only by a written document signed by the Executive and the Company.

26.Severability.  If any provision of this Agreement or application thereof to anyone or under any circumstances is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.  If any provision is held void, invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

27.Choice of Law and Forum.  Except as expressly provided otherwise in this Agreement, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, and both parties consent to the jurisdiction of the courts of the State of Delaware with respect thereto.

28.Counterparts.  This Agreement may be executed in any number of counterparts (including facsimile counterparts), each of which shall be an original, but all of which together shall constitute one instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of August 5, 2014, to become effective immediately.

PHOTOMEDEX, INC.
By:	/s/ Lewis C. Pell
Name	Lewis C. Pell
Title	Chairman of the Board of Directors

EXECUTIVE
By:	/s/ Dennis McGrath
Name	Dennis McGrath

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SCHEDULE A

CORPORATE BOARDS

Executive is a member of the following corporate boards as of the Effective Date:

·   Noninvasive Medical Technologies, Inc.

·   LabStyle Innovations, Inc.

·   Cagent Vascular, Inc.

·   Taylor University Board of Visitors

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EXHIBIT A

GENERAL RELEASE OF CLAIMS

For and in consideration of the promises set forth in the Amended and Restated Employment Agreement, agreement dated [•], 2014 (the “Agreement”), between Dennis McGrath (“Executive”) and PhotoMedex, Inc. (the “Company”), including the benefits and other valuable consideration as set forth therein, and in consideration for the promises set forth in this General Release of Claims (this “Release”), the parties agree as follows:

1.Executive, for himself, his heirs, administrators, representatives, executors, successors, assigns, and all other individuals and entities claiming through him, if any (collectively, the “Releasors”), hereby releases, waives, and forever discharges the Company and each of its affiliates, related organizations, and their successors and assigns, and each of its and their employees, officers, directors, members, agents, trustees, attorneys, successors, and assigns in their capacities as such (collectively, “Releasees”) from, and does fully waive any obligations of Releasees to Releasors for, any and all liability, actions, charges, causes of action, demands, damages, or claims for relief, remuneration, sums of money, accounts or expenses of any kind whatsoever, whether known or unknown or contingent or absolute, which heretofore has been or which hereafter may be suffered or sustained, directly or indirectly, by Releasors, including, without limitation, any obligations of Releasees in consequence of, arising out of, or in any way relating to: (i) Executive’ service with the Company (whether as an employee or a consultant); (ii) the separation or termination of Executive’ service to the Company (whether as an employee or a consultant); or (iii) any events, acts, or omissions occurring on or prior to the date of this Release (collectively, “Claims”).  The foregoing release, discharge and waiver includes, but is not limited to, all waivable Claims and any obligations, liabilities or causes of action arising from such Claims under common law, including, but not limited to, wrongful or retaliatory discharge, breach of contract, libel, slander, defamation or intentional infliction of emotional distress; and further includes, but is not limited to, any claims under any federal, state or local statute, ordinance, or regulation, including, but not limited to, the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act (“OWBPA”), the Civil Rights Act of 1991, the Equal Pay Act, the Immigration and Reform Control Act, the Uniform Services Employment and Re-Employment Act, the Rehabilitation Act of 1973, Executive Order 11246, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Title VII of the Civil Rights Act of 1964, other civil rights statutes including, without limitation 42 U.S.C. § 1981, 42 U.S.C. § 1982, and 42 U.S.C. § 1985, the National Labor Relations Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, the Family and Medical Leave Act, the Sarbanes-Oxley Act, the Occupational Safety and Health Act, the Immigration Reform and Control Act, the Pennsylvania Human Relations Act, the Pennsylvania Equal Pay Law, the Pennsylvania Whistleblower Law or any other applicable state or local labor or human rights laws, as such laws have been amended, or the discrimination or employment laws of any state or municipality, and/or any claims under any express or implied contract which Releasors may claim existed with Releasees.  This also includes a release of any claims for wrongful discharge and all claims for alleged physical or personal injury, emotional distress, damages, attorneys or experts fees, interest and penalties relating to or arising out of Executive’ service to the Company or any of its affiliates or related organizations (whether as an employee or an independent contractor) or the separation or termination of such service, and any claims under the Worker Adjustment and Retraining Notification Act or any similar law, which requires, among other things, that advance notice be given of certain work force reductions.

2.           Notwithstanding anything contained in Section 1 above to the contrary, nothing contained herein will constitute a release by Releasors of any of his rights or remedies available to him, at law or in equity, related to, on account of, in connection with or in any way pertaining to the enforcement of: (i) any rights to the receipt of employee benefits or other payments which were earned and vested on or prior to the

- 16 -

date of this Release; (ii) any claims that cannot be waived by applicable law, including but not limited to the right to participate in an investigation conducted by certain government agencies (provided, however, that Executive does waive his right to, and will not accept, any monetary payment should any government agency (such as the Equal Employment Opportunity Commission or Department of Labor) pursue any claims on his behalf); or (iii) the Agreement or any of its terms or conditions.

3.           Executive understands that he will have at least [twenty one (21)][forty five (45)]1 days from the date of receipt of this Release to consider the terms and conditions of this Release.  Executive may accept this Release by signing it and returning it to the Company.  After executing this Release, Executive will have seven (7) days (the “Revocation Period”) to revoke this Release by indicating his desire to do so in writing delivered to the Company by no later than the seventh (7th) day after the date he signs this Release.  The effective date of this Release will be the eighth (8th) day after Executive signs this Release.  If the last day of the Revocation Period falls on a Saturday, Sunday or holiday, the last day of the Revocation Period will be deemed to be the next business day.  In the event Executive does not accept this Release as set forth above, or in the event he revokes this Release during the Revocation Period, this Release, including but not limited to the obligation of the Company to provide the payments and benefits provided in the Agreement, will be deemed automatically null and void.

4.           Executive acknowledges that he: (a) has carefully read this Release in its entirety; (b) has had an opportunity to consider for at least [twenty one (21)][forty five (45)] days the terms of this Release; (c) is hereby advised by the Company, in this writing, to consult with an attorney of his choice before signing this Release; (d) fully understands the significance of all of the terms and conditions of this Release and has discussed them with an attorney of his choice, or has had a reasonable opportunity to do so; and (e) is signing this Release voluntarily and of his own free will and agrees to abide by all the terms and conditions contained herein.

5.           This Release will not affect Executive’ rights under the Older Workers Benefit Protection Act to have a judicial determination of the validity of this Release and does not purport to limit any right that Executive may have to file a charge under the Age Discrimination in Employment Act or other civil rights statute or to participate in an investigation or proceeding conducted by the Equal Employment Opportunity Commission or other investigative agency.  This Release does, however, waive and release any right to recover damages under the Age Discrimination in Employment Act or other civil rights statute.

[SIGNATURE PAGE FOLLOWS]

 

1 Note – 21- or 45-day period dependent on circumstances required for ADEA/OWBPA purposes - consideration period of 45 days generally required if the waiver relates to a group or class termination.

- 17 -

IN WITNESS WHEREOF, the parties hereto have executed this Release as of the dates set forth below.

PHOTOMEDEX, INC.
By:	/s/ Lewis C. Pell
Name	Lewis C. Pell
Title	Chairman of the Board of Directors

EXECUTIVE
By:	/s/ Dennis McGrath
Name	Dennis McGrath

- 18 -

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Dolev Rafaeli, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of PhotoMedex, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

	PhotoMedex, Inc.
Date: August 11, 2014	By:	/s/ Dolev Rafaeli
		Name:  Dolev Rafaeli
		Title:    Chief Executive Officer

E-31.1

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Dennis M. McGrath, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of PhotoMedex, Inc.;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 11, 2014	By:	/s/ Dennis M. McGrath
		Dennis M. McGrath
		Chief Financial Officer

E-31.2

EX-32.1

EXHIBIT 32.1

SECTION 906 CERTIFICATION

CERTIFICATION (1)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Dolev Rafaeli, the Chief Executive Officer of PhotoMedex, Inc. (the “Company”), and Dennis M. McGrath, the President and Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 11, 2014

/s/ Dolev Rafaeli

Name:  Dolev Rafaeli

Title: Chief Executive Officer

/s/ Dennis M. McGrath

Name: Dennis M. McGrath

Title: President and Chief Financial Officer

(1) This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of PhotoMedex, Inc. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to PhotoMedex, Inc. and will be retained by PhotoMedex, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

E-32.1

XML

Property and Equipment, net (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Schedule property and equipment [Abstract]
Property and equipment, gross	$ 39,238		$ 18,568
Accumulated depreciation and amortization	(10,100)		(8,079)
Total property and equipment, net	29,138		10,489
Depreciation and related amortization expense	2,390	1,343
Lasers-in-Service [Member]
Schedule property and equipment [Abstract]
Property and equipment, gross	23,540		12,599
Equipment, Computer Hardware and Software [Member]
Schedule property and equipment [Abstract]
Property and equipment, gross	5,725		4,730
Furniture and Fixtures [Member]
Schedule property and equipment [Abstract]
Property and equipment, gross	1,343		705
Land and Building [Member]
Schedule property and equipment [Abstract]
Property and equipment, gross	2,905		0
Leasehold Improvements [Member]
Schedule property and equipment [Abstract]
Property and equipment, gross	$ 5,725		$ 534

