----

----

|   | Delaware(State or other jurisdictionof incorporation or organization) |   | 59-2058100(I.R.S.  EmployerIdentification No.) |   |
|--------|-----------------------------------------------------------------------|--------|----------------------------------------------------------|--------|

----

| Part I. Financial Information: | PAGE                                                                                                           |
|--------------------------------|----------------------------------------------------------------------------------------------------------------|
|                           |                                                                                                           |   |   |
|                           | ITEM 1.  Financial Statements:                                                                       |   |
|                           | a.                                                                                                             | Consolidated Balance Sheets, September 30, 2009 (unaudited) and December 31, 2008 | 3 |
|                           |                                                                                                           |   |   |
|                           | b.                                                                                                             | Consolidated Statements of Operations for the three months ended September 30, 2009 and 2008 (unaudited) | 4 |
|                           |                                                                                                           |   |   |
|                           | c.                                                                                                             | Consolidated Statements of Operations for the nine months ended September 30, 2009 and 2008 (unaudited) | 5 |
|                           |                                                                                                           |   |   |
|                           | d.                                                                                                             | Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2009 (unaudited) | 6 |
|                           |                                                                                                           |   |   |
|                           | e.                                                                                                             | Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 (unaudited) | 7 |
|                           |                                                                                                           |   |   |
|                           | f.                                                                                                             | Notes to Consolidated Financial Statements (unaudited) | 8 |
|                           |                                                                                                           |   |   |
|                           | ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28 |
|                           |                                                                                                           |   |   |
|                           | ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk                                   | 47 |
|                           |                                                                                                           |   |   |
|                           | ITEM 4.  Controls and Procedures                                                                     | 48 |
|                           |                                                                                                           |   |   |
| Part II. Other Information:    |                                                                                                           |
|                           |                                                                                                           |   |   |
|                           | ITEM 1  Legal Proceedings                                                                            | 49 |
|                           |                                                                                                           |   |   |
|                           | ITEM 1A.  Risk Factors                                                                               | 50 |
|                           |                                                                                                           |   |   |
|                           | ITEM 4   Security Holders Submission of Matters to a Vote                                       | 50 |
|                           |                                                                                                           |   |   |
|                           | ITEM 5.  Other Information                                                                           | 50 |
|                           |                                                                                                           |   |   |
|                           | ITEM 6.  Exhibits                                                                                    | 50 |
|                           |                                                                                                           |   |   |
|                           |                                                                                                           | Signatures | 50 |
|                           |                                                                                                           |   |   |
|                           |                                                                                                           | Certifications | E-31.1 |

----

CONSOLIDATED 

|                                                                                                                             |   | September 30, 2009 |            |   | December 31, 2008 |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------------|--------|-------------------|--------|
|                                                                                                                             |   | (Unaudited)        |            |   |              | *      |   |
| ASSETS                                                                                                                           |   |               |            |   |              |   |   |
|                                                                                                                             |   |               |            |   |              |   |   |
| Current assets:                                                                                                                  |   |               |            |   |              |   |   |
| Cash and cash equivalents                                                                                                        |   | $                  | 1,839,625       |   |              | $      | 3,658,607 |   |
| Restricted cash                                                                                                                  |   |               | 78,000          |   |              |   | 78,000 |   |
| Accounts receivable, net of allowance for doubtful accounts of $433,000 and $486,000, respectively                               |   |               |  4,476,354 |   |              |   |  5,421,688 |   |
| Inventories, net                                                                                                                 |   |               | 7,939,382       |   |              |   | 6,974,194 |   |
| Prepaid expenses and other current assets                                                                                        |   |               | 612,936         |   |              |   | 322,549 |   |
| Total current assets                                                                                                             |   |               | 14,946,297      |   |              |   | 16,455,038 |   |
|                                                                                                                             |   |               |            |   |              |   |   |   |
| Property and equipment, net                                                                                                      |   |               | 9,998,325       |   |              |   | 10,388,406 |   |
| Patents and licensed technologies, net                                                                                           |   |               | 8,014,140       |   |              |   | 1,142,462 |   |
| Goodwill                                                                                                                         |   |               | 19,472,686      |   |              |   | 16,917,808 |   |
| Other intangible assets, net                                                                                                     |   |               | 2,170,625       |   |              |   | 1,095,625 |   |
| Other assets                                                                                                                     |   |               | 1,144,487       |   |              |   | 714,930 |   |
| Total assets                                                                                                                     |   | $                  | 55,746,560      |   |              | $      | 46,714,269 |   |
|                                                                                                                             |   |               |            |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                             |   |               |            |   |              |   |   |   |
|                                                                                                                             |   |               |            |   |              |   |   |   |
| Current liabilities:                                                                                                             |   |               |            |   |              |   |   |   |
| Current portion of notes payable                                                                                                 |   | $                  | 275,976         |   |              | $      | 28,975 |   |
| Current portion of long-term debt                                                                                                |   |               | 3,492,847       |   |              |   | 4,663,281 |   |
| Accounts payable                                                                                                                 |   |               | 6,144,320       |   |              |   | 5,204,334 |   |
| Accrued compensation and related expenses                                                                                        |   |               | 1,569,180       |   |              |   | 1,487,153 |   |
| Accrued interest payable                                                                                                         |   |               | 124,800         |   |              |   | - |   |
| Other accrued liabilities                                                                                                        |   |               | 1,438,760       |   |              |   | 864,433 |   |
| Deferred revenues                                                                                                                |   |               | 836,536         |   |              |   | 798,675 |   |
| Total current liabilities                                                                                                        |   |               | 13,882,419      |   |              |   | 13,046,851 |   |
| Long-term liabilities:                                                                                                           |   |               |            |   |              |   |   |   |
| Notes payable                                                                                                                    |   |               | 54,341          |   |              |   | 77,239 |   |
| Long-term debt                                                                                                                   |   |               | 1,464,443       |   |              |   | 3,907,752 |   |
| Convertible debt                                                                                                                 |   |               | 17,307,824      |   |              |   | - |   |
| Warrants related to convertible debt                                                                                             |   |               | 345,133         |   |              |   | - |   |
| Total liabilities                                                                                                                |   |               | 33,054,160      |   |              |   | 17,031,842 |   |
|                                                                                                                             |   |               |            |   |              |   |   |   |
| Stockholders’ equity:                                                                                                      |   |               |            |   |              |   |   |   |
| Common stock, $0.01 par value, 21,428,572 shares authorized; 9,033,175 and 9,004,601 shares issued and outstanding, respectively |   |               |  90,331    |   |              |   |  90,046 |   |
| Additional paid-in capital                                                                                                       |   |               | 136,076,543     |   |              |   | 134,912,537 |   |
| Accumulated deficit                                                                                                              |   |               | (113,552,852    | )      |              |   | (105,320,156 | ) |
| Accumulated other comprehensive income                                                                                           |   |               | 78,378          |   |              |   | - |   |
| Total stockholders’ equity                                                                                                 |   |               | 22,692,400      |   |              |   | 29,682,427 |   |
| Total liabilities and stockholders’ equity                                                                                 |   | $                  | 55,746,560      |   |              | $      | 46,714,269 |   |

----

CONSOLIDATED 

|                                                          |   | For the Three Months Ended September 30, |        |
|---------------------------------------------------------------|--------|-----------------------------------------------|-------------|
|                                                          |   | 2009                                          |        |   | 2008 |   |
|                                                          |   |                                          |        |   |   |   |
| Revenues:                                                     |   |                                          |        |   |   |   |
| Product sales                                                 |   | $                                             | 6,118,941   |   |   | $ | 6,789,127 |   |
| Services                                                      |   |                                          | 2,478,051   |   |   |   | 2,077,999 |   |
|                                                          |   |                                          | 8,596,992   |   |   |   | 8,797,126 |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Cost of revenues:                                             |   |                                          |        |   |   |   |   |   |
| Product cost of revenues                                      |   |                                          | 3,349,218   |   |   |   | 2,828,986 |   |
| Services cost of revenues                                     |   |                                          | 1,531,839   |   |   |   | 1,240,670 |   |
|                                                          |   |                                          | 4,881,057   |   |   |   | 4,069,656 |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Gross profit                                                  |   |                                          | 3,715,935   |   |   |   | 4,727,470 |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Operating expenses:                                           |   |                                          |        |   |   |   |   |   |
| Selling and marketing                                         |   |                                          | 3,159,903   |   |   |   | 3,622,002 |   |
| General and administrative                                    |   |                                          | 1,882,649   |   |   |   | 2,587,099 |   |
| Engineering and product development                           |   |                                          | 311,181     |   |   |   | 224,236 |   |
|                                                          |   |                                          | 5,353,733   |   |   |   | 6,433,337 |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Operating loss from continuing operations                     |   |                                          | (1,637,798  | ) |   |   | (1,705,867 | ) |
|                                                          |   |                                          |        |   |   |   |   |   |
| Other income (loss):                                          |   |                                          |        |   |   |   |   |   |
| Interest expense, net                                         |   |                                          | (654,721    | ) |   |   | (251,883 | ) |
| Change in fair value of warrants (see Note 1)                 |   |                                          | 281,462     |   |   |   | - |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Loss from continuing operations                               |   |                                          | (2,011,057  | ) |   |   | (1,957,750 | ) |
|                                                          |   |                                          |        |   |   |   |   |   |
| Discontinued operations:                                      |   |                                          |        |   |   |   |   |   |
| Income from discontinued operations, net of nil in taxes      |   |                                          | -           |   |   |   | 39,059 |   |
| Loss on sale of discontinued operations                       |   |                                          | -           |   |   |   | 131,186 |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Net loss                                                      |   | $                                             | ( 2,011,057 | ) |   | $ | ( 1,787,505 | ) |
|                                                          |   |                                          |        |   |   |   |   |   |
|                                                          |   |                                          |        |   |   |   |   |   |
| Basic and diluted net loss per share:                         |   |                                          |        |   |   |   |   |   |
| Continuing operations                                         |   | $                                             | (0.22       | ) |   | $ | (0.22 | ) |
| Discontinued operations                                       |   | $                                             | (0.00       | ) |   | $ | 0.02 |   |
| Basic and diluted net loss per share                          |   | $                                             | (0.22       | ) |   | $ | (0.20 | ) |
|                                                          |   |                                          |        |   |   |   |   |   |
| Shares used in computing basic and diluted net loss per share |   |                                          | 9,033,175   |   |   |   | 9,004,601 |   |