XML

Employee Stock Benefit Plans (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended		3 Months Ended	6 Months Ended	1 Months Ended	0 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Stock Options [Member]	Jun. 30, 2014 Stock Options [Member]	Feb. 28, 2013 Stock Options [Member] Employees And Consultants [Member]	May 12, 2014 Stock Options [Member] Executive Employees [Member]	May 12, 2014 Restricted Stock [Member] LCA [Member] Employees And Consultants [Member]	May 12, 2014 Restricted Stock [Member] LCA [Member] Employees And Consultants [Member] Executive	Jun. 30, 2014 Non-Employee Director Stock Option Plan [Member]	Jul. 31, 2014 Non-Employee Director Stock Option Plan [Member] Subsequent Event [Member]	Jun. 30, 2014 Non-Employee Director Stock Option Plan [Member] Common Stock [Member]	Jun. 30, 2014 Non-Employee Director Stock Option Plan [Member] Stock Options [Member]	Jun. 30, 2014 2005 Equity Plan [Member]	Jul. 31, 2014 2005 Equity Plan [Member] Subsequent Event [Member]	Jun. 30, 2014 2005 Equity Plan [Member] Common Stock [Member]	Jun. 30, 2014 2005 Equity Plan [Member] Stock Options [Member]
Employee Stock Benefit Plan [Abstract]
Common stock authorized in stock option plan (in shares)									120,000	370,000			3,000,000	6,000,000
Common stock issued or reserved for issuance (in shares)											7,000	14,578			867,432	1,293,601
Number of Options [Roll Forward]
Outstanding (in shares)				1,132,678
Granted (in shares)				180,500	71,500	109,000
Exercised (in shares)				0
Cancelled (in shares)				(4,999)
Outstanding (in shares)			1,308,179	1,308,179
Options exercisable (in shares)			517,179	517,179
Weighted Average Exercise Price [Roll Forward]
Outstanding (in dollars per share)				$ 16.51
Granted (in dollars per share)				$ 14.11	$ 14.80	$ 13.70
Exercised (in dollars per share)				$ 0
Cancelled (in dollars per share)				$ 58.63
Outstanding (in dollars per share)			$ 16.02	$ 16.02
Options exercisable (in dollars per share)			$ 16.45	$ 16.45
Unrecognized compensation cost related to non-vested option grants and stock awards	$ 9,693
Weighted-average period over which unrecognized compensation is expected to be recognized	2 years 9 months 18 days
Weighted average assumptions to estimate fair value of grants of stock options [Abstract]
Risk-free interest rate (in hundredths)			2.21%	2.17%
Volatility (in hundredths)			76.61%	78.41%
Expected dividend yield (in hundredths)			0.00%	0.00%
Expected life			5 years 6 months	5 years 6 months
Estimated forfeiture rate (in hundredths)			0.00%	0.00%
Number of shares issued to non-employee director (in shares)	5,000
Aggregate fair value of shares issued to non-employee director	75
Options granted to purchase common stock (in shares)				180,500	71,500	109,000
Strike price of options granted (in dollars per share)				$ 14.11	$ 14.80	$ 13.70
Vesting period of options granted					5 years	4 years	3 years
Expiration period of options granted					10 years	10 years
Number of executive employees								3
Aggregate fair value of options granted					718	975
Total stock based compensation expense	$ 2,556	$ 2,584
Restricted stock units granted (in shares)							141,337
Price of restricted stock (in dollars per share)							$ 0.01

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Income Taxes (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Effective income tax rate reconciliation [Line Items]
Statutory income tax rate (in hundredths)	34.00%	34.00%
Israeli subsidiaries [Member] | Prospective [Member]
Effective income tax rate reconciliation [Line Items]
Preferred income tax rate ( in hundredths)		16.00%
Standard corporate income tax rate (in hundredths)		26.50%
UK Subsidiaries [Member]
Effective income tax rate reconciliation [Line Items]
Standard corporate income tax rate (in hundredths)		20.00%

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Employee Stock Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2014

Employee Stock Benefit Plans [Abstract]

Stock Option Activity

Stock option activity under all of the Company’s share-based compensation plans for the six months ended June 30, 2014 was as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding, January 1, 2014		1,132,678		$	16.51
Granted		180,500			14.11
Exercised		-			-
Cancelled		(4,999	)		58.63
Outstanding, June 30, 2014		1,308,179		$	16.02
Options exercisable at June 30, 2014		517,179		$	16.45

Weighted Average Assumptions Used to Estimate Fair Value of Stock Options

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

	Three Months Ended June 30, 2014	Six Months Ended June 30, 2014
Risk-free interest rate	2.21%	2.17%
Volatility	76.61%	78.41%
Expected dividend yield	0%	0%
Expected life	5.5 years	5.5 years
Estimated forfeiture rate	0%	0%

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Inventories, net (Tables)

6 Months Ended

Jun. 30, 2014

Inventories, net [Abstract]

Inventories, net

Inventories, net:

	June 30, 2014		December 31, 2013
	(unaudited)
Raw materials and work in progress	$	10,252	$	12,631
Finished goods		15,366		14,916
Total inventories, net	$	25,618	$	27,547

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Business Segment and Geographic Data, Revenue by Geographical Data (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Dec. 31, 2013
Net revenues by geographic area [Abstract]
Revenues	$ 52,120		$ 58,065		$ 102,195		$ 115,281
Reportable Geographical Components [Member]
Net revenues by geographic area [Abstract]
Revenues	52,120		58,065		102,195		115,281
Long-lived assets by geographic area [Abstract]
Long-lived assets	29,138				29,138				10,489
Reportable Geographical Components [Member] | North America [Member]
Net revenues by geographic area [Abstract]
Revenues	41,803	[1]	42,033	[1]	81,776	[1]	86,932	[1]
Long-lived assets by geographic area [Abstract]
Long-lived assets	27,859				27,859				9,119
Reportable Geographical Components [Member] | Asia Pacific [Member]
Net revenues by geographic area [Abstract]
Revenues	2,638	[2]	9,440	[2]	5,014	[2]	15,202	[2]
Long-lived assets by geographic area [Abstract]
Long-lived assets	4				4				0
Reportable Geographical Components [Member] | Europe (Including Israel) [Member]
Net revenues by geographic area [Abstract]
Revenues	7,084		5,861		14,492		11,494
Long-lived assets by geographic area [Abstract]
Long-lived assets	1,270				1,270				1,370
Reportable Geographical Components [Member] | South America [Member]
Net revenues by geographic area [Abstract]
Revenues	595		731		912		1,653
Long-lived assets by geographic area [Abstract]
Long-lived assets	5				5				0
Reportable Geographical Components [Member] | United States [Member]
Net revenues by geographic area [Abstract]
Revenues	38,612		37,329		73,379		75,336
Reportable Geographical Components [Member] | Canada [Member]
Net revenues by geographic area [Abstract]
Revenues	3,191		4,704		8,397		11,596
Reportable Geographical Components [Member] | Japan [Member]
Net revenues by geographic area [Abstract]
Revenues	$ 290		$ 7,452		$ 988		$ 11,715

[1] United States $38,612 $37,329 $73,379 $75,336 Canada $3,191 $4,704 $8,397 $11,596

[2] Japan $290 $7,452 $988 $11,715

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Accrued Compensation and related expenses (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accrued Compensation and related expenses [Abstract]
Accrued payroll and related taxes	$ 1,932	$ 707
Accrued vacation	442	290
Accrued commissions and bonus	1,600	2,233
Total accrued compensation and related expense	$ 3,974	$ 3,230

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Acquisition of LCA-Vision Inc (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 LCA Vision Inc [Member]		Jun. 30, 2014 LCA Vision Inc [Member]	May 12, 2014 LCA Vision Inc [Member]
Business Acquisition [Line Items]
Effective date of merger								May 12, 2014
Percentage of shares acquired by wholly-owned subsidiary (in hundredths)									100.00%
Fair value LCA-Vision stock						$ 103,896	[1]
Fair value of LCA-Vision restricted stock units, including payroll taxes						2,656	[2]
Total purchase price						106,552
Common Stock, outstanding (in shares)	19,049,582		19,049,582		18,903,245				19,347,554
Restricted stock, outstanding or deemed to be outstanding (in shares)									476,436
Goodwill	75,010		75,010		24,930				49,582
Fair value of the assets acquired and liabilities assumed [Abstract]
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
Summarized combined result after giving effect acquisition adjustments [Abstract]
Net revenues	61,170	80,674	136,776	166,194
Net income (loss)	$ (14,734)	$ 5,762	$ (16,747)	$ 12,579
Net income (loss) per share: [Abstract]
Basic (in dollars per share)	$ (0.79)	$ 0.28	$ (0.89)	$ 0.61
Diluted (in dollars per share)	$ (0.79)	$ 0.27	$ (0.89)	$ 0.60
Shares used in calculating net income (loss) per share [Abstract]
Basic (in shares)	18,723,484	20,573,048	18,721,463	20,624,588
Diluted (in shares)	18,723,484	21,033,349	18,721,463	21,084,889

[1] Based on 19,347,554 outstanding shares of LCA-Vision common stock at May 12, 2014.

[2] Based on 476,436 outstanding or deemed to be outstanding restricted stock units of LCA-Vision common stock at May 12, 2014.

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Commitments and contingencies (Details)	6 Months Ended			6 Months Ended
	Jun. 30, 2014 USD ($) Lawsuit Executive Shareholder	Jun. 30, 2014 ILS	Dec. 20, 2013 State Customer	Jun. 30, 2014 Minimum [Member] USD ($)	Jun. 30, 2014 Maximum [Member] USD ($)
Commitments and contingencies [Abstract]
Total operating lease obligations	$ 19,456,000
Operating lease obligation due in less than 1 year	5,910,000
Operating lease due between 1 to 3 years	9,149,000
Operating lease due 3 to 5 years	3,693,000
Operating lease obligation due more than 5 years	704,000
Loss Contingencies [Line Items]
Insurance Reserves	6,111,000
Insurance Reserve Current	805,000
Probable loss				4,383,000	12,758,000
Number of executives	2	2
Number of shareholders	2	2
Number of lawsuits	6	6
Number of lawsuits filed in Court of Chancery	2	2
Number of lawsuits filed in Court of Common Pleas	4	4
Number of customers			12
Number of states			10
Number of days to submit response	90 days	90 days
Damages sought	$ 42,050,000	145,000,000

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Inventories, net

6 Months Ended

Jun. 30, 2014

Inventories, net [Abstract]

Inventories, net

Note 3

Inventories, net:

	June 30, 2014		December 31, 2013
	(unaudited)
Raw materials and work in progress	$	10,252	$	12,631
Finished goods		15,366		14,916
Total inventories, net	$	25,618	$	27,547

Work-in-process is immaterial, given the Company’s typically short manufacturing cycle, and therefore is disclosed in conjunction with raw materials.

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Other Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Other Accrued Liabilities [Abstract]
Accrued warranty, current, see Note 1	$ 864	$ 1,117	$ 1,094
Accrued taxes, net	1,753		1,023
Accrued sales return	6,547	7,940
Insurance liability reserves, current	805		0
Accrued enhancement expenses, current	836		0
Other accrued liabilities	5,162		3,869
Total other accrued liabilities	15,967		22,032
Sales returns liability roll forward [Abstract]
Balance at beginning of year	16,046	11,901
Additions that reduce net sales	18,636	17,156
Deductions from reserves	(28,135)	(21,117)
Balance at end of period	$ 6,547	$ 7,940

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Accrued Compensation and related expenses (Tables)

6 Months Ended

Jun. 30, 2014

Accrued Compensation and related expenses [Abstract]

Accrued Compensation and Related Expenses

Accrued Compensation and related expenses:

	June 30, 2014		December 31, 2013
	(unaudited)
Accrued payroll and related taxes	$	1,932	$	707
Accrued vacation		442		290
Accrued commissions and bonus		1,600		2,233
Total accrued compensation and related expense	$	3,974	$	3,230

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Goodwill and Other Intangible Assets, net (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill and Other Intangible Assets, net [Abstract]

Goodwill Acquired

The purchase price intrinsically recognizes the benefits of leveraging under-utilized clinics by establishing XTRAC centers of excellence in key markets.

	Goodwill		Trademarks
Balance at January 1, 2014	$	24,930	$	-
Additions for LCA-Vision acquisition		49,582		29,850
Translation differences		498		-
Balance at June 30, 2014	$	75,010	$	29,850

Other Definite-lived Intangible Assets

Set forth below is a detailed listing of other definite-lived intangible assets:

	June 30, 2014
	(unaudited)
	Trademarks			Customer Relationships			Managed Care Network			Total
Gross Amount beginning of period	$	5,772		$	6,417		$	-		$	12,189
Additions		-			-			9,200			9,200
Translation differences		46			72			-			118
Gross Amount end of period		5,818			6,489			9,200			21,507
Accumulated amortization		(1,479	)		(1,649	)		(144	)		(3,272	)
Net Book Value	$	4,339		$	4,840		$	9,056		$	18,235

	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

Estimated Amortization Expense for Amortizable Intangible Assets

Estimated amortization expense for the above amortizable intangible assets for the next five years is as follows:

Last six months of 2014	$	1,175
2015		2,350
2016		2,350
2017		2,350
2018		2,350
Thereafter		7,660
Total	$	18,235

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Long-Term Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Long-Term Other Liabilities [Abstract]
Long-term insurance liability reserves, net of current portion	$ 5,305	$ 0
Accrued enhancement expenses, net of current portion	1,140	0
Other liabilities	834	61
Total long-term liabilities	$ 7,279	$ 61

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Other Accrued Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Other Accrued Liabilities [Abstract]

Other Accrued Liabilities

Other Accrued Liabilities:

	June 30, 2014		December 31, 2013
	(unaudited)
Accrued warranty, current, see Note 1	$	864	$	1,094
Accrued taxes, net		1,753		1,023
Accrued sales returns (1)		6,547		16,046
Insurance liability reserves, current		805		-
Accrued enhancement expenses, current		836		-
Other accrued liabilities		5,162		3,869
Total other accrued liabilities	$	15,967	$	22,032

(1)   The activity in the sales returns liability account was as follows:

	Six Months Ended June 30,
	2014			2013
	(unaudited)			(unaudited)
Balance at beginning of year	$	16,046		$	11,901
Additions that reduce net sales		18,636			17,156
Deductions from reserves		(28,135	)		(21,117	)
Balance at end of period	$	6,547		$	7,940

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Long-Term Other Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Long-Term Other Liabilities [Abstract]

Other Long-Term Liabilities

Long-Term Other Liabilities:

	June 30, 2014		December 31, 2013
	(unaudited)
Long-term insurance liability reserves, net of current portion	$	5,305	$	-
Accrued enhancement expenses, net of current portion		1,140		-
Other liabilities		834		61
Total long-term liabilities	$	7,279	$	61

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Acquisition of LCA-Vision Inc

6 Months Ended

Jun. 30, 2014

Acquisition of LCA-Vision Inc [Abstract]

Acquisition of LCA-Vision Inc

Note 2

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.

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 expects that the allocation will be finalized within twelve months after the merger. 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.

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 six months ended June 30, 2014 and 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 June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Net revenues	$	61,170		$	80,674	$	136,776		$	166,194
Net income (loss)		(14,734	)		5,762		(16,747	)		12,579
Net income (loss) per share:
Basic	$	(0.79	)	$	0.28	$	(0.89	)	$	0.61
Diluted	$	(0.79	)	$	0.27	$	(0.89	)	$	0.60
Shares used in calculating net income (loss) per share:
Basic		18,723,484			20,573,048		18,721,463			20,624,588
Diluted		18,723,484			21,033,349		18,721,463			21,084,889

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.

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Long-term Debt (Tables)

6 Months Ended

Jun. 30, 2014

Long-term Debt [Abstract]

Schedule of Long-term Debt

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

	June 30, 2014		December 31, 2013
	(unaudited)
Senior-secured credit facilities, net of unamortized debt discount of $606	$	84,394	$	-
Term note		-		10,000
Third-party debt		1,472		-
Sub-total		85,866		10,000
Less: current portion		85,185		10,000
Long-term debt	$	681	$	-

Maturities of Long-term Debt

The following table summarizes the future minimum payments that the Company expects to make for long-term debt:

Last six months of 2014	$	7,892
2015		17,405
2016		19,025
2017		20,900
2018		21,250
Total minimum payments		86,472
Less: unamortized discount		(606	)
Present value of total minimum obligations	$	85,866

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Patents and Licensed Technologies, net (Details) (USD $) In Thousands, unless otherwise specified			6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Patents and Licensed Technologies [Member]	Jun. 30, 2013 Patents and Licensed Technologies [Member]
Patents and Licensed Technologies [Abstract]
Gross Amount beginning of period			$ 15,648	$ 15,411
Additions			98	171
Translation differences			107	66
Gross Amount end of period			15,853	15,648
Accumulated amortization			(5,893)	(4,816)
Patents and licensed technologies, net	9,960	10,832	9,960	10,832
Amortization expense			1,040	1,020
Estimated amortization expense for amortizable patents and licensed technologies assets [Abstract]
Last six months of 2014			1,062
2015			2,049
2016			2,059
2017			909
2018			899
Thereafter			2,982
Patents and licensed technologies, net	$ 9,960	$ 10,832	$ 9,960	$ 10,832

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 36,662	$ 45,388
Short term bank deposit	0	14,113
Accounts receivable, net of allowance for doubtful accounts of $12,020 and $10,734, respectively	21,374	27,218
Inventories, net	25,618	27,547
Deferred tax asset	14,085	13,041
Prepaid expenses and other current assets	15,296	12,597
Total current assets	113,035	139,904
Property and equipment, net	29,138	10,489
Patents and licensed technologies, net	9,960	10,832
Other intangible assets, net	48,085	9,701
Goodwill	75,010	24,930
Deferred tax asset	24,008	24,039
Other assets	3,322	213
Total assets	302,558	220,108
Current liabilities:
Current portion of notes payable	416	838
Current portion of debt	85,185	10,000
Accounts payable	17,461	14,785
Accrued compensation and related expenses	3,974	3,230
Other accrued liabilities	15,967	22,032
Deferred revenues	5,460	5,961
Total current liabilities	128,463	56,846
Long-term liabilities:
Long-term note payable, net of current maturities	53	82
Long-term debt, net of current portion	681	0
Deferred revenues	2,031	2,758
Deferred tax liability	8,909	0
Other liabilities	7,279	61
Total liabilities	147,416	59,747
Commitments and Contingencies (Note 12)
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2014 and December 31, 2013	0	0
Common stock, $.01 par value, 50,000,000 shares authorized; 19,049,582 and 18,903,245 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	190	189
Additional paid-in capital	106,529	104,954
Retained earnings	45,854	53,679
Accumulated other comprehensive income	2,569	1,539
Total stockholders' equity	155,142	160,361
Total liabilities and stockholders' equity	$ 302,558	$ 220,108