----

CONSOLIDATED 

|                                                          |   | For the Nine Months Ended September 30, |        |
|---------------------------------------------------------------|--------|----------------------------------------------|-------------|
|                                                          |   | 2009                                         |        |   | 2008 |   |
|                                                          |   |                                         |        |   |   |   |
| Revenues:                                                     |   |                                         |        |   |   |   |
| Product sales                                                 |   | $                                            | 16,982,601  |   |   | $ | 20,549,712 |   |
| Services                                                      |   |                                         | 7,426,043   |   |   |   | 5,968,027 |   |
|                                                          |   |                                         | 24,408,644  |   |   |   | 26,517,739 |   |
|                                                          |   |                                         |        |   |   |   |   |   |
| Cost of revenues:                                             |   |                                         |        |   |   |   |   |   |
| Product cost of revenues                                      |   |                                         | 8,464,916   |   |   |   | 8,682,917 |   |
| Services cost of revenues                                     |   |                                         | 4,119,858   |   |   |   | 3,539,872 |   |
|                                                          |   |                                         | 12,584,774  |   |   |   | 12,222,789 |   |
|                                                          |   |                                         |        |   |   |   |   |   |
| Gross profit                                                  |   |                                         | 11,823,870  |   |   |   | 14,294,950 |   |
|                                                          |   |                                         |        |   |   |   |   |   |
| Operating expenses:                                           |   |                                         |        |   |   |   |   |   |
| Selling and marketing                                         |   |                                         | 10,701,822  |   |   |   | 11,490,801 |   |
| General and administrative                                    |   |                                         | 7,971,767   |   |   |   | 6,968,801 |   |
| Engineering and product development                           |   |                                         | 849,588     |   |   |   | 881,268 |   |
|                                                          |   |                                         | 19,523,177  |   |   |   | 19,340,870 |   |
|                                                          |   |                                         |        |   |   |   |   |   |
| Operating loss from continuing operations                     |   |                                         | (7,699,307  | ) |   |   | (5,045,920 | ) |
|                                                          |   |                                         |        |   |   |   |   |   |
| Other income (loss):                                          |   |                                         |        |   |   |   |   |   |
| Interest expense, net                                         |   |                                         | (1,738,567  | ) |   |   | (761,020 | ) |
| Change in fair value of warrants (see Note 1)                 |   |                                         | 1,205,178   |   |   |   | - |   |
|                                                          |   |                                         |        |   |   |   |   |   |
| Loss from continuing operations                               |   |                                         | (8,232,696  | ) |   |   | (5,806,940 | ) |
|                                                          |   |                                         |        |   |   |   |   |   |
| Discontinued operations:                                      |   |                                         |        |   |   |   |   |   |
| Income from discontinued operations, net of nil in taxes      |   |                                         | -           |   |   |   | 284,929 |   |
| Loss on sale of discontinued operations                       |   |                                         | -           |   |   |   | (414,658 | ) |
|                                                          |   |                                         |        |   |   |   |   |   |
| Net loss                                                      |   | $                                            | ( 8,232,696 | ) |   | $ | ( 5,936,669 | ) |
|                                                          |   |                                         |        |   |   |   |   |   |
|                                                          |   |                                         |        |   |   |   |   |   |
| Basic and diluted net loss per share:                         |   |                                         |        |   |   |   |   |   |
| Continuing operations                                         |   | $                                            | (0.91       | ) |   | $ | (0.65 | ) |
| Discontinued operations                                       |   | $                                            | (0.00       | ) |   | $ | (0.01 | ) |
| Basic and diluted net loss per share                          |   | $                                            | (0.91       | ) |   | $ | (0.66 | ) |
|                                                          |   |                                         |        |   |   |   |   |   |
| Shares used in computing basic and diluted net loss per share |   |                                         | 9,016,095   |   |   |   | 9,004,601 |   |

----

CONSOLIDATED 

|                                                          |   |         |      |   |       |   |   |        |   |   | Accumulated   |   |   |   |         |
|---------------------------------------------------------------|--------|--------------|-----------|--------|------------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------|--------------|
|                                                          |   |         |      |   | Additional |   |   |        |   |   | Other         |   |   |   |         |
|                                                          |   | Common Stock |      |   | Paid-In    |   |   | Accumulated |   |   | Comprehensive |   |   |   |         |
|                                                          |   | Shares       |      |   | Amount     |   |   | Capital     |   |   | Deficit       |   |   | Income |         |   | Total |   |
| BALANCE, DECEMBER 31, 2008                                    |   |         | 9,004,601 |   |       | $      | 90,046 |        |   | $      | 134,912,537   |   |   | $      | (105,320,156 | ) |   | $ | - |   |   | $ | 29,682,427 |   |
| Round up for fractional shares due to the reverse stock split |   |         | 574       |   |       |   | 5      |        |   |   | (5            | )      |   |   | -            |   |   |   | - |   |   |   | - |   |
| Stock options issued to consultants for services              |   |         | -         |   |       |   | -      |        |   |   | 42,533        |   |   |   | -            |   |   |   | - |   |   |   | 42,533 |   |
| Issuance of restricted stock                                  |   |         | 28,000    |   |       |   | 280    |        |   |   | -             |   |   |   | -            |   |   |   | - |   |   |   | 280 |   |
| Amortization of expense for restricted stock                  |   |         | -         |   |       |   | -      |        |   |   | 601,156       |   |   |   | -            |   |   |   | - |   |   |   | 601,156 |   |
| Change in cumulative translation adjustments                  |   |         | -         |   |       |   | -      |        |   |   | -             |   |   |   | -            |   |   |   | 78,378 |   |   |   | 78,378 |   |
| Stock-based compensation expense related to employee options  |   |         | -         |   |       |   | -      |        |   |   | 603,635       |   |   |   | -            |   |   |   | - |   |   |   | 603,635 |   |
| Registration costs                                            |   |         | -         |   |       |   | -      |        |   |   | (83,313       | )      |   |   | -            |   |   |   | - |   |   |   | (83,313 | ) |
| Net loss for the nine months ended September 30, 2009         |   |         | -         |   |       |   | -      |        |   |   | -             |   |   |   | (8,232,696   | ) |   |   | - |   |   |   | (8,232,696 | ) |
| BALANCE, SEPTEMBER 30, 2009                                   |   |         | 9,033,175 |   |       | $      | 90,331 |        |   | $      | 136,076,543   |   |   | $      | (113,552,852 | ) |   | $ | 78,378 |   |   | $ | 22,692,400 |   |

----

CONSOLIDATED 

|                                                                                              |   | For the Nine Months Ended September 30, |            |
|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------------|
|                                                                                              |   | 2009                                    |            |   | 2008 |   |
| Cash Flows From Operating Activities:                                                             |   |                                    |            |   |   |   |
| Net loss                                                                                          |   | $                                       | ( 8,232,696     | ) |   | $ | ( 5,936,669 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities-continuing operations: |   |                                    |            |   |   |   |   |   |
| Depreciation and amortization                                                                     |   |                                    | 3,409,245       |   |   |   | 3,078,475 |   |
| Loss on sale of discontinued operations                                                           |   |                                    | -               |   |   |   | 414,658 |   |
| Stock options issued to consultants for services                                                  |   |                                    | 42,533          |   |   |   | 78,015 |   |
| Stock-based compensation expense related to employee options and restricted stock                 |   |                                    |  1,204,791 |   |   |   |  1,009,684 |   |
| Provision for bad debts                                                                           |   |                                    | 55,088          |   |   |   | 89,259 |   |
| Change in estimated fair value of warrant liability (See Note 1)                                  |   |                                    | (1,205,178      | ) |   |   | - |   |
| Changes in operating assets and liabilities, net of effects from discontinued operations:         |   |                                    |            |   |   |   |   |   |
| Accounts receivable                                                                               |   |                                    | 1,733,253       |   |   |   | (1,013,633 | ) |
| Inventories                                                                                       |   |                                    | 1,059,263       |   |   |   | (254,490 | ) |
| Prepaid expenses and other assets                                                                 |   |                                    | 98,453          |   |   |   | 642,448 |   |
| Accounts payable                                                                                  |   |                                    | 3,885           |   |   |   | 1,053,352 |   |
| Accrued compensation and related expenses                                                         |   |                                    | 46,121          |   |   |   | (100,725 | ) |
| Other accrued liabilities                                                                         |   |                                    | 155,143         |   |   |   | 371,049 |   |
| Interest accrued on convertible debt                                                              |   |                                    | 844,800         |   |   |   | - |   |
| Deferred revenues                                                                                 |   |                                    | (538,488        | ) |   |   | 472,916 |   |
| Net cash used in operating activities – continuing operations                               |   |                                    | (1,323,787      | ) |   |   | (95,661 | ) |
| Net cash provided by operating activities – discontinued operations                         |   |                                    | -               |   |   |   | 766,328 |   |
| Net cash (used in) provided by operating activities                                               |   |                                    | (1,323,787      | ) |   |   | 670,667 |   |
| Cash Flows From Investing Activities:                                                             |   |                                    |            |   |   |   |   |   |
| Purchases of property and equipment                                                               |   |                                    | (61,511         | ) |   |   | (229,942 | ) |
| Lasers placed into service                                                                        |   |                                    | (1,908,338      | ) |   |   | (3,852,917 | ) |
| Proceeds from disposition of discontinued operations                                              |   |                                    | -               |   |   |   | 3,149,736 |   |
| Deferred costs on proposed acquisition                                                            |   |                                    | -               |   |   |   | (1,762,501 | ) |
| Acquisition costs, net of cash received                                                           |   |                                    | (12,578,022     | ) |   |   | - |   |
| Net cash used in investing activities – continuing operations                               |   |                                    | (14,547,871     | ) |   |   | (2,695,624 | ) |
| Net cash used in investing activities – discontinued operations                             |   |                                    | -               |   |   |   | (68,462 | ) |
| Net cash used in investing activities                                                             |   |                                    | (14,547,871     | ) |   |   | (2,764,086 | ) |
| Cash Flows From Financing Activities:                                                             |   |                                    |            |   |   |   |   |   |
| Registration costs                                                                                |   |                                    | (83,313         | ) |   |   | - |   |
| Issuance of restricted stock                                                                      |   |                                    | 280             |   |   |   | - |   |
| Payments on long-term debt other than line of credit                                              |   |                                    | -               |   |   |   | (107,376 | ) |
| Payments on notes payable                                                                         |   |                                    | (261,756        | ) |   |   | (672,399 | ) |
| Advances on line of credit                                                                        |   |                                    | -               |   |   |   | 3,600,209 |   |
| Repayments on line of credit                                                                      |   |                                    | (3,684,784      | ) |   |   | (3,872,525 | ) |
| Decrease in restricted cash and cash equivalents                                                  |   |                                    | -               |   |   |   | 39,000 |   |
| Proceeds from convertible debt                                                                    |   |                                    | 18,000,000      |   |   |   | - |   |
| Net cash provided by (used in) financing activities  - continuing operations            |   |                                    | 13,970,427      |   |   |   | (1,013,091 | ) |
| Net cash provided by (used in) financing activities  - discontinued operations          |   |                                    | -               |   |   |   | - |   |
| Net cash provided by (used in) financing activities                                               |   |                                    | 13,970,427      |   |   |   | (1,013,091 | ) |
| Effect of exchange rate changes on cash                                                           |   |                                    | 82,249          |   |   |   | - |   |
| Net decrease in cash and cash equivalents                                                         |   |                                    | (1,818,982      | ) |   |   | (3,106,510 | ) |
|                                                                                              |   |                                    |            |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                                    |   |                                    | 3,658,607       |   |   |   | 9,837,303 |   |
| Cash and cash equivalents, end of period                                                          |   | $                                       | 1,839,625       |   |   | $ | 6,730,793 |   |

----

NOTES 

| Note 1 |
|--------|

| Basis of Presentation: |
|------------------------|

----

----

|   | • | Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 3 - unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                       |   | Fair Value as of September 30, 2009 |    |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|--------------------------------------------|--------|-------------------------------------|---------|--------|---------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|------------------------------------------|--------|
| Liabilities:                               |   |                                |    |   |                                                          |   |   |                                         |   |   |                                     |   |
| Derivative financial instruments (Note 12) |   | $                                   | 345,133 |   |                                                          | $      | -      |                                         |   | $      | -                                        |   |   | $ | 345,133 |   |

----

----

|                             |   | Nine Months Ended September 30, 2009(unaudited) |     |
|----------------------------------|--------|-------------------------------------------------|----------|
| Accrual at beginning of period   |   | $                                               | 442,527  |   |
| Additions due to PTL acquisition |   |                                            | 227,334  |   |
| Additions to accrued warranties  |   |                                            | 273,091  |   |
| Expiring warranties              |   |                                            | (112,828 | ) |
| Claims satisfied                 |   |                                            | (135,132 | ) |
| Accrual at end of period         |   | $                                               | 694,992  |   |

----

|                                        |   | Three Months Ended September 30,(unaudited) |       |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------------------------|--------|---------------------------------------------|------------|--------|---------------------------------------------|--------|
|                                        |   | 2009                                        |       |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Net loss                                    |   | $                                           | (2,011,057 | )      |                                        | $      | (1,787,505 | ) |   | $ | (8,232,696 | ) |   | $ | (5,936,669 | ) |
| Change in cumulative translation adjustment |   |                                        | (29,987    | )      |                                        |   |  - |   |   |   | 78,378 |   |   |   | - |   |
| Comprehensive loss                          |   | $                                           | (2,041,044 | )      |                                        | $      | (1,787,505 | ) |   | $ | (8,154,318 | ) |   | $ | (5,936,669 |   |

----

| Cash and cash equivalents                 |   | $      | 421,978    |   |
|-------------------------------------------|--------|--------|------------|--------|
| Accounts receivable                       |   |   | 843,007    |   |
| Inventories                               |   |   | 1,979,983  |   |
| Prepaid expenses and other current assets |   |   | 187,232    |   |
| Property and equipment                    |   |   | 80,462     |   |
| Patents and licensed technologies         |   |   | 7,400,000  |   |
| Other intangible assets                   |   |   | 1,500,000  |   |
| Total assets acquired at fair value       |   |   | 12,412,662 |   |
|                                      |   |   |       |   |
| Accounts payable                          |   |   | (936,099   | )      |
| Accrued compensation and related expenses |   |   | (35,906    | )      |
| Other accrued liabilities                 |   |   | (419,186   | )      |
| Deferred revenues                         |   |   | (576,349   | )      |
| Total liabilities assumed                 |   |   | (1,967,540 | )      |
|                                      |   |   |       |   |
| Net assets acquired                       |   | $      | 10,445,122 |   |

----

|                                                        |   | Three Months Ended September 30, (unaudited) |            |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------------------------------------------|--------|---------------------------------------------------|-----------------|--------|-------------------------------------------------------|--------|
|                                                        |   | 2009                                              |            |   | 2008                                                  |   |   | 2009 |   |   | 2008 |   |
|                                                        |   |                                              |            |   |                                                  |   |   |   |   |   |   |   |
| Net revenues                                                |   | $                                                 | 8,596,992       |   |                                                  | $      | 11,564,887 |   |   | $ | 25,236,052 |   |   | $ | 24,531,312 |   |
| Net loss                                                    |   | $                                                 | (2,011,057      | )      |                                                  | $      | (1,952,790 | ) |   | $ | (8,945,839 | ) |   | $ | (8,285,186 | ) |
| Basic and diluted loss per share                            |   | $                                                 | (0.22           | )      |                                                  | $      | (0.22 | ) |   | $ | (0.99 | ) |   | $ | (0.92 | ) |
| Shares used in calculating basic and diluted loss per share |   |                                              |  9,033,175 |   |                                                  |   | 9,004,601 |   |   |   |  9,016,095 |   |   |   | 9,004,601 |   |

----

|                               |   | September 30, 2009 |      |   | December 31, 2008 |   |
|------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
|                               |   | (unaudited)             |      |   |                   |   |
| Raw materials and work in progress |   | $                       | 4,929,090 |   |                   | $      | 5,157,455 |   |
| Finished goods                     |   |                    | 3,010,292 |   |                   |   | 1,816,739 |   |
| Total inventories                  |   | $                       | 7,939,382 |   |                   | $      | 6,974,194 |   |

|                                      |   | September 30, 2009 |       |   | December 31, 2008 |   |
|-------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                      |   | (unaudited)        |       |   |              |   |
| Lasers in service                         |   | $                  | 17,201,817 |   |              | $      | 17,288,400 |   |
| Computer hardware and software            |   |               | 368,666    |   |              |   | 341,407 |   |
| Furniture and fixtures                    |   |               | 626,159    |   |              |   | 562,418 |   |
| Machinery and equipment                   |   |               | 832,406    |   |              |   | 830,778 |   |
| Leasehold improvements                    |   |               | 262,395    |   |              |   | 259,595 |   |
| Vehicles                                  |   |               | 4,521      |   |              |   | - |   |
|                                      |   |               | 19,295,964 |   |              |   | 19,282,598 |   |
| Accumulated depreciation and amortization |   |               | (9,297,639 | )      |              |   | (8,894,192 | ) |
| Property and equipment, net               |   | $                  | 9,998,325  |   |              | $      | 10,388,406 |   |

|                                                                                                                                                               |   | September 30, 2009 |            |   | December 31, 2008 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------------|--------|-------------------|--------|
|                                                                                                                                                               |   | (unaudited)        |            |   |              |   |
| Patents, owned and licensed, at gross costs of $8,043,190 and $583,623, net of accumulated amortization of $828,015 and $359,195, respectively.                    |   | $                  |  7,215,175 |   |              | $      |  224,428 |   |
| Other licensed or developed technologies, at gross costs of $2,332,364 and $2,328,059, net of accumulated amortization of $1,533,399 and $1,410,025, respectively. |   |               |  798,965   |   |              |   |  918,034 |   |
|                                                                                                                                                               |   | $                  | 8,014,140       |   |              | $      | 1,142,462 |   |

----

|                                                                                                                                            |   | September 30, 2009 |            |   | December 31, 2008 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------------|--------|-------------------|--------|
|                                                                                                                                            |   | (unaudited)        |            |   |              |   |
| Customer Relationships, at gross cost of $2,200,000 and $1,700,000, net of accumulated amortization of $1,571,899 and $1,287,735, respectively. |   | $                  |  628,101   |   |              | $      |  412,265 |   |
| Tradename, at gross cost of $2,100,000 and $1,100,000, net of accumulated amortization of $557,476 and $416,640, respectively.                  |   |               |  1,542,524 |   |              |   |  683,360 |   |
|                                                                                                                                            |   | $                  | 2,170,625       |   |              | $      | 1,095,625 |   |

|                                           |   | September 30, 2009 |      |   | December 31, 2008 |   |
|------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                           |   | (unaudited)        |      |   |              |   |
| Accrued payroll and related taxes              |   | $                  | 76,797    |   |              | $      | 348,677 |   |
| Accrued vacation                               |   |               | 178,880   |   |              |   | 143,922 |   |
| Accrued commissions and bonus                  |   |               | 824,057   |   |              |   | 930,355 |   |
| Accrued severance                              |   |               | 489,446   |   |              |   | 64,199 |   |
| Total accrued compensation and related expense |   | $                  | 1,569,180 |   |              | $      | 1,487,153 |   |

----

|                                     |   | September 30, 2009 |      |   | December 31, 2008 |   |
|------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                     |   | (unaudited)        |      |   |              |   |
| Accrued professional and consulting fees |   | $                  | 439,169   |   |              | $      | 186,162 |   |
| Accrued warranty                         |   |               | 694,992   |   |              |   | 442,527 |   |
| Accrued sales taxes                      |   |               | 275,694   |   |              |   | 196,121 |   |
| Accrued other expense                    |   |               | 28,905    |   |              |   | 39,623 |   |
| Total other accrued liabilities          |   | $                  | 1,438,760 |   |              | $      | 864,433 |   |

|                                                                                                                                           |   | September 30, 2009 |     |   | December 31, 2008 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|----------|--------|-------------------|--------|
|                                                                                                                                           |   | (unaudited)        |     |   |              |   |
| Note Payable – secured creditor, interest at 6%, payable in monthly principal and interest installments of $2,880 through June 2012      |   | $                  | 84,646   |   |              | $      | 106,214 |   |
|  Note Payable- unsecured creditor, interest at 5.43%, payable in monthly principal and interest payments of $49,803 through February 2010 |   |               | 245,671  |   |              |   | - |   |
|                                                                                                                                           |   |               | 330,317  |   |              |   | 106,214 |   |
| Less: current maturities                                                                                                                       |   |               | (275,976 | )      |              |   | (28,975 | ) |
| Notes payable, net of current maturities                                                                                                       |   | $                  | 54,341   |   |              | $      | 77,239 |   |

|                                |   | September 30, 2009 |       |   | December 31, 2008 |   |
|-------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                |   | (unaudited)        |       |   |              |   |
| Total borrowings on credit facility |   | $                  | 4,957,290  |   |              | $      | 8,571,033 |   |
| Less: current portion               |   |               | (3,492,847 | )      |              |   | (4,663,281 | ) |
| Total long-term debt                |   | $                  | 1,464,443  |   |              | $      | 3,907,752 |   |