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Long-term Debt (Details) (USD $)	6 Months Ended		6 Months Ended			12 Months Ended		12 Months Ended		6 Months Ended						6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Senior-secured credit facilities [Member]	May 12, 2014 Senior-secured credit facilities [Member]	Dec. 31, 2013 Senior-secured credit facilities [Member]	Dec. 31, 2013 Term Note [Member]	Jun. 30, 2014 Term Note [Member]	Dec. 31, 2013 Term Note [Member] LIBOR [Member]	Dec. 31, 2013 Term Note [Member] Federal [Member]	Jun. 30, 2014 Third-party debt [Member]	Dec. 31, 2013 Third-party debt [Member]	Jun. 30, 2014 Revolving Credit Facility [Member]	May 12, 2014 Revolving Credit Facility [Member]	Jun. 30, 2014 Term Loan [Member]	May 12, 2014 Term Loan [Member]	Jun. 30, 2014 Minimum [Member] Senior-secured credit facilities [Member] Eurodollar [Member]	Jun. 30, 2014 Maximum [Member] Senior-secured credit facilities [Member] Eurodollar [Member]
Debt Instrument [Line Items]
Sub-Total	$ 85,866,000	$ 10,000,000	$ 84,394,000		$ 0	$ 10,000,000	$ 0			$ 1,472,000	$ 0
Less: current portion	85,185,000	10,000,000
Long-term Debt	681,000	0
Maximum borrowing capacity			85,000,000	85,000,000		15,000,000						10,000,000	10,000,000	75,000,000	75,000,000
Total borrowings									10,000,000
Effective interest rate (in hundredths)								2.50%	0.50%							3.25%	4.50%
Possible increase in interest (in hundredths)			2.00%
Description of variable rate basis	LIBOR plus 2.5%		Eurodollar
Repayment period (in years)			4 years			1 year				36 months
Interest rate (in hundredths)										3.50%
Long-term Debt, Fiscal Year Maturity [Abstract]
Last six months of 2014	7,892,000
2015	17,405,000
2016	19,025,000
2017	20,900,000
2018	21,250,000
Total minimum payments	86,472,000
Less: unamortized discount	(606,000)
Sub-Total	$ 85,866,000	$ 10,000,000	$ 84,394,000		$ 0	$ 10,000,000	$ 0			$ 1,472,000	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash Flows From Operating Activities:
Net (loss) income	$ (7,825)	$ 14,306
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	4,186	2,959
Provision for doubtful accounts	3,442	2,125
Deferred income taxes	(31)	1,982
Stock-based compensation	2,556	2,584
Insurance reserves	(240)	0
Loss on disposal of property and equipment	(10)	0
Changes in operating assets and liabilities:
Accounts receivable	6,012	(11,773)
Inventories	2,050	(457)
Prepaid expenses and other assets	(2,329)	3,873
Accounts payable	(7,650)	311
Accrued compensation and related expenses	(1,329)	473
Other accrued liabilities	(12,620)	(7,555)
Deferred revenues	(1,371)	592
Net cash (used in) provided by operating activities	(15,159)	9,420
Cash Flows From Investing Activities:
Purchases of property and equipment	(154)	(474)
Investment in (sales of) short term bank deposits	14,113	(3,185)
Acquisition, net of cash received	(77,510)	0
Lasers placed in service	(3,624)	(2,780)
Proceeds from sales of property and equipment	20	0
Net cash used in investing activities	(67,155)	(6,439)
Cash Flows From Financing Activities:
Payments on notes payable	(451)	(418)
Repayments of term debt	(131)	(14)
Proceeds from credit facilities, net	75,000	0
Proceeds from option exercises	0	23
Repurchase of company stock	0	(5,381)
Issuance of restricted stock, net of payroll taxes paid	(980)	0
Net cash provided by (used in) financing activities	73,438	(5,790)
Effect of exchange rate changes on cash	150	(239)
Net decrease increase in cash and cash equivalents	(8,726)	(3,048)
Cash and cash equivalents, beginning of period	45,388	44,348
Cash and cash equivalents, end of period	36,662	41,300
Supplemental information:
Cash paid for income taxes	812	4,381
Cash paid for interest	$ 108	$ 11

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Significant Customer Concentration (Tables)

6 Months Ended

Jun. 30, 2014

Significant Customer Concentration [Abstract]

Significant Customer Concentration

No customer was more than 10% of total company revenues for the three and six months ended June 30, 2014. For the three and six months ended June 30, 2013, there were two customers more than 10% of revenues.

	Three Months Ended June 30, 2013	Six Months Ended June 30, 2013
Customer A	11%	11%
Customer B	12%	9%

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The Company (Policies)

6 Months Ended

Jun. 30, 2014

The Company [Abstract]

Basis of Presentation

Basis of Presentation:

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, 2013 (“fiscal 2013”). 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 six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other interim period or for any future period.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the wholly- and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The LCA-Vision results have been included in the financial statements from May 13, 2014, the day following the closing date of the acquisition.

Reclassification

Reclassification

Certain reclassifications from the prior year presentation have been made to conform to the current year presentation. These reclassifications did not have material impact on the Company’s equity, net assets, results of operations or cash flows.

Revenue Recognition

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 upon FOB destination. 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.

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.

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 8).

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 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

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 $111 or less than 1% of the clinics revenues for the period of May 13, 2014 through June 30, 2014.

For patients that the Company internally finance, the Company charges interest at market rates. Finance and interest charges on patient receivables were $113 for the periods ended June 30, 2014.

Insurance Reserves

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 so it is included in the Company’s consolidated financial statements. As of June 30, 2014, the insurance reserves were $6,111, 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

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 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) 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, 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. Deferred taxes are not provided on translation adjustments as the earnings of the subsidiaries are considered to be permanently reinvested.

Fair Value Measurements

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:

• 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 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 is estimated to be equal to their fair value due to the short-term nature or commercial terms of these instruments.

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

Derivatives

The group 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 and included in financing income (expenses), net.

At June 30, 2014, the balance of such derivative instruments amounted to approximately $118 in assets and approximately $93 and $183 were recognized as financing income in the Statement of Comprehensive Income during the three and six months ended June 30, 2014, respectively.

The nominal amounts of foreign currency derivatives as of June 30, 2014 consist of forward transactions for the exchange of $5,200 into NIS as of June 30, 2014.

Accrued Enhancement Expense

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.

Accrued Warranty Costs

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 six months ended June 30, 2014 and 2013 is summarized as follows:

	June 30,
	2014			2013
	(unaudited)			(unaudited)
Accrual at beginning of year	$	1,151		$	1,440
Additions charged to warranty expense		398			691
Expiring warranties		(116	)		(281	)
Claims satisfied		(497	)		(655	)
Total		936			1,195
Less: current portion		(864	)		(1,117	)
Accrued extended warranty	$	72		$	78

For extended warranty on the consumer products, see Revenue Recognition above.

Earnings Per Share

Earnings Per Share

Basic and diluted earnings per common share were calculated using the following weighted-average shares outstanding:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2014	2013		2014	2013
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding	18,723,484	20,573,048		18,721,463	20,624,588
Dilutive effect of stock options and warrants	-	460,301		-	460,301
Diluted number of common and common stock equivalent shares outstanding	18,723,484	21,033,349		18,721,463	21,084,889

Diluted earnings per share for the three and six months ended June 30, 2014, exclude the impact of common stock options and warrants, totaling 2,550,516 shares, as the effect of their inclusion would be anti-dilutive. Diluted earnings per share for the three and six months ended June 30, 2013, excluded the impact of common stock options and warrants, totaling 2,200,350 shares, as the effect of their inclusion would be anti-dilutive.

Adoption of New Accounting Standards

Adoption of New Accounting Standards

Effective January 1, 2014, the Company adopted Accounting Standard Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) ("ASU 2013-11").

The amendments in ASU 2013-11 state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction 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.

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The Company (Details) (USD $)	3 Months Ended		6 Months Ended			6 Months Ended				6 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Segment	Jun. 30, 2013	Dec. 31, 2013	Jun. 30, 2014 Senior-Secured Credit Facilities [Member]	May 12, 2014 Senior-Secured Credit Facilities [Member]	Jun. 30, 2014 Revolving Credit Facility [Member]	May 12, 2014 Revolving Credit Facility [Member]	Jun. 30, 2014 Term Loan [Member]	May 12, 2014 Term Loan [Member]	Jun. 30, 2014 Minimum [Member]	Jun. 30, 2014 Minimum [Member] Senior-Secured Credit Facilities [Member] Eurodollar [Member]	Jun. 30, 2014 Maximum [Member]	Jun. 30, 2014 Maximum [Member] Senior-Secured Credit Facilities [Member] Eurodollar [Member]	Jun. 30, 2014 PhotoMedex, Inc. [Member]	Jun. 30, 2014 Radiancy, Inc. [Member]	Jun. 30, 2014 LCA Vision Inc [Member]
Business Acquisition [Line Items]
Maximum borrowing capacity						$ 85,000,000	$ 85,000,000	$ 10,000,000	$ 10,000,000	$ 75,000,000	$ 75,000,000
Term loan period										4 years
Effective interest rate (in hundredths)													3.25%		4.50%
Possible increase in interest (in hundredths)						2.00%
Effective date of merger																		May 12, 2014
Percentage of ownership on reverse merger (in hundredths)																20.00%	80.00%
Number of operating units			4
Percentage of shares acquired by wholly-owned subsidiary (in hundredths)																		100.00%
Revenue Recognition [Abstract]
Number of distribution channels			2
Period of sales deferred			14 days
Patient Receivables and Allowance for Doubtful Accounts [Abstract]
Minimum collection period of patient receivables			12 months
Maximum collection period of patient receivables			36 months
Bad debt expense, on patient receivables			111,000
Percentage of bad debt expenses on patient receivables (in hundredths)			1.00%
Finance and interest charges on patient receivables			113,000
Insurance Reserves [Abstract]
Insurance reserves	6,111,000		6,111,000
Derivatives [Abstract]
Balance of derivative instruments	118,000		118,000
Amount recognized as financing income	93,000		183,000
Notional amounts of foreign currency derivatives	5,200,000		5,200,000
Warranty on Product Sales [Line Items]
Period of warranty on product sales												1 year		2 years
Extended period of warranty on domestic sale of laser equipment												3 years		4 years
Activity in warranty accrual [Roll Forward]
Accrual at beginning of year			1,151,000	1,440,000
Additions charged to warranty expense			398,000	691,000
Expiring warranties			(116,000)	(281,000)
Claims satisfied			(497,000)	(655,000)
Total	936,000	1,195,000	936,000	1,195,000
Less: current portion	(864,000)	(1,117,000)	(864,000)	(1,117,000)	(1,094,000)
Accrued long-term warranty	$ 72,000	$ 78,000	$ 72,000	$ 78,000
Weighted-average number of common and common equivalent shares outstanding [Abstract]
Basic number of common shares outstanding (in shares)	18,723,484	20,573,048	18,721,463	20,624,588
Dilutive effect of stock options and warrants (in shares)	0	460,301	0	460,301
Diluted number of common and common stock equivalent shares outstanding (in shares)	18,723,484	21,033,349	18,721,463	21,084,889
Common stock options and warrants excluded from computation of diluted earnings per share (in shares)	2,550,516	2,200,350	2,550,516	2,200,350