----

|                    |   | December 2007 |    |   | September 2008 |   |
|-------------------------|--------|---------------|---------|--------|---------------------|--------|
|                    |   |          |    |   |                |   |
| Number of warrants      |   |          | 67,292  |   |                |   | 27,536 |   |
| Exercise price          |   | $             | 7.84    |   |                | $      | 3.08 |   |
| Fair value of warrants  |   | $             | 221,716 |   |                | $      | 44,366 |   |
| Volatility              |   |          | 59.44   | %      |                |   | 60.92 | % |
| Risk-free interest rate |   |          | 3.45    | %      |                |   | 2.98 | % |
| Expected dividend yield |   |          | 0       | %      |                |   | 0 | % |
| Expected warrant life   |   | 5 years       |    |   | 5 years             |   |

| Year Ended December 31,                    |   |   |      |
|--------------------------------------------|--------|--------|-----------|
| 2009 for the last three months             |   | $      | 1,152,592 |   |
| 2010                                       |   |   | 3,444,783 |   |
| 2011                                       |   |   | 811,059   |   |
| Total minimum payments                     |   |   | 5,408,434 |   |
|                                       |   |   |      |   |
| Less: interest                             |   |   | (401,840  | ) |
| Less: unamortized warrant discount         |   |   | (49,304   | ) |
|                                       |   |   |      |   |
| Present value of total minimum obligations |   | $      | 4,957,290 |   |

----

|                                          |   | September 30, 2009 |       |
|-----------------------------------------------|--------|--------------------|------------|
|                                          |   | (unaudited)        |       |
| Total borrowings on convertible debt facility |   | $                  | 17,307,824 |   |
| Less: current portion                         |   |               | -          |   |
| Total long-term debt                          |   | $                  | 17,307,824 |   |

----

|                    |   | Feb. 27, 2009 |      |   | June 30, 2009 |   |      | Sept. 30, 2009 |   |
|-------------------------|--------|---------------|-----------|--------|---------------|--------|-----------|----------------|--------|
| Number of warrants      |   |          | 1,046,204 |   |          |   | 1,046,204 |           |   |   | 1,046,204 |   |
| Exercise price          |   | $             | 5.16      |   |          | $      | 5.16      |           |   | $ | 5.16 |   |
| Fair value of warrants  |   | $             | 1,550,311 |   |          | $      | 626,595   |           |   | $ | 345,133 |   |
| Volatility              |   |          | 87.89     | %      |          |   | 88.68     | %              |   |   | 82.18 | % |
| Risk-free interest rate |   |          | 2.69      | %      |          |   | 3.19      | %              |   |   | 2.93 | % |
| Expected dividend yield |   |          | 0         | %      |          |   | 0         | %              |   |   | 0 | % |
| Expected warrant life   |   | 8 years       |      |   | 7.67 years    |   |      | 7.42 years     |   |

| Warrant liability:                 |   |   |       |
|------------------------------------|--------|--------|------------|
| Balance as of January 1, 2009      |   | $      | -          |   |
| Initial measurement of warrants    |   |   | 1,550,311  |   |
| Decrease in fair value of warrants |   |   | (1,205,178 | ) |
| Balance as of September 30, 2009   |   | $      | 345,133    |   |

----

|                                      |   |  Number of Options |     |   | Weighted Average Exercise Price |   |
|-------------------------------------------|--------|-------------------------|----------|--------|---------------------------------|--------|
| Outstanding, January 1, 2009              |   |                    | 870,865  |   |                            | $      | 12.46 |   |
| Granted                                   |   |                    | 247,342  |   |                            |   | 1.24 |   |
| Cancelled                                 |   |                    | (183,581 | )      |                            |   | 12.86 |   |
| Outstanding, September 30 2009            |   |                    | 934,626  |   |                            | $      | 9.50 |   |
| Options exercisable at September 30, 2009 |   |                    | 568,674  |   |                            | $      | 12.84 |   |

| Assumptions for Option Grants | Three Months Ended Sept. 30, |   | Nine Months Ended Sept. 30, |
|-------------------------------|------------------------------|--------|-----------------------------|
|                          | 2009                         |   | 2008                        |   | 2009 |   | 2008 |
| Risk-free interest rate       | N/A                          |   | 3.86%                       |   | 3.46% |   | 3.73% |
| Volatility                    | N/A                          |   | 82.14%                      |   | 88.67% |   | 84.13% |
| Expected dividend yield       | N/A                          |   | 0%                          |   | 0% |   | 0% |
| Expected life                 | N/A                          |   | 8.1 years                   |   | 8.1 years |   | 8.1 years |
| Estimated forfeiture rate     | N/A                          |   | 12%                         |   | 12% |   | 12% |

----

----

|                                     |   | Three Months Ended September 30, 2009 (unaudited) |            |
|------------------------------------------|--------|---------------------------------------------------|-----------------|
|                                     |   | DOMESTICXTRAC                                     |            |   | INTERN’LDERM. EQUIPMENT |   |   |  SKIN CARE |   |   |  PTL |   |   | SURGICAL PRODUCTSAND OTHER |   |   |  TOTAL |   |
| Revenues                                 |   | $                                                 | 3,546,777       |   |   | $ | 819,568 |   |   | $ | 2,047,089 |   |   | $ | 1,236,042 |   |   | $ | 947,516 |   |   | $ | 8,596,992 |   |
| Costs of revenues                        |   |                                              | 2,153,152       |   |   |   | 628,855 |   |   |   | 589,371 |   |   |   | 812,462 |   |   |   | 697,217 |   |   |   | 4,881,057 |   |
| Gross profit                             |   |                                              | 1,393,625       |   |   |   | 190,713 |   |   |   | 1,457,718 |   |   |   | 423,580 |   |   |   | 250,299 |   |   |   | 3,715,935 |   |
| Gross profit %                           |   |                                              | 39.3            | % |   |   | 23.3 | % |   |   | 71.2 | % |   |   | 34.3 | % |   |   | 26.4 | % |   |   | 43.2 | % |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allocated operating expenses:            |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative      |   |                                              |  1,732,171 |   |   |   | 44,510 |   |   |   |  1,049,813 |   |   |   | 512,201 |   |   |   |  40,814 |   |   |   |  3,379,509 |   |
| Engineering and product development      |   |                                              |  -         |   |   |   |  - |   |   |   |  95,381 |   |   |   | 95,470 |   |   |   | 120,331 |   |   |   |  311,182 |   |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated operating expenses           |   |                                              |  -         |   |   |   |  - |   |   |   |  - |   |   |   | - |   |   |   |  - |   |   |   |  1,663,042 |   |
|                                     |   |                                              | 1,732,171       |   |   |   | 44,510 |   |   |   | 1,145,194 |   |   |   | 607,671 |   |   |   | 161,145 |   |   |   | 5,353,733 |   |
| Income (loss) from operations            |   |                                              | (338,546        | ) |   |   | 146,203 |   |   |   | 312,524 |   |   |   | (184,091 | ) |   |   | 89,154 |   |   |   | (1,637,798 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                    |   |                                              | -               |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (654,721 | ) |
| Change in fair value of warrant          |   |                                              | -               |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 281,462 |   |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations |   |                                              | (338,546        | ) |   |   |  146,203 |   |   |   |  312,524 |   |   |   | (184,091 | ) |   |   |  89,154 |   |   |   | (2,011,057 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued operations:                 |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from discontinued operations      |   |                                              |  -         |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                        |   | $                                                 | (338,546        | ) |   | $ | 146,203 |   |   | $ | 312,524 |   |   | $ | (184,091 | ) |   | $ | 89,154 |   |   | $ | (2,011,057 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                     |   | Three Months Ended September 30, 2008 (unaudited) |            |
|------------------------------------------|--------|---------------------------------------------------|-----------------|
|                                     |   | DOMESTICXTRAC                                     |            |   | INTERN’LDERM. EQUIPMENT |   |   |  SKIN CARE |   |   |  PTL |   |   | SURGICAL PRODUCTSAND OTHER |   |   |  TOTAL |   |
| Revenues                                 |   | $                                                 | 3,001,878       |   |   | $ | 1,096,853 |   |   | $ | 3,627,940 |   |   | $ | - |   |   | $ | 1,070,455 |   |   | $ | 8,797,126 |   |
| Costs of revenues                        |   |                                              | 1,620,060       |   |   |   | 586,865 |   |   |   | 1,288,946 |   |   |   | - |   |   |   | 573,785 |   |   |   | 4,069,656 |   |
| Gross profit                             |   |                                              | 1,381,818       |   |   |   | 509,988 |   |   |   | 2,338,994 |   |   |   | - |   |   |   | 496,670 |   |   |   | 4,727,470 |   |
| Gross profit %                           |   |                                              | 46.0            | % |   |   | 46.5 | % |   |   | 64.5 | % |   |   | N/A |   |   |   | 46.4 | % |   |   | 53.7 | % |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allocated operating expenses:            |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative      |   |                                              |  1,933,848 |   |   |   | 68,665 |   |   |   |  1,486,800 |   |   |   |  - |   |   |   |  151,690 |   |   |   |  3,641,003 |   |
| Engineering and product development      |   |                                              |  -         |   |   |   |  - |   |   |   |  114,336 |   |   |   |  - |   |   |   | 109,900 |   |   |   |  224,236 |   |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated operating expenses           |   |                                              |  -         |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  2,568,098 |   |
|                                     |   |                                              | 1,933,848       |   |   |   | 68,665 |   |   |   | 1,601,136 |   |   |   | - |   |   |   | 261,590 |   |   |   | 6,433,337 |   |
| Income (loss) from operations            |   |                                              | (552,030        | ) |   |   | 441,323 |   |   |   | 737,858 |   |   |   | - |   |   |   | 235,080 |   |   |   | (1,705,867 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                    |   |                                              | -               |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (251,883 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations |   |                                              | (552,030        | ) |   |   |  441,323 |   |   |   |  737,858 |   |   |   |  - |   |   |   |  235,080 |   |   |   | (1,957,750 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued operations:                 |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from discontinued operations      |   |                                              |  -         |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  39,059 |   |
| Sale of discontinued operations          |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 131,186 |   |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                        |   | $                                                 | (552,030        | ) |   | $ | 441,323 |   |   | $ | 737,858 |   |   | $ | - |   |   | $ | 235,080 |   |   | $ | (1,787,505 | ) |
|                                     |   |                                              |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                     |   | Nine Months Ended September 30, 2009 (unaudited) |            |
|------------------------------------------|--------|--------------------------------------------------|-----------------|
|                                     |   | DOMESTICXTRAC                                    |            |   | INTERN’LDERM. EQUIPMENT |   |   |  SKIN CARE |   |   |  PTL * |   |   | SURGICAL PRODUCTSAND OTHER |   |   |  TOTAL |   |
| Revenues                                 |   | $                                                | 9,381,389       |   |   | $ | 2,879,259 |   |   | $ | 6,261,278 |   |   | $ | 3,262,678 |   |   | $ | 2,624,040 |   |   | $ | 24,408,644 |   |
| Costs of revenues                        |   |                                             | 5,059,613       |   |   |   | 1,917,810 |   |   |   | 2,038,094 |   |   |   | 1,653,087 |   |   |   | 1,916,170 |   |   |   | 12,584,774 |   |
| Gross profit                             |   |                                             | 4,321,776       |   |   |   | 961,449 |   |   |   | 4,223,184 |   |   |   | 1,609,591 |   |   |   | 707,870 |   |   |   | 11,823,870 |   |
| Gross profit %                           |   |                                             | 46.1            | % |   |   | 33.4 | % |   |   | 67.4 | % |   |   | 49.3 | % |   |   | 27.0 | % |   |   | 48.4 | % |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allocated operating expenses:            |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative      |   |                                             |  5,559,618 |   |   |   | 225,739 |   |   |   |  3,813,839 |   |   |   | 1,538,051 |   |   |   |  217,264 |   |   |   |  11,354,511 |   |
| Engineering and product development      |   |                                             |  -         |   |   |   |  - |   |   |   |  314,433 |   |   |   | 186,762 |   |   |   | 348,394 |   |   |   |  849,589 |   |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated operating expenses           |   |                                             |  -         |   |   |   |  - |   |   |   |  - |   |   |   | - |   |   |   |  - |   |   |   |  7,319,077 |   |
|                                     |   |                                             | 5,559,618       |   |   |   | 225,739 |   |   |   | 4,128,272 |   |   |   | 1,724,813 |   |   |   | 565,658 |   |   |   | 19,523,177 |   |
| Income (loss) from operations            |   |                                             | (1,237,842      | ) |   |   | 735,710 |   |   |   | 94,912 |   |   |   | (115,222 | ) |   |   | 142,212 |   |   |   | (7,699,307 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                    |   |                                             | -               |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,738,567 | ) |
| Change in fair value of warrant          |   |                                             | -               |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,205,178 |   |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations |   |                                             | (1,237,842      | ) |   |   |  735,710 |   |   |   |  94,912 |   |   |   | (115,222 | ) |   |   |  142,212 |   |   |   | (8,232,696 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued operations:                 |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from discontinued operations      |   |                                             |  -         |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                        |   | $                                                | (1,237,842      | ) |   | $ | 735,710 |   |   | $ | 94,912 |   |   | $ | (115,222 | ) |   | $ | 142,212 |   |   | $ | (8,232,696 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                     |   | Nine Months Ended September 30, 2008 (unaudited) |            |
|------------------------------------------|--------|--------------------------------------------------|-----------------|
|                                     |   | DOMESTICXTRAC                                    |            |   | INTERN’LDERM. EQUIPMENT |   |   |  SKIN CARE |   |   |  PTL |   |   | SURGICAL PRODUCTSAND OTHER |   |   |  TOTAL |   |
| Revenues                                 |   | $                                                | 8,546,583       |   |   | $ | 2,963,031 |   |   | $ | 10,327,189 |   |   | $ | - |   |   | $ | 4,680,936 |   |   | $ | 26,517,739 |   |
| Costs of revenues                        |   |                                             | 4,534,644       |   |   |   | 1,493,553 |   |   |   | 3,429,410 |   |   |   | - |   |   |   | 2,765,182 |   |   |   | 12,222,789 |   |
| Gross profit                             |   |                                             | 4,011,939       |   |   |   | 1,469,478 |   |   |   | 6,897,779 |   |   |   | - |   |   |   | 1,915,754 |   |   |   | 14,294,950 |   |
| Gross profit %                           |   |                                             | 46.9            | % |   |   | 49.6 | % |   |   | 66.8 | % |   |   | N/A |   |   |   | 40.9 | % |   |   | 54.0 | % |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allocated operating expenses:            |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative      |   |                                             |  5,989,789 |   |   |   | 206,546 |   |   |   |  4,891,899 |   |   |   |  - |   |   |   |  459,568 |   |   |   |  11,547,802 |   |
| Engineering and product development      |   |                                             |  168,214   |   |   |   |  20,790 |   |   |   |  361,970 |   |   |   |  - |   |   |   | 330,294 |   |   |   |  881,268 |   |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated operating expenses           |   |                                             |  -         |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  6,911,800 |   |
|                                     |   |                                             | 6,158,003       |   |   |   | 227,336 |   |   |   | 5,253,869 |   |   |   | - |   |   |   | 789,862 |   |   |   | 19,340,870 |   |
| Income (loss) from operations            |   |                                             | (2,146,064      | ) |   |   | 1,242,142 |   |   |   | 1,643,910 |   |   |   | - |   |   |   | 1,125,892 |   |   |   | (5,045,920 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                    |   |                                             | -               |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (761,020 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) income from continuing operations |   |                                             | (2,146,064      | ) |   |   |  1,242,142 |   |   |   |  1,643,910 |   |   |   |  - |   |   |   |  1,125,892 |   |   |   | (5,806,940 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discontinued operations:                 |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from discontinued operations      |   |                                             |  -         |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |   |   |  284,929 |   |
| Loss on sale of discontinued operations  |   |                                             | -          |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | -  |   |   |   | (414,658 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss) income                        |   | $                                                | (2,146,064      | ) |   | $ | 1,242,142 |   |   | $ | 1,643,910 |   |   | $ | - |   |   | $ | 1,125,892 |   |   | $ | (5,936,669 | ) |
|                                     |   |                                             |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                 |   | September 30, 2009 |       |   | December 31, 2008 |   |
|--------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                 |   | (unaudited)        |       |   |              |   |
| Assets:                              |   |               |       |   |              |   |
| Total assets for reportable segments |   | $                  | 52,458,146 |   |              | $      | 42,075,242 |   |
| Other unallocated assets             |   |               | 3,288,414  |   |              |   | 4,639,027 |   |
| Consolidated total                   |   | $                  | 55,746,560 |   |              | $      | 46,714,269 |   |

|     |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|----------|--------|---------------------------------------------------|-----------|--------|--------------------------------------------------|--------|
|     |   | 2009                                              |      |   | 2008                                             |   |   | 2009 |   | 2008 |   |
| Domestic |   | $                                                 | 6,512,236 |   |                                             | $      | 6,702,085 |   |   | $ | 18,098,780 |   |   | $ | 20,766,092 |   |
| Foreign  |   |                                              | 2,084,756 |   |                                             |   | 2,095,041 |   |   |   | 6,309,864 |   |   |   | 5,751,647 |   |
|     |   | $                                                 | 8,596,992 |   |                                             | $      | 8,797,126 |   |   | $ | 24,408,644 |   |   | $ | 26,517,739 |   |

----

Management’s 

| ·   | Domestic XTRAC, |
|--------------------|-----------------|

| ·   | International Dermatology Equipment, |
|--------------------|--------------------------------------|

| ·   | Skin Care (ProCyte), |
|--------------------|----------------------|

| ·   | Photo Therapeutics (PTL), and |
|--------------------|-------------------------------|

| ·   | Surgical Products. |
|--------------------|--------------------|

----

----

----

|                                         |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|----------------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                         |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| XTRAC Domestic Services                      |   | $                                            | 3,546,777 |   |                                        | $      | 3,001,878 |   |   | $ | 9,381,389 |   |   | $ | 8,546,583 |   |
| International Dermatology Equipment Products |   |                                         | 819,568   |   |                                        |   | 1,096,853 |   |   |   |  2,879,259 |   |   |   |  2,963,031 |   |
| Skin Care (ProCyte) Products                 |   |                                         | 2,047,089 |   |                                        |   | 3,627,940 |   |   |   | 6,261,278 |   |   |   | 10,327,189 |   |
| Photo Therapeutics (PTL) Products            |   |                                         | 1,236,042 |   |                                        |   | - |   |   |   | 3,262,678 |   |   |   | - |   |
|    Total Dermatology Revenues |   |                                         | 7,649,476 |   |                                        |   | 7,726,671 |   |   |   | 21,784,604 |   |   |   | 21,836,803 |   |
|                                         |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Surgical Products                            |   |                                         | 947,516   |   |                                        |   | 1,070,455 |   |   |   | 2,624,040 |   |   |   | 4,680,936 |   |
|    Total Surgical Revenues    |   |                                         | 947,516   |   |                                        |   | 1,070,455 |   |   |   | 2,624,040 |   |   |   | 4,680,936 |   |
|                                         |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Revenues                               |   | $                                            | 8,596,992 |   |                                        | $      | 8,797,126 |   |   | $ | 24,408,644 |   |   | $ | 26,517,739 |   |