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Acquisition of LCA-Vision Inc (Tables)

6 Months Ended

Jun. 30, 2014

Acquisition of LCA-Vision Inc [Abstract]

Schedule of Aggregate Consideration Paid

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 expects that the allocation will be finalized within twelve months after the merger. 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

Purchase Price Allocation

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

Pro Forma Information

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 six months ended June 30, 2014 and 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 June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Net revenues	$	61,170		$	80,674	$	136,776		$	166,194
Net income (loss)		(14,734	)		5,762		(16,747	)		12,579
Net income (loss) per share:
Basic	$	(0.79	)	$	0.28	$	(0.89	)	$	0.61
Diluted	$	(0.79	)	$	0.27	$	(0.89	)	$	0.60
Shares used in calculating net income (loss) per share:
Basic		18,723,484			20,573,048		18,721,463			20,624,588
Diluted		18,723,484			21,033,349		18,721,463			21,084,889

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The Company

6 Months Ended

Jun. 30, 2014

The Company [Abstract]

The Company

Note 1

The Company:

Background

PhotoMedex, Inc. (and its subsidiaries) (the “Company”) is a Global Health products and services company providing integrated disease management and aesthetic solutions to dermatologists, professional aestheticians, ophthalmologists, optometrists, consumers and patients. The Company provides proprietary products and services that address skin diseases and conditions including psoriasis, vitiligo, acne, actinic keratosis photo damage, unwanted hair as well as fixed-site laser vision correction services at our LasikPlus® vision centers.

On May 12, 2014, PhotoMedex, Inc. (the “Company”) entered into an $85 million senior secured credit facilities (“the Facilities”) with the lenders that are parties thereto (collectively, the “Lenders”) and JP Morgan Chase (“Chase”) as Administrative Agent for the Lenders.  The Facilities 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-Vision, Inc. and for working capital and other general corporate purposes.

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 June 30, 2014, the Company failed to meet both financial covenants and is in default of the Facilities. On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and is engaging a third-party independent advisor to assist the Company in negotiating a longer term solution to the current default.  As a result of the default, the Lenders may accelerate the $85 million outstanding under the Facilities.  The Lenders also may increase the applicable interest on loans under the Facilities by 2%.  As of the date of this report, the Lenders have neither accelerated the outstanding amount nor increased the applicable interest but may do so in the future.

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.

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 consumer as dictated by normal product-life-cycle evolution and establishing XTRAC centers of excellence in key markets by acquiring a fully paid infrastructure of existing clinics with established high customer service standards and culture. 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.

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.

On May 12, 2014, PhotoMedex completed the acquisition of 100% of the shares of LCA-Vision Inc. (“LCA-Vision” or “LCA”), 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 added an additional operating segment to its organization. The Company plans 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 June 30, 2014 in the PhotoMedex consolidated financial statements. (See Note 2, Acquisition).

Basis of Presentation:

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, 2013 (“fiscal 2013”). 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 six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 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- and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The LCA-Vision results have been included in the financial statements from May 13, 2014, the day following the closing date of the acquisition.

Reclassification

Certain reclassifications from the prior year presentation have been made to conform to the current year presentation. These reclassifications did not have material impact on the Company’s equity, net assets, results of operations or cash flows.

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 upon FOB destination. 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.

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.

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 8).

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 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 $111 or less than 1% of the clinics revenues for the period of May 13, 2014 through June 30, 2014.

For patients that the Company internally finance, the Company charges interest at market rates. Finance and interest charges on patient receivables were $113 for the periods ended June 30, 2014.

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 so it is included in the Company’s consolidated financial statements. As of June 30, 2014, the insurance reserves were $6,111, 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 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) 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, 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. 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:

• 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 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 is estimated to be equal to their fair value due to the short-term nature or commercial terms of these instruments.

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 group 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 and included in financing income (expenses), net.

At June 30, 2014, the balance of such derivative instruments amounted to approximately $118 in assets and approximately $93 and $183 were recognized as financing income in the Statement of Comprehensive Income during the three and six months ended June 30, 2014, respectively.

The nominal amounts of foreign currency derivatives as of June 30, 2014 consist of forward transactions for the exchange of $5,200 into NIS as of June 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.

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 six months ended June 30, 2014 and 2013 is summarized as follows:

	June 30,
	2014			2013
	(unaudited)			(unaudited)
Accrual at beginning of year	$	1,151		$	1,440
Additions charged to warranty expense		398			691
Expiring warranties		(116	)		(281	)
Claims satisfied		(497	)		(655	)
Total		936			1,195
Less: current portion		(864	)		(1,117	)
Accrued extended warranty	$	72		$	78

For extended warranty on the consumer products, see Revenue Recognition above.

Earnings Per Share

Basic and diluted earnings per common share were calculated using the following weighted-average shares outstanding:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2014	2013		2014	2013
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding	18,723,484	20,573,048		18,721,463	20,624,588
Dilutive effect of stock options and warrants	-	460,301		-	460,301
Diluted number of common and common stock equivalent shares outstanding	18,723,484	21,033,349		18,721,463	21,084,889

Diluted earnings per share for the three and six months ended June 30, 2014, exclude the impact of common stock options and warrants, totaling 2,550,516 shares, as the effect of their inclusion would be anti-dilutive. Diluted earnings per share for the three and six months ended June 30, 2013, excluded the impact of common stock options and warrants, totaling 2,200,350 shares, as the effect of their inclusion would be anti-dilutive.

Adoption of New Accounting Standards

Effective January 1, 2014, the Company adopted Accounting Standard Update 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force) ("ASU 2013-11").

The amendments in ASU 2013-11 state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction 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.

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Accounts receivable, allowance for doubtful accounts	$ 12,020	$ 10,734
Stockholders' Equity
Preferred Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred Stock, authorized (in shares)	5,000,000	5,000,000
Preferred Stock, issued (in shares)	0	0
Preferred Stock, outstanding (in shares)	0	0
Common Stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common Stock, authorized (in shares)	50,000,000	50,000,000
Common Stock, issued (in shares)	19,049,582	18,903,245
Common Stock, outstanding (in shares)	19,049,582	18,903,245

XML

Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes [Abstract]

Income Taxes

Note 11

Income Taxes:

The Company's effective tax rate is dependent upon the geographic distribution of its earnings or losses (mainly between US and Israel).

The difference between the Company's effective tax rates for the three and six month periods ended June 30, 2014 and the U.S. Federal statutory rate (34%) resulted primarily from Pre-merged PhotoMedex current operations which have generated losses, which reduced 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. In addition, the Israeli and UK subsidiaries’ earnings are taxed at rates lower than the federal statutory rate (Israel 16% preferred income tax rate, 26.5% standard corporation tax rate and in the UK 20%).

The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and can be ambiguous; the Company is, therefore, obliged to make many subjective assumptions and judgments regarding the application of such laws and regulations to 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.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 11, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	PHOTOMEDEX INC
Entity Central Index Key	0000711665
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		19,049,582
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014

XML

Commitments and contingencies

6 Months Ended

Jun. 30, 2014

Commitments and contingencies [Abstract]

Commitments and contingencies

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 $19,456, with $5,910 due less than 1 year; $9,149 due between 1 to 3 years; $3,693 due 3 to 5 years and $704 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 Company’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 June 30, 2014 could differ from the amounts recorded. At June 30, 2014, the Company maintained insurance reserves of $6,111 of which $805 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 $4,383 to $12,758 at June 30, 2104. Any adjustments to 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.

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. 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. The Court also appointed a Special Master to oversee discovery. As of August 9, 2014, the case remains in the discovery phase of the litigation. Radiancy, and PhotoMedex, had moved to dismiss PhotoMedex from the case, and to dismiss the counterclaims and affirmative defenses asserted by Viatek. 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 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. 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 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.

Six putative 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 assert 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, although the Ohio Court did not formally consolidate the suits until April 24, 2014. The Delaware suits were consolidated on March 25, 2014; on or around 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 affect the terms of the Merger Agreement or the amount of consideration LCA stockholders will be entitled to receive in the merger. The Company intends to continue to vigorously defend itself in 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 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 if the cases cannot be resolved.

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. Radiancy and its officers intend to vigorously defend themselves against 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 and its officers intend to vigorously defend themselves against 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.

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 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. 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.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Product sales	$ 33,476	$ 54,041	$ 79,141	$ 108,688
Services	5,501	4,024	9,911	6,593
Clinic services	13,143	0	13,143	0
Total revenues	52,120	58,065	102,195	115,281
Cost of revenues:
Product sales	6,874	9,933	15,482	20,168
Services	1,895	1,457	3,632	3,088
Clinic services	8,883	0	8,883	0
Total cost of revenues	17,652	11,390	27,997	23,256
Gross profit	34,468	46,675	74,198	92,025
Operating expenses:
Engineering and product development	723	814	1,518	1,587
Selling and marketing	30,420	30,468	62,046	59,794
General and administrative	11,452	6,268	19,039	11,927
Total operating expenses	42,595	37,550	82,603	73,308
Operating (loss) profit	(8,127)	9,125	(8,405)	18,717
Other loss:
Interest and other financing expense, net	(175)	(134)	(321)	(3)
(Loss) Income before income tax benefit (expense)	(8,302)	8,991	(8,726)	18,714
Income tax benefit (expense)	822	(1,897)	901	(4,408)
Net (loss) income	(7,480)	7,094	(7,825)	14,306
Net (loss) income per share:
Basic (in dollars per share)	$ (0.40)	$ 0.34	$ (0.42)	$ 0.69
Diluted (in dollars per share)	$ (0.40)	$ 0.34	$ (0.42)	$ 0.68
Shares used in computing net (loss) income per share:
Basic (in shares)	18,723,484	20,573,048	18,721,463	20,624,588
Diluted (in shares)	18,723,484	21,033,349	18,721,463	21,084,889
Other comprehensive income :
Foreign currency translation adjustments	693	21	1,030	(1,792)
Comprehensive (loss) income	$ (6,787)	$ 7,115	$ (6,795)	$ 12,514

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Goodwill and Other Intangible Assets, net

6 Months Ended

Jun. 30, 2014

Goodwill and Other Intangible Assets, net [Abstract]

Goodwill and Other Intangible Assets, net

Note 6

Goodwill and Other Intangible Assets, net:

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 which was allocated to the activities of LCA-Vision was recognized as a new reportable segment (“Clinics”). Goodwill and the LCA-Vision trademark name have an indefinite useful life and therefore are not amortized as an expense, but is reviewed at least annually for impairment. The goodwill and other identifiable assets of LCA-Vision are subject to change based upon the final allocation of the purchase price. The purchase price intrinsically recognizes the benefits of leveraging under-utilized clinics by establishing XTRAC centers of excellence in key markets.