----

----

|                                                      |   | Three Months Ended September 30, (unaudited) |        |   | Nine Months Ended September 30, (unaudited) |   |
|-----------------------------------------------------------|--------|----------------------------------------------|-------------|--------|---------------------------------------------|--------|
|                                                      |   | 2009                                         |        |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Total revenue                                             |   | $                                            | 3,546,777   |   |                                        | $      | 3,001,878 |   |   | $ | 9,381,389 |   |   | $ | 8,546,583 |   |
| Less: laser sales revenue                                 |   |                                         | (1,078,890  | )      |                                        |   | (1,034,130 | ) |   |   | (2,240,875 | ) |   |   | (2,675,780 | ) |
| Recognized treatment revenue                              |   |                                         | 2,467,887   |   |                                        |   | 1,967,748 |   |   |   | 7,140,514 |   |   |   | 5,870,803 |   |
| Change in deferred programRevenue                         |   |                                         |  5,245 |   |                                        |   |  15,496 |   |   |   |  9,146 |   |   |   |  74,343 |   |
| Change in deferred unusedTreatments                       |   |                                         | (125,803    | )      |                                        |   |  367,199 |   |   |   | (107,552 | ) |   |   |  474,877 |   |
| Net billed revenue                                        |   | $                                            | 2,347,329   |   |                                        | $      | 2,350,443 |   |   | $ | 7,042,108 |   |   | $ | 6,420,023 |   |
| Procedure volume total                                    |   |                                         | 38,478      |   |                                        |   | 37,879 |   |   |   | 112,850 |   |   |   | 102,823 |   |
| Less: Non-billed procedures                               |   |                                         | 1,846       |   |                                        |   | 1,800 |   |   |   | 4,872 |   |   |   | 4,449 |   |
| Net billed procedures                                     |   |                                         | 36,632      |   |                                        |   | 36,079 |   |   |   | 107,978 |   |   |   | 98,374 |   |
| Avg. price of treatments billed                           |   | $                                            | 64.08       |   |                                        | $      | 65.15 |   |   | $ | 65.22 |   |   | $ | 65.26 |   |
| Change in procedures with deferred program revenue, net   |   |                                         |  82    |   |                                        |   |  238 |   |   |   |  140 |   |   |   |  1,139 |   |
| Change in procedures with deferred unused treatments, net |   |                                         | (1,963      | )      |                                        |   |  5,636 |   |   |   | (1,649 | ) |   |   |  7,277 |   |

| ·   | We sell refurbished domestic XTRAC laser systems into the international market. The selling price for used equipment is substantially less than new equipment, some of which may be substantially depreciated in connection with its use in the domestic market. We sold no such used lasers in the three months ended September 30, 2009 and four such used lasersin the nine months ended September 30, 2009, at an average price of $32,500. We sold two and six such lasers in the three and nine months ended September 30, 2008, at an average price of $32,500 and $31,667, respectively; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | In addition to the XTRAC laser system (both new and used), we sell the VTRAC, a lamp-based, alternative UVB light source that has a wholesale sales price that is targeted to be below our competitors’ international dermatology equipment and below our XTRAC laser. In the three and nine months ended September 30, 2009, we sold 10 and 13 VTRAC systems,respectively. In the three and nine months ended September 30, 2008, we sold nine and 19 VTRAC systems, respectively. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                 |   | Three Months Ended September 30, (unaudited) |     |   | Nine Months Ended September 30, (unaudited) |   |
|--------------------------------------|--------|----------------------------------------------|----------|--------|---------------------------------------------|--------|
|                                 |   | 2009                                         |     |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                             |   | $                                            | 819,568  |   |                                        | $      | 1,096,853 |   |   | $ | 2,879,259 |   |   | $ | 2,963,031 |   |
|    Less: part sales   |   |                                         | (209,568 | )      |                                        |   | (138,853 | ) |   |   | (647,459 | ) |   |   | (530,031 | ) |
| Laser revenues                       |   |                                         | 610,000  |   |                                        |   | 958,000 |   |   |   | 2,231,800 |   |   |   | 2,433,000 |   |
|    Laser systems sold |   |                                         | 18       |   |                                        |   | 25 |   |   |   | 58 |   |   |   | 63 |   |
| Average revenue per laser            |   | $                                            | 33,889   |   |                                        | $      | 38,320 |   |   | $ | 38,479 |   |   | $ | 38,619 |   |

| ·   | The product sales decreased for the three and nine months ended September 30, 2009 due to macro-economic conditions and to transitioning from our discontinued MD Lash Factor eyelash conditioning product to our internally developed Neova Advanced Essential Lash™ eyelash conditioner, which was launched February 1, 2009. This segment is more susceptibleto such economic conditions than our other segments because cosmetic products are more likely to be discretionary and not medically necessary. Product sales for the three months ended September 30, 2009 were approximately $1.9 million, down from approximately $3.5 million for the three months ended September 30, 2008. Product sales for the nine months ended September 30, 2009 were approximately $6.0 million, down from approximately $10.1 million for the nine months ended September 30, 2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Included in product sales for the three and nine months ended September 30, 2008, were $1,139,204 and $2,247,038, respectively, of revenues from MD Lash Factor as part of an exclusive license to distribute in the United States. In the three and nine months ended September 30, 2009, there were no revenues from this product as we have discontinued marketingMD Lash Factor as of January 31, 2009 under the terms of an agreement with Allergan, Inc. in settlement of certain patent litigation, and we have replaced it with our own peptide-based conditioner. For the three and nine months ended September 30, 2009, we sold $108,515 and $299,287 of Neova Advanced Essential Lash, respectively. The launch date for the Neova Advanced Essential Lash was February 1, 2009. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Bulk compound sales increased by $63,840 for the three months ended September 30, 2009, and decreased by $16,240 for the nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                     |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|------------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                     |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Product sales                            |   | $                                            | 1,887,249 |   |                                        | $      | 3,530,327 |   |   | $ | 6,019,755 |   |   | $ | 10,066,389 |   |
| Bulk compound sales                      |   |                                         | 159,840   |   |                                        |   | 96,000 |   |   |   | 239,760 |   |   |   | 256,000 |   |
| Royalties                                |   |                                         | -         |   |                                        |   | 1,613 |   |   |   | 1,763 |   |   |   | 4,800 |   |
|    Total ProCyte revenues |   | $                                            | 2,047,089 |   |                                        | $      | 3,627,940 |   |   | $ | 6,261,278 |   |   | $ | 10,327,189 |   |

|                                 |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|--------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                 |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Product revenues                     |   | $                                            | 1,236,042 |   |                                        | $      | - |   |   | $ | 3,049,573 |   |   | $ | - |   |
| Licensing revenues                   |   |                                         | -         |   |                                        |   | - |   |   |   | 213,105 |   |   |   | - |   |
|    Total PTL revenues |   | $                                            | 1,236,042 |   |                                        | $      | - |   |   | $ | 3,262,678 |   |   | $ | - |   |

----

|                                        |   | Three Months Ended September 30, (unaudited) |    |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------------------------|--------|----------------------------------------------|---------|--------|---------------------------------------------|--------|
|                                        |   | 2009                                         |    |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                                    |   | $                                            | 947,516 |   |                                        | $      | 1,070,455 |   |   | $ | 2,624,040 |   |   | $ | 4,680,936 |   |
|    Laser systems sold        |   |                                         | 9       |   |                                        |   | 8 |   |   |   | 16 |   |   |   | 134 |   |
| Laser system revenues                       |   | $                                            | 227,350 |   |                                        | $      | 171,393 |   |   | $ | 357,996 |   |   | $ | 2,080,133 |   |
|    Average revenue per laser |   | $                                            | 25,261  |   |                                        | $      | 21,424 |   |   | $ | 22,375 |   |   | $ | 15,523 |   |

----

|                                     |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|------------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                     |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Product:                                 |   |                                         |      |   |                                        |   |   |   |   |   |   |   |
| XTRAC Domestic                           |   | $                                            | 653,408   |   |                                        | $      | 406,612 |   |   | $ | 1,036,128 |   |   | $ | 1,076,285 |   |
| International Dermatology Equipment |   |                                         | 628,855   |   |                                        |   | 586,865 |   |   |   | 1,917,810 |   |   |   | 1,493,553 |   |
| Skin Care                                |   |                                         | 589,371   |   |                                        |   | 1,288,946 |   |   |   | 2,038,094 |   |   |   | 3,429,410 |   |
| PTL                                      |   |                                         | 812,462   |   |                                        |   | - |   |   |   | 1,653,087 |   |   |   | - |   |
| Surgical products                        |   |                                         | 665,122   |   |                                        |   | 546,563 |   |   |   | 1,819,797 |   |   |   | 2,683,669 |   |
| Total Product costs                      |   | $                                            | 3,349,218 |   |                                        | $      | 2,828,986 |   |   | $ | 8,464,916 |   |   | $ | 8,682,917 |   |
|                                     |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Services:                                |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| XTRAC Domestic                           |   | $                                            | 1,499,744 |   |                                        | $      | 1,213,448 |   |   | $ | 4,023,485 |   |   | $ | 3,458,359 |   |
| Surgical products                        |   |                                         | 32,095    |   |                                        |   | 27,222 |   |   |   | 96,373 |   |   |   | 81,513 |   |
| Total Services costs                     |   | $                                            | 1,531,839 |   |                                        | $      | 1,240,670 |   |   | $ | 4,119,858 |   |   | $ | 3,539,882 |   |
|                                     |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Costs of Revenues                  |   | $                                            | 4,881,057 |   |                                        | $      | 4,069,656 |   |   | $ | 12,584,774 |   |   | $ | 12,222,789 |   |

| Company Profit Analysis |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                    |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                |   | $                                            | 8,596,992 |   |                                        | $      | 8,797,126 |   |   | $ | 24,408,644 |   |   | $ | 26,517,739 |   |
| Percent decrease        |   |                                         | (2.3      | %)     |                                        |   |   |   |   |   | (8.0 | %) |   |   |   |   |
| Cost of revenues        |   |                                         | 4,881,057 |   |                                        |   | 4,069,656 |   |   |   | 12,584,774 |   |   |   | 12,222,789 |   |
| Percent increase        |   |                                         | 19.9      | %      |                                        |   |   |   |   |   | 3.0 | % |   |   |   |   |
| Gross profit            |   | $                                            | 3,715,935 |   |                                        | $      | 4,727,470 |   |   | $ | 11,823,870 |   |   | $ | 14,294,950 |   |
| Gross margin percentage |   |                                         | 43.2      | %      |                                        |   | 53.7 | % |   |   | 48.4 | % |   |   | 53.9 | % |