	Goodwill		Trademarks
Balance at January 1, 2014	$	24,930	$	-
Additions for LCA-Vision acquisition		49,582		29,850
Translation differences		498		-
Balance at June 30, 2014	$	75,010	$	29,850

The Company has no impairment loss on goodwill or indefinite-lived assets as of June 30, 2014.

Set forth below is a detailed listing of other definite-lived intangible assets:

	June 30, 2014
	(unaudited)
	Trademarks			Customer Relationships			Managed Care Network			Total
Gross Amount beginning of period	$	5,772		$	6,417		$	-		$	12,189
Additions		-			-			9,200			9,200
Translation differences		46			72			-			118
Gross Amount end of period		5,818			6,489			9,200			21,507
Accumulated amortization		(1,479	)		(1,649	)		(144	)		(3,272	)
Net Book Value	$	4,339		$	4,840		$	9,056		$	18,235

	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 $756 and $600 for the periods ended June 30, 2014 and 2013, respectively. 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”). 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 six months of 2014	$	1,175
2015		2,350
2016		2,350
2017		2,350
2018		2,350
Thereafter		7,660
Total	$	18,235

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Patents and Licensed Technologies, net

6 Months Ended

Jun. 30, 2014

Patents and Licensed Technologies, net [Abstract]

Patents and Licensed Technologies, net

Note 5

Patents and Licensed Technologies, net:

	June 30, 2014			December 31, 2013
	(unaudited)
Gross Amount beginning of period	$	15,648		$	15,411
Additions		98			171
Translation differences		107			66
Gross Amount end of period		15,853			15,648
Accumulated amortization		(5,893	)		(4,816	)
Patents and licensed technologies, net	$	9,960		$	10,832

Related amortization expense was $1,040 and $1,020 for the six months ended June 30, 2014 and 2013, respectively.

Estimated amortization expense for amortizable patents and licensed technologies assets for the next five years is as follows:

Last six months of 2014	$	1,062
2015		2,049
2016		2,059
2017		909
2018		899
Thereafter		2,982
Total	$	9,960

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The Company (Tables)

6 Months Ended

Jun. 30, 2014

The Company [Abstract]

Activity in the Warranty Accrual

The activity in the warranty accrual during the six months ended June 30, 2014 and 2013 is summarized as follows:

	June 30,
	2014			2013
	(unaudited)			(unaudited)
Accrual at beginning of year	$	1,151		$	1,440
Additions charged to warranty expense		398			691
Expiring warranties		(116	)		(281	)
Claims satisfied		(497	)		(655	)
Total		936			1,195
Less: current portion		(864	)		(1,117	)
Accrued extended warranty	$	72		$	78

Calculation of Basic and Diluted Earnings per Common Share

Basic and diluted earnings per common share were calculated using the following weighted-average shares outstanding:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2014	2013		2014	2013
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding	18,723,484	20,573,048		18,721,463	20,624,588
Dilutive effect of stock options and warrants	-	460,301		-	460,301
Diluted number of common and common stock equivalent shares outstanding	18,723,484	21,033,349		18,721,463	21,084,889

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Employee Stock Benefit Plans

6 Months Ended

Jun. 30, 2014

Employee Stock Benefit Plans [Abstract]

Employee Stock Benefit Plans

Note 13

Employee Stock Benefit Plans:

Post-Reverse Merger

Following the closing of the December 2011 reverse acquisition, the previous Non-Employee Director Stock Option Plan of PhotoMedex (the acquired entity) was adopted by the group. This plan has authorized 120,000 shares; of which 7,000 shares had been issued or were reserved for issuance as awards of shares of common stock, and 14,578 shares were reserved for outstanding stock options. On July 31, 2014, the shareholders approved an increase in the authorized shares to 370,000 shares under the stock based benefit plan.

In addition, following the closing of the December 2011 reverse acquisition, the previous 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 3,000,000 shares, of which 867,432 shares had been issued or were reserved for issuance as awards of shares of common stock, and 1,293,601 shares were reserved for outstanding options. On July 31, 2014, the shareholders approved an increase in the authorized shares to 6,000,000 shares under the stock based benefit plan.

Stock option activity under all of the Company’s share-based compensation plans for the six months ended June 30, 2014 was as follows:

	Number of Options			Weighted Average Exercise Price
Outstanding, January 1, 2014		1,132,678		$	16.51
Granted		180,500			14.11
Exercised		-			-
Cancelled		(4,999	)		58.63
Outstanding, June 30, 2014		1,308,179		$	16.02
Options exercisable at June 30, 2014		517,179		$	16.45

At June 30, 2014, there was $9,693 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 2.8 years. The intrinsic value of options outstanding and exercisable at June 30, 2014 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 six months ended June 30, 2014, 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.

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

	Three Months Ended June 30, 2014	Six Months Ended June 30, 2014
Risk-free interest rate	2.21%	2.17%
Volatility	76.61%	78.41%
Expected dividend yield	0%	0%
Expected life	5.5 years	5.5 years
Estimated forfeiture rate	0%	0%

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, 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 141,337 restricted stock units to three LCA employees as part of their respective employment agreements related to the acquisition. These 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-year period. The Company determined the fair value of the awards to be the fair value of the Company’s common stock on the date of issuance less the value paid for the award. 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 the 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.

Total stock based compensation expense was $2,556 and $2,584 for the six months ended June 30, 2014 and 2013, including amounts relating to consultants.

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Long-Term Other Liabilities

6 Months Ended

Jun. 30, 2014

Long-Term Other Liabilities [Abstract]

Long-Term Other Liabilities

Note 9

Long-Term Other Liabilities:

	June 30, 2014		December 31, 2013
	(unaudited)
Long-term insurance liability reserves, net of current portion	$	5,305	$	-
Accrued enhancement expenses, net of current portion		1,140		-
Other liabilities		834		61
Total long-term liabilities	$	7,279	$	61

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Accrued Compensation and related expenses

6 Months Ended

Jun. 30, 2014

Accrued Compensation and related expenses [Abstract]

Accrued Compensation and related expenses

Note 7

Accrued Compensation and related expenses:

	June 30, 2014		December 31, 2013
	(unaudited)
Accrued payroll and related taxes	$	1,932	$	707
Accrued vacation		442		290
Accrued commissions and bonus		1,600		2,233
Total accrued compensation and related expense	$	3,974	$	3,230

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Other Accrued Liabilities

6 Months Ended

Jun. 30, 2014

Other Accrued Liabilities [Abstract]

Other Accrued Liabilities

Note 8

Other Accrued Liabilities:

	June 30, 2014		December 31, 2013
	(unaudited)
Accrued warranty, current, see Note 1	$	864	$	1,094
Accrued taxes, net		1,753		1,023
Accrued sales returns (1)		6,547		16,046
Insurance liability reserves, current		805		-
Accrued enhancement expenses, current		836		-
Other accrued liabilities		5,162		3,869
Total other accrued liabilities	$	15,967	$	22,032

(1)   The activity in the sales returns liability account was as follows:

	Six Months Ended June 30,
	2014			2013
	(unaudited)			(unaudited)
Balance at beginning of year	$	16,046		$	11,901
Additions that reduce net sales		18,636			17,156
Deductions from reserves		(28,135	)		(21,117	)
Balance at end of period	$	6,547		$	7,940

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Long-term Debt

6 Months Ended

Jun. 30, 2014

Long-term Debt [Abstract]

Long-term Debt

Note 10

Long-term Debt:

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

	June 30, 2014		December 31, 2013
	(unaudited)
Senior-secured credit facilities, net of unamortized debt discount of $606	$	84,394	$	-
Term note		-		10,000
Third-party debt		1,472		-
Sub-total		85,866		10,000
Less: current portion		85,185		10,000
Long-term debt	$	681	$	-

Senior Secured Credit Facilities

On May 12, 2014, PhotoMedex, Inc. (the “Company”) entered into an $85 million senior secured credit facilities (“the Facilities”) with the lenders that are parties thereto (collectively, the “Lenders”) and JP Morgan Chase (“Chase”) as Administrative Agent for the Lenders.  The Facilities 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-Vision, Inc. and for working capital and other general corporate purposes.

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 June 30, 2014, the Company failed to meet both financial covenants and is in default of the Facilities. On August 4, 2014, the Company received a notice of default and a reservation of rights from Chase and is engaging a third-party independent advisor to assist the Company in negotiating a longer term solution to the current default.  As a result of the default, the Lenders may accelerate the $85 million outstanding under the Facilities.  The Lenders also may increase the applicable interest on loans under the Facilities by 2%.  As of the date of this report, the Lenders have neither accelerated the outstanding amount nor increased the applicable interest butmay do so in the future.

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 six months of 2014	$	7,892
2015		17,405
2016		19,025
2017		20,900
2018		21,250
Total minimum payments		86,472
Less: unamortized discount		(606	)
Present value of total minimum obligations	$	85,866

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Business Segments and Geographic Data (Tables)

6 Months Ended

Jun. 30, 2014

Business Segments and Geographic Data [Abstract]

Results of Operations from Business Segments

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

Three Months Ended June 30, 2014 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics			Total
Revenues	$	28,453		$	8,607		$	1,917		$	13,143		$	52,120
Costs of revenues		3,983			3,425			1,361			8,883			17,652
Gross profit		24,470			5,182			556			4,260			34,468
Gross profit %		86.0	%		60.2	%		29.0	%		32.4	%		66.1	%
Allocated operating expenses:
Engineering and product development		305			257			161			-			723
Selling and marketing expenses		23,223			4,268			274			2,655			30,420
Unallocated operating expenses		-			-			-			-			11,452
		23,528			4,525			435			2,655			42,595
Income (loss) from operations		942			657			121			1,605			(8,127	)
Interest  and other financing expense, net		-			-			-			-			(175	)
Net income (loss) before taxes	$	942		$	657		$	121		$	1,605		$	( 8,302	)

Three Months Ended June 30, 2013 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics		Total
Revenues	$	48,673		$	7,376		$	2,016		$	-	$	58,065
Costs of revenues		7,174			3,014			1,202			-		11,390
Gross profit		41,499			4,362			814			-		46,675
Gross profit %		85.3	%		59.1	%		40.4	%		N/A		80.4	%
Allocated operating expenses:
Engineering and product development		279			317			218			-		814
Selling and marketing expenses		26,703			3,233			532			-		30,468
Unallocated operating expenses		-			-			-			-		6,268
		26,982			3,550			750			-		37,550
Income from operations		14,517			812			64			-		9,125
Interest and other financing expense, net		-			-			-			-		(134	)
Net income before taxes	$	14,517		$	812		$	64		$	-	$	8,991

Six Months Ended June 30, 2014 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics			Total
Revenues	$	69,323		$	15,826		$	3,903		$	13,143		$	102,195
Costs of revenues		10,233			6,255			2,626			8,883			27,997
Gross profit		59,090			9,571			1,277			4,260			74,198
Gross profit %		85.2	%		60.5	%		32.7	%		32.4	%		72.6	%
Allocated operating expenses:
Engineering and product development		592			567			359			-			1,518
Selling and marketing expenses		50,381			8,279			731			2,655			62,046
Unallocated operating expenses		-			-			-			-			19,039
		50,973			8,846			1,090			2,655			82,603
Income from operations		8,117			725			187			1,605			(8,405	)
Interest and other financing expense, net		-			-			-			-			(321	)
Net income (loss)before taxes	$	8,117		$	725		$	187		$	1,605		$	(8,726	)

Six Months Ended June 30, 2013 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics		Total
Revenues	$	97,733			13,331		$	4,217		$	-	$	115,281
Costs of revenues		14,691			5,945			2,620			-		23,256
Gross profit		83,042			7,386			1,597			-		92,025
Gross profit %		85.0	%		55.4	%		37.9	%		N/A		79.8	%
Allocated operating expenses:
Engineering and product development		497			641			449			-		1,587
Selling and marketing expenses		52,334			6,407			1,053			-		59,794
Unallocated operating expenses		-			-			-			-		11,927
		52,831			7,048			1,502			-		73,308
Income from operations		30,211			338			95			-		18,717
Interest  and other financing expense, net		-			-			-			-		(3	)
Net income before taxes	$	30,211		$	338		$	95		$	-	$	18,714

Net Revenues and Long-Lived Assets by Geographical Area

For the three and six months ended June 30, 2014 and 2013 (unaudited), net revenues by geographic area were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
North America 1	$	41,803	$	42,033	$	81,776	$	86,932
Asia Pacific 2		2,638		9,440		5,015		15,202
Europe (including Israel)		7,084		5,861		14,492		11,494
South America		595		731		912		1,653
	$	52,120	$	58,065	$	102,195	$	115,281
1 United States	$	38,612	$	37,329	$	73,379	$	75,336
1 Canada	$	3,191	$	4,704	$	8,397	$	11,596
2  Japan	$	290	$	7,452	$	988	$	11,715

As of June 30, 2014 and December 31, 2013, long-lived assets by geographic area were as follows:

	June 30, 2014		December 31, 2013
	(unaudited)
North America	$	27,859	$	9,119
Asia Pacific		4		-
Europe (including Israel)		1,270		1,370
South America		5		-
	$	29,138	$	10,489

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Significant Customer Concentration (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014 Customer	Jun. 30, 2013 Customer	Jun. 30, 2014 Customer	Jun. 30, 2013 Customer
Revenue, Major Customer [Line Items]
Number of major customers	0	2	0	2
Customer A [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue generated by single major customer (in hundredths)		11.00%		11.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue generated by single major customer (in hundredths)		12.00%		9.00%

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Significant Customer Concentration

6 Months Ended

Jun. 30, 2014

Significant Customer Concentration [Abstract]

Significant Customer Concentration

Note 15

Significant Customer Concentration:

No customer was more than 10% of total company revenues for the three and six months ended June 30, 2014. For the three and six months ended June 30, 2013, there were two customers more than 10% of revenues.

	Three Months Ended June 30, 2013	Six Months Ended June 30, 2013
Customer A	11%	11%
Customer B	12%	9%

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Property and Equipment, net (Tables)

6 Months Ended

Jun. 30, 2014

Property and Equipment, net [Abstract]

Property and Equipment, net

Property and Equipment, net:

	June 30, 2014			December 31, 2013
	(unaudited)
Lasers-in-service	$	23,540		$	12,599
Equipment, computer hardware and software		5,725			4,730
Furniture and fixtures		1,343			705
Land and building		2,905			-
Leasehold improvements		5,725			534
		39,238			18,568
Accumulated depreciation and amortization		(10,100	)		(8,079	)
Property and equipment, net	$	29,138		$	10,489

XML

Business Segments and Geographic Data (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Segment	Jun. 30, 2013
Business Segments and Geographic Data [Abstract]
Number of operating units			4
Results of operations from business segments [Abstract]
Revenues	$ 52,120	$ 58,065	$ 102,195	$ 115,281
Costs of revenues	17,652	11,390	27,997	23,256
Gross profit	34,468	46,675	74,198	92,025
Gross profit % (in hundredths)	66.10%	80.40%	72.60%	79.80%
Allocated operating expenses [Abstract]
Engineering and product development	723	814	1,518	1,587
Selling and marketing expenses	30,420	30,468	62,046	59,794
Unallocated operating expenses	11,452	6,268	19,039	11,927
Total operating expenses	42,595	37,550	82,603	73,308
Operating (loss) profit	(8,127)	9,125	(8,405)	18,717
Interest and other financing income, net	(175)	(134)	(321)	(3)
(Loss) Income before income tax benefit (expense)	(8,302)	8,991	(8,726)	18,714
Operating Segments [Member] | Consumer [Member]
Results of operations from business segments [Abstract]
Revenues	28,453	48,673	69,323	97,733
Costs of revenues	3,983	7,174	10,233	14,691
Gross profit	24,470	41,499	59,090	83,042
Gross profit % (in hundredths)	86.00%	85.30%	85.20%	85.00%
Allocated operating expenses [Abstract]
Engineering and product development	305	279	592	497
Selling and marketing expenses	23,223	26,703	50,381	52,334
Unallocated operating expenses	0	0	0	0
Total operating expenses	23,528	26,982	50,973	52,831
Operating (loss) profit	942	14,517	8,117	30,211
Interest and other financing income, net	0	0	0	0
(Loss) Income before income tax benefit (expense)	942	14,517	8,117	30,211
Operating Segments [Member] | Physician Recurring [Member]
Results of operations from business segments [Abstract]
Revenues	8,607	7,376	15,826	13,331
Costs of revenues	3,425	3,014	6,255	5,945
Gross profit	5,182	4,362	9,571	7,386
Gross profit % (in hundredths)	60.20%	59.10%	60.50%	55.40%
Allocated operating expenses [Abstract]
Engineering and product development	257	317	567	641
Selling and marketing expenses	4,268	3,233	8,279	6,407
Unallocated operating expenses	0	0	0	0
Total operating expenses	4,525	3,550	8,846	7,048
Operating (loss) profit	657	812	725	338
Interest and other financing income, net	0	0	0	0
(Loss) Income before income tax benefit (expense)	657	812	725	338
Operating Segments [Member] | Professional [Member]
Results of operations from business segments [Abstract]
Revenues	1,917	2,016	3,903	4,217
Costs of revenues	1,361	1,202	2,626	2,620
Gross profit	556	814	1,277	1,597
Gross profit % (in hundredths)	29.00%	40.40%	32.70%	37.90%
Allocated operating expenses [Abstract]
Engineering and product development	161	218	359	449
Selling and marketing expenses	274	532	731	1,053
Unallocated operating expenses	0	0	0	0
Total operating expenses	435	750	1,090	1,502
Operating (loss) profit	121	64	187	95
Interest and other financing income, net	0	0	0	0
(Loss) Income before income tax benefit (expense)	121	64	187	95
Operating Segments [Member] | Clinics [Member]
Results of operations from business segments [Abstract]
Revenues	13,143	0	13,143	0
Costs of revenues	8,883	0	8,883	0
Gross profit	4,260	0	4,260	0
Gross profit % (in hundredths)	32.40%		32.40%
Allocated operating expenses [Abstract]
Engineering and product development	0	0	0	0
Selling and marketing expenses	2,655	0	2,655	0
Unallocated operating expenses	0	0	0	0
Total operating expenses	2,655	0	2,655	0
Operating (loss) profit	1,605	0	1,605	0
Interest and other financing income, net	0	0	0	0
(Loss) Income before income tax benefit (expense)	$ 1,605	$ 0	$ 1,605	$ 0