| ·   | The current world macro economic conditions as well as the related credit crisis have affected our revenues and consequently have required us to lower our expectations of growth until the market conditions improve. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our Skin Care segment is more susceptible to the macro economic conditions than our other segments because cosmetic products are more likely to be discretionary and not medically necessary. Product sales for the third quarter of 2009 were approximately $1.9 million down from approximately $3.5 million for the third quarter of 2008. Skin Care margins aresubstantially higher than the other business segments, consequently substantive swings in the revenues attributed to skin care's sales will have a significant impact on overall margins. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Sales of domestic XTRAC lasers in the three months ended September 30, 2009 and 2008 were approximately the same, $1.1 million compared to $1.0 million, respectively, although the current period sales were at lower margins compared to the same period in 2008. Certain of these lasers were previously being depreciated, since they were previously placements.The margin on these capital equipment sales was 39% in 2009 compared to 61% in 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Additional gross profit was realized from our PTL segment. We acquired PTL on February 27, 2009, therefore only the activity after that date is recorded in our financial statements. There was no activity recorded in our financial statements in 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | While we decreased the number of laser systems placed with our customers, we maintained the same level of XTRAC treatment procedures in 2009 compared to 2008. Procedure volume increased 1.5% from 36,079 to 36,632 billed procedures in the three months ended September 30, 2009 compared to the same period in 2008. Increased usage at existing sites carriesnegligible variable cost thereby enhancing profit margins. Our ability to increase the number of procedures sold is a direct result of improved insurance reimbursement and increased marketing efforts. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our Skin Care segment is more susceptible to the macro economic conditions than our other segments because cosmetic products are more likely to be discretionary and not medically necessary. Product sales for the first nine months of 2009 were approximately $6.0 million down from approximately $10.1 million for the first nine months of 2008. Skin Care marginsare substantially higher than the other business segments, consequently substantive swings in the revenues attributed to skin care's sales will have a significant impact on overall margins. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In our Surgical Products segment there were 118 fewer laser systems sold in the nine months ended September 30, 2009 than in the comparable period of 2008. This included 100 sales due to our OEM arrangement, but in the second half of 2008, AngioDynamics elected out of the OEM contract. Since that time, our sales to AngioDynamics have been $0. Additionally,the higher manufacturing levels in 2008 caused better absorption of fixed overheads which lowered average unit costs and resulted in a higher gross margin in 2008 compared to 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We sold approximately $434,905 less in domestic XTRAC lasers in the nine months ended September 30, 2009. In addition, the current year sales were at lower margins compared to the same period in 2008. Certain of these lasers were previously being depreciated, since they were previously placements. The margin on these capital equipment sales was 53% in2009 compared to 60% in 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We recorded severance and lease liability of approximately $226,000 related to the integration of the PTL acquisition and the relocation of the Skin Care facility. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Additional gross profit was realized from our PTL segment. We acquired PTL on February 27, 2009, therefore only the activity after that date is recorded in our financial statements. There was no activity recorded in our financial statements in 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We decreased the number of laser systems placed with our customers but were able to sell a greater number of XTRAC treatment procedures in 2009 than in 2008. Procedure volume increased 9.8% from 98,374 to 107,978 billed procedures in the nine months ended September 30, 2009 compared to the same period in 2008. Increased usage at existing sites carriesnegligible variable cost thereby enhancing profit margins. Our ability to increase the number of procedures sold is a direct result of improved insurance reimbursement and increased marketing efforts. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Domestic XTRAC Segment  |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                    |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                |   | $                                            | 3,546,777 |   |                                        | $      | 3,001,878 |   |   | $ | 9,381,389 |   |   | $ | 8,546,583 |   |
| Percent increase        |   |                                         | 18.2      | %      |                                        |   |   |   |   |   | 9.8 | % |   |   |   |   |
| Cost of revenues        |   |                                         | 2,153,152 |   |                                        |   | 1,620,060 |   |   |   | 5,059,613 |   |   |   | 4,534,644 |   |
| Percent increase        |   |                                         | 32.9      | %      |                                        |   |   |   |   |   | 11.6 | % |   |   |   |   |
| Gross profit            |   | $                                            | 1,393,625 |   |                                        | $      | 1,381,818 |   |   | $ | 4,321,776 |   |   | $ | 4,011,939 |   |
| Gross margin percentage |   |                                         | 39.3      | %      |                                        |   | 46.0 | % |   |   | 46.1 | % |   |   | 46.9 | % |

| ·   | Key drivers in increasing the fee-per-procedure revenue from this segment are insurance reimbursement and increased direct-to-consumer advertising in targeted territories. Together with offering enhanced services to our customers through a recently developed membership program which bundles certain features and benefits offered to our customers. This includesenhanced access to our reimbursement team, marketing assistance, and discounts off our other product lines. Consequently, procedure volume increased 1.5% from 36,079 to 36,632 billed procedures in the three months ended September 30, 2009 compared to the same period in 2008. Procedure volume increased 9.8% from 98,374 to 107,978 billed procedures in the nine months ended September 30, 2009 compared to the same period in 2008. Price per procedure did not change significantly between the periods. Each incrementaltreatment procedure carries negligible variable cost. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We sold approximately the same amount in domestic XTRAC lasers in the three months ended September 30, 2009, although at lower margins compared to the same period in 2008. Certain of these lasers were previously being depreciated, since they were previous placements. The margin on these capital equipment sales was 39% in the three months ended September30, 2009 compared to 61% in the comparable period in 2008. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The cost of revenues increased by $533,092 for the three months ended September 30, 2009. This increase is due to an increase in cost of revenues related to laser sales of $246,796 over the comparable period in 2008. In addition, there were increases in the service expenses due to the increase in lasers placed in the field, of approximately $46,855 andin certain allocable XTRAC manufacturing overhead costs that are charged against the XTRAC service revenues of $184,180. The increase in allocated manufacturing overhead costs is due to an increased effort to refurbish the existing lasers. The depreciation costs will continue to increase in subsequent periods as the number of net placements grows. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Key drivers in increasing the fee-per-procedure revenue from this segment are insurance reimbursement and increased direct-to-consumer advertising in targeted territories. Together with offering enhanced services to our customers through a recently developed membership program which bundles certain features and benefits offered to our customers. This includesenhanced access to our reimbursement team, marketing assistance, and discounts off our other product lines.  Consequently, procedure volume increased 9.8% from 98,374 to 107,978 billed procedures in the nine months ended September 30, 2009 compared to the same period in 2008. Price per procedure did not change significantly between the periods. Each incremental treatment procedure carries negligible variable cost. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We sold approximately $434,905 less in domestic XTRAC lasers in the nine months ended September 30, 2009, although at lower margins compared to the same period in 2008. Certain of these lasers were previously being depreciated, since they were previously placements. The margin on these capital equipment sales was 53% in the nine months ended September30, 2009 compared to 60% in the comparable period in 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The cost of revenues increased by $524,969 for the nine months ended September 30, 2009. This increase is due to an increase in the service expenses due to the increase in lasers placed in the field, of approximately $242,250 and in certain allocable XTRAC manufacturing overhead costs that are charged against the XTRAC service revenues of $215,509. Offsettingthis increase was a decrease in cost of revenues related to laser sales of $40,156 over the comparable period in 2008. The depreciation costs will continue to increase in subsequent periods as the number of net placements grows. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| International Dermatology Equipment Segment |   | Three Months Ended September 30, (unaudited) |    |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------------------------|--------|----------------------------------------------|---------|--------|---------------------------------------------|--------|
|                                        |   | 2009                                         |    |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                                    |   | $                                            | 819,568 |   |                                        | $      | 1,096,853 |   |   | $ | 2,879,259 |   |   | $ | 2,963,031 |   |
| Percent decrease                            |   |                                         | (25.3   | %)     |                                        |   |   |   |   |   | (2.8 | %) |   |   |   |   |
| Cost of revenues                            |   |                                         | 628,855 |   |                                        |   | 586,865 |   |   |   | 1,917,810 |   |   |   | 1,493,553 |   |
| Percent increase                            |   |                                         | 7.2     | %      |                                        |   |   |   |   |   | 28.4 | % |   |   |   |   |
| Gross profit                                |   | $                                            | 190,713 |   |                                        | $      | 509,988 |   |   | $ | 961,449 |   |   | $ | 1,469,478 |   |
| Gross margin percentage                     |   |                                         | 23.3    | %      |                                        |   | 46.5 | % |   |   | 33.4 | % |   |   | 49.6 | % |

| ·   | We sold 8 XTRAC laser systems and 10 VTRAC lamp-based excimer systems during the three months ended September 30, 2009 and 16 XTRAC laser systems and 9 VTRAC systems in the comparable period in 2008. Consequently, gross profit decreased as a result of a decrease in the volume of units sold. The gross margin percentage for the VTRAC is higher than for theXTRAC. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We sold 34 XTRAC laser systems and 23 VTRAC lamp-based excimer systems during the nine months ended September 30, 2009 and 44 XTRAC laser systems and 19 VTRAC systems in the comparable period in 2008. The gross margin percentage for the VTRAC is higher than for the XTRAC. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | International part sales, which have a higher margin percentage than system sales, increased approximately $70,715 and $117,428, respectively, for the three and nine months ended September 30, 2009 as compared to the same period in 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In addition, there were increases of approximately $120,000 and $235,000, for the three and nine months ended September 30, 2009 and 2008, respectively, in certain allocable XTRAC manufacturing overhead costs that are charged against our international dermatology equipment revenues. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Skin Care (ProCyte) Segment    |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|--------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                           |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Product revenues               |   | $                                            | 1,887,249 |   |                                        | $      | 3,530,327 |   |   | $ | 6,019,755 |   |   | $ | 10,066,389 |   |
| Bulk compound revenues         |   |                                         | 159,840   |   |                                        |   | 96,000 |   |   |   | 239,760 |   |   |   | 256,000 |   |
| Royalties                      |   |                                         | -         |   |                                        |   | 1,613 |   |   |   | 1,763 |   |   |   | 4,800 |   |
| Total revenues                 |   |                                         | 2,047,089 |   |                                        |   | 3,424,557 |   |   |   | 6,261,278 |   |   |   | 10,327,189 |   |
| Percent decrease               |   |                                         | (43.6     | %)     |                                        |   |   |   |   |   | (39.4 | %) |   |   |   |   |
|                           |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Product cost of revenues       |   |                                         | 498,235   |   |                                        |   | 1,220,594 |   |   |   | 1,901,390 |   |   |   | 3,197,488 |   |
| Bulk compound cost of revenues |   |                                         | 91,136    |   |                                        |   | 68,352 |   |   |   | 136,704 |   |   |   | 231,922 |   |
| Total cost of revenues         |   |                                         | 589,371   |   |                                        |   | 1,288,946 |   |   |   | 2,038,094 |   |   |   | 3,429,410 |   |
| Percent decrease               |   |                                         | (54.3     | %)     |                                        |   |   |   |   |   | (40.6 | %) |   |   |   |   |
| Gross profit                   |   | $                                            | 1,457,718 |   |                                        | $      | 2,338,994 |   |   | $ | 4,223,184 |   |   | $ | 6,897,779 |   |
| Gross margin percentage        |   |                                         | 71.2      | %      |                                        |   | 64.5 | % |   |   | 67.4 | % |   |   | 66.8 | % |