XML

Goodwill and Other Intangible Assets, net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Dec. 31, 2013
Goodwill [Roll Forward]
Goodwill, beginning balance			$ 24,930
Goodwill, ending balance	75,010		75,010	24,930
Definite-lived intangibles	48,085		48,085	9,701
Schedule of definite-lived intangible assets [Abstract]
Gross Amount beginning of period			12,189	12,116
Additions			9,200
Translation differences			118	73
Gross Amount end of period	21,507		21,507	12,189
Accumulated amortization	(3,272)		(3,272)	(2,488)
Net Book Value	18,235		18,235	9,701
Amortization expense	756	600
Estimated amortization expense for amortizable intangible assets [Abstract]
Last six months of 2014	1,175		1,175
2015	2,350		2,350
2016	2,350		2,350
2017	2,350		2,350
2018	2,350		2,350
Thereafter	7,660		7,660
Net Book Value	18,235		18,235	9,701
Trademarks [Member]
Schedule of definite-lived intangible assets [Abstract]
Gross Amount beginning of period			5,772	5,744
Additions			0
Translation differences			46	28
Gross Amount end of period	5,818		5,818	5,772
Accumulated amortization	(1,479)		(1,479)	(1,178)
Net Book Value	4,339		4,339	4,594
Estimated amortization expense for amortizable intangible assets [Abstract]
Net Book Value	4,339		4,339	4,594
Customer Relationships [Member]
Schedule of definite-lived intangible assets [Abstract]
Gross Amount beginning of period			6,417	6,372
Additions			0
Translation differences			72	45
Gross Amount end of period	6,489		6,489	6,417
Accumulated amortization	(1,649)		(1,649)	(1,310)
Net Book Value	4,840		4,840	5,107
Estimated amortization expense for amortizable intangible assets [Abstract]
Net Book Value	4,840		4,840	5,107
Managed Care Network [Member]
Schedule of definite-lived intangible assets [Abstract]
Gross Amount beginning of period			0	0
Additions			9,200
Translation differences			0	0
Gross Amount end of period	9,200		9,200	0
Accumulated amortization	(144)		(144)	0
Net Book Value	9,056		9,056	0
Amortization Life			10 years
Estimated amortization expense for amortizable intangible assets [Abstract]
Net Book Value	9,056		9,056	0
Radiancy, Inc. [Member]
Goodwill [Roll Forward]
Goodwill, ending balance	24,005		24,005
Definite-lived intangibles	12,000		12,000
Goodwill [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance			24,930
Additions for LCA-Vision acquisition			49,582
Translation differences			498
Goodwill, ending balance	75,010		75,010
Trademarks [Member]
Goodwill [Roll Forward]
Goodwill, beginning balance			0
Additions for LCA-Vision acquisition			29,850
Translation differences			0
Goodwill, ending balance	$ 29,850		$ 29,850

XML

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Total
BALANCE at Dec. 31, 2013	$ 189	$ 104,954	$ 53,679	$ 1,539	$ 160,361
BALANCE (in shares) at Dec. 31, 2013	18,903,245				18,903,245
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation related to stock options and restricted stock	0	2,486	0	0	2,486
Stock options issued to consultants for services	0	70	0	0	70
Restricted stock issued, net of payroll taxes paid	1	(981)	0	0	(980)
Restricted stock issued, net of payroll taxes paid (in shares)	146,337
Other comprehensive income	0	0	0	1,030	1,030
Net (loss) income	0	0	(7,825)	0	(7,825)
BALANCE at Jun. 30, 2014	$ 190	$ 106,529	$ 45,854	$ 2,569	$ 155,142
BALANCE (in shares) at Jun. 30, 2014	19,049,582				19,049,582

XML

Property and Equipment, net

6 Months Ended

Jun. 30, 2014

Property and Equipment, net [Abstract]

Property and Equipment, net

Note 4

Property and Equipment, net:

	June 30, 2014			December 31, 2013
	(unaudited)
Lasers-in-service	$	23,540		$	12,599
Equipment, computer hardware and software		5,725			4,730
Furniture and fixtures		1,343			705
Land and building		2,905			-
Leasehold improvements		5,725			534
		39,238			18,568
Accumulated depreciation and amortization		(10,100	)		(8,079	)
Property and equipment, net	$	29,138		$	10,489

Depreciation and related amortization expense was $2,390 and $1,343 for the six months ended June 30, 2014 and 2013, respectively.

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Patents and Licensed Technologies, net (Tables)

6 Months Ended

Jun. 30, 2014

Patents and Licensed Technologies, net [Abstract]

Patents and Licensed Technologies

Patents and Licensed Technologies, net:

	June 30, 2014			December 31, 2013
	(unaudited)
Gross Amount beginning of period	$	15,648		$	15,411
Additions		98			171
Translation differences		107			66
Gross Amount end of period		15,853			15,648
Accumulated amortization		(5,893	)		(4,816	)
Patents and licensed technologies, net	$	9,960		$	10,832

Amortization Expense for Amortizable Patents and Licensed Technologies

Estimated amortization expense for amortizable patents and licensed technologies assets for the next five years is as follows:

Last six months of 2014	$	1,062
2015		2,049
2016		2,059
2017		909
2018		899
Thereafter		2,982
Total	$	9,960

XML

Inventories, net (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of inventories [Abstract]
Raw materials and work-in-process	$ 10,252	$ 12,631
Finished goods	15,366	14,916
Total inventories, net	$ 25,618	$ 27,547

XML

Business Segments and Geographic Data

6 Months Ended

Jun. 30, 2014

Business Segments and Geographic Data [Abstract]

Business Segments and Geographic Data

Note 14

Business Segments and Geographic Data:

Following the acquisition of LCA-Vision, the Company’s business was aligned into four operating segments 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.

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Unallocated assets include cash 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 June 30, 2014 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics			Total
Revenues	$	28,453		$	8,607		$	1,917		$	13,143		$	52,120
Costs of revenues		3,983			3,425			1,361			8,883			17,652
Gross profit		24,470			5,182			556			4,260			34,468
Gross profit %		86.0	%		60.2	%		29.0	%		32.4	%		66.1	%
Allocated operating expenses:
Engineering and product development		305			257			161			-			723
Selling and marketing expenses		23,223			4,268			274			2,655			30,420
Unallocated operating expenses		-			-			-			-			11,452
		23,528			4,525			435			2,655			42,595
Income (loss) from operations		942			657			121			1,605			(8,127	)
Interest  and other financing expense, net		-			-			-			-			(175	)
Net income (loss) before taxes	$	942		$	657		$	121		$	1,605		$	( 8,302	)

Three Months Ended June 30, 2013 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics		Total
Revenues	$	48,673		$	7,376		$	2,016		$	-	$	58,065
Costs of revenues		7,174			3,014			1,202			-		11,390
Gross profit		41,499			4,362			814			-		46,675
Gross profit %		85.3	%		59.1	%		40.4	%		N/A		80.4	%
Allocated operating expenses:
Engineering and product development		279			317			218			-		814
Selling and marketing expenses		26,703			3,233			532			-		30,468
Unallocated operating expenses		-			-			-			-		6,268
		26,982			3,550			750			-		37,550
Income from operations		14,517			812			64			-		9,125
Interest and other financing expense, net		-			-			-			-		(134	)
Net income before taxes	$	14,517		$	812		$	64		$	-	$	8,991

Six Months Ended June 30, 2014 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics			Total
Revenues	$	69,323		$	15,826		$	3,903		$	13,143		$	102,195
Costs of revenues		10,233			6,255			2,626			8,883			27,997
Gross profit		59,090			9,571			1,277			4,260			74,198
Gross profit %		85.2	%		60.5	%		32.7	%		32.4	%		72.6	%
Allocated operating expenses:
Engineering and product development		592			567			359			-			1,518
Selling and marketing expenses		50,381			8,279			731			2,655			62,046
Unallocated operating expenses		-			-			-			-			19,039
		50,973			8,846			1,090			2,655			82,603
Income from operations		8,117			725			187			1,605			(8,405	)
Interest and other financing expense, net		-			-			-			-			(321	)
Net income (loss)before taxes	$	8,117		$	725		$	187		$	1,605		$	(8,726	)

Six Months Ended June 30, 2013 (unaudited)

	Consumer			Physician Recurring			Professional			Clinics		Total
Revenues	$	97,733			13,331		$	4,217		$	-	$	115,281
Costs of revenues		14,691			5,945			2,620			-		23,256
Gross profit		83,042			7,386			1,597			-		92,025
Gross profit %		85.0	%		55.4	%		37.9	%		N/A		79.8	%
Allocated operating expenses:
Engineering and product development		497			641			449			-		1,587
Selling and marketing expenses		52,334			6,407			1,053			-		59,794
Unallocated operating expenses		-			-			-			-		11,927
		52,831			7,048			1,502			-		73,308
Income from operations		30,211			338			95			-		18,717
Interest  and other financing expense, net		-			-			-			-		(3	)
Net income before taxes	$	30,211		$	338		$	95		$	-	$	18,714

For the three and six months ended June 30, 2014 and 2013 (unaudited), net revenues by geographic area were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
North America 1	$	41,803	$	42,033	$	81,776	$	86,932
Asia Pacific 2		2,638		9,440		5,015		15,202
Europe (including Israel)		7,084		5,861		14,492		11,494
South America		595		731		912		1,653
	$	52,120	$	58,065	$	102,195	$	115,281
1 United States	$	38,612	$	37,329	$	73,379	$	75,336
1 Canada	$	3,191	$	4,704	$	8,397	$	11,596
2  Japan	$	290	$	7,452	$	988	$	11,715

As of June 30, 2014 and December 31, 2013, long-lived assets by geographic area were as follows:

	June 30, 2014		December 31, 2013
	(unaudited)
North America	$	27,859	$	9,119
Asia Pacific		4		-
Europe (including Israel)		1,270		1,370
South America		5		-
	$	29,138	$	10,489

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