| ·   | The decrease in revenues for the three months ended September 30, 2009 is due in large part to the macro economic conditions. This segment is more susceptible to such economic conditions than our other segments because cosmetic products are more likely to be discretionary and not medically necessary. Product sales for the third quarter of 2009 were approximately$1.9 million down from approximately $3.5 million for the third quarter of 2008. Product sales for the first nine months of 2009 were approximately $6.0 million down from approximately $10.1 million for the first nine months of 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Copper peptide bulk compound is sold at a substantially lower gross margin than our other skin care products. |
|--------------------|---------------------------------------------------------------------------------------------------------------|

| ·   | In the nine months ended September 30, 2009, severance and lease liability expense of approximately $168,000 were recorded with respect to the relocation of the warehouse facility. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| PTL Segment             |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                    |   | 2009                                         |      |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                |   | $                                            | 1,236,042 |   |                                        | $      | - |   |   | $ | 3,262,678 |   |   | $ | - |   |
| Percent increase        |   |                                         | 100       | %      |                                        |   |   |   |   |   | 100 | % |   |   |   |   |
| Cost of revenues        |   |                                         | 812,462   |   |                                        |   | - |   |   |   | 1,653,087 |   |   |   | - |   |
| Percent increase        |   |                                         | 100       | %      |                                        |   |   |   |   |   | 100 | % |   |   |   |   |
| Gross profit            |   | $                                            | 423,580   |   |                                        | $      | - |   |   | $ | 1,609,591 |   |   | $ | - |   |
| Gross margin percentage |   |                                         | 34.3      | %      |                                        |   |   |   |   |   | 49.3 | % |   |   |   |   |

| ·   | Since the business was acquired on February 27, 2009, there was no corresponding activity for the periods ending 2008. Consequently, the activity for the nine months ended September 30, 2009 includes activity from February 27, 2009 through June 30, 2009. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The nine months ended September 30, 2009 includes revenues from a milestone payment of $213,000 under a certain licensing arrangement for the Clear U™ hand-held device. The licensee intends to use the device and its technology as a platform to attempt to address the mass consumer acne market. There are no specific costs allocated to this revenuestream. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Surgical Products Segment   |   | Three Months Ended September 30, (unaudited) |    |   | Nine Months Ended September 30, (unaudited) |   |
|-----------------------------|--------|----------------------------------------------|---------|--------|---------------------------------------------|--------|
|                        |   | 2009                                         |    |   | 2008                                        |   |   | 2009 |   |   | 2008 |   |
| Revenues                    |   | $                                            | 947,516 |   |                                        | $      | 1,070,455 |   |   | $ | 2,624,040 |   |   | $ | 4,680,936 |   |
| Percent decrease            |   |                                         | (11.5   | %)     |                                        |   |   |   |   |   | (43.9 | %) |   |   |   |   |
| Cost of revenues            |   |                                         | 697,217 |   |                                        |   | 573,783 |   |   |   | 1,916,170 |   |   |   | 2,765,183 |   |
| Percent increase/(decrease) |   |                                         | 21.5    | %      |                                        |   |   |   |   |   | (30.7 | %) |   |   |   |   |
| Gross profit                |   | $                                            | 250,299 |   |                                        | $      | 496,673 |   |   | $ | 707,869 |   |   | $ | 1,915,754 |   |
| Gross margin percentage     |   |                                         | 26.4    | %      |                                        |   | 46.4 | % |   |   | 27.0 | % |   |   | 40.9 | % |

| ·   | This segment includes product sales of surgical laser systems and laser disposables. Disposables are more profitable than laser systems, but the sale of laser systems generates the subsequent recurring sale of laser disposables. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Revenues for the three months ended September 30, 2009 decreased by $122,939 from the three months ended September 30, 2008, while cost of revenues increased by $123,434 between the same periods. There was 1 additional laser system sold in the three months ended September 30, 2009 than in the comparable period of 2008. Revenues for the nine months endedSeptember 30, 2009 decreased by $2,056,896 from the nine months ended September 30, 2008 while cost of revenues decreased by $849,013 between the same periods. There were 118 fewer laser systems sold in the nine months ended September 30, 2009 than in the comparable period of 2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The sales of diode systems, in the nine months ended September 30, 2008, included 100 sales due to our OEM arrangement, but in the second half of 2008 AngioDynamics elected not to continue the contract. Since that time, our sales to AngioDynamics have been $0. Additionally, the higher manufacturing levels in 2008 caused better absorption of fixed overheadcosts, which lowered average unit costs resulting in a higher gross margin in 2008 compared to 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Additionally, there was a decrease in sales of disposables between the periods, which have a higher gross margin as a percent of revenues than lasers. Fiber and other disposables sales decreased 20% and 13% between the comparable three and nine-month periods ended September 30, 2009 and 2008. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | There was a decrease of $447,000 in salaries, benefits and travel expenses associated with a decrease in the sales force and decreased revenues which generated lower commission expenses, particularly in our Skin Care segment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A decrease of approximately $130,000 in legal costs in the current three month period. |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | There was a decrease of bonus expense of $375,000 due to the fact that no bonus accrual was recorded in the current year. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | There was a reduction of approximately $235,000 in stock option and restricted stock expense due to fewer options issued in the current year and due to the accelerated vesting of the restricted stock and options in connection with the termination of our former chief executive officer, which occurred in the three months ended June 30, 2009. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Additionally, there was a decrease in amortization expense of $120,000 related to the impairment of certain intangibles as of the year end December 31, 2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Offsetting the above decreases was the selling, general and administrative expenses related to our PTL segment of $509,339. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling, general and administrative expenses related to our PTL segment accounted for $1,535,209 of the increase. |
|--------------------|-------------------------------------------------------------------------------------------------------------------|

| ·   | We expensed approximately $987,000 related to severance and accelerated vesting of restricted stock and options in connection with the termination of our former chief executive officer. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We expensed $432,000 of additional costs which incurred in connection with the acquisition of our PTL segment. |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Offsetting the above increases was a decrease of $1,469,000 in salaries, benefits and travel expenses associated with a decrease in the sales force and decreased revenues which generated lower commission expenses, particularly in our Skin Care segment. There was a decrease of bonus expense of $475,000 due to the fact that no bonus accrual was recordedin the current year. Additionally, there was a decrease in amortization expense of $360,000 related to the impairment of certain intangibles as of the year end December 31, 2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                 |   | Three Months Ended September 30, (unaudited) |    |
|----------------------|--------|----------------------------------------------|---------|
|                 |   | 2009                                         |    |   | 2008 |   |   | Change |   |
|                 |   |                                         |    |   |   |   |   |   |   |
| Interest expense     |   | $                                            | 655,518 |   |   | $ | 276,590 |   |   | $ | 378,928 |   |
| Interest income      |   |                                         | (797    | ) |   |   | (24,707 | ) |   |   | 23,910 |   |
| Net interest expense |   | $                                            | 654,721 |   |   | $ | 251,883 |   |   | $ | 402,838 |   |
|                 |   |                                         |    |   |   |   |   |   |   |   |   |   |

|                 |   | Nine Months Ended September 30, (unaudited) |      |
|----------------------|--------|---------------------------------------------|-----------|
|                 |   | 2009                                        |      |   | 2008 |   |   | Change |   |
|                 |   |                                        |      |   |   |   |   |   |   |
| Interest expense     |   | $                                           | 1,745,993 |   |   | $ | 892,932 |   |   | $ | 853,061 |   |
| Interest income      |   |                                        | (7,426    | ) |   |   | (131,912 | ) |   |   | 124,486 |   |
| Net interest expense |   | $                                           | 1,738,567 |   |   | $ | 761,020 |   |   | $ | 977,547 |   |
|                 |   |                                        |      |   |   |   |   |   |   |   |   |   |

----

|                                    |   | For the three months ended September 30, (unaudited) |       |
|-----------------------------------------|--------|------------------------------------------------------|------------|
|                                    |   | 2009                                                 |       |   | 2008 |   |   | Change |   |
|                                    |   |                                                 |       |   |   |   |   |   |   |
| Net loss                                |   | $                                                    | 2,011,057  |   |   | $ | 1,787,505 |   |   | $ | 223,552 |   |
|                                    |   |                                                 |       |   |   |   |   |   |   |   |   |   |
| Components included in net loss:        |   |                                                 |       |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization           |   |                                                 | (1,221,778 | ) |   |   | (1,038,428 | ) |   |   | (183,350 | ) |
| Stock-based compensation                |   |                                                 | (146,932   | ) |   |   | (382,228 | ) |   |   | 235,296 |   |
| Litigation costs                        |   |                                                 | (38,632    | ) |   |   | (334,160 | ) |   |   | 295,528 |   |
| Interest expense, net                   |   |                                                 | (654,721   | ) |   |   | (251,883 | ) |   |   | (402,838 | ) |
| Change in fair value of warrants        |   |                                                 | 281,462    |   |   |   | - |   |   |   | 281,462 |   |
| Loss on sale of discontinued operations |   |                                                 | -          |   |   |   | 131,186 |   |   |   | (131,186 | ) |
|                                    |   | $                                                    | (1,780,601 | ) |   | $ | (1,875,513 | ) |   | $ | 94,912 |   |

|                                    |   | For the nine months ended September 30, (unaudited) |           |
|-----------------------------------------|--------|-----------------------------------------------------|----------------|
|                                    |   | 2009                                                |           |   | 2008 |   |   | Change |   |
|                                    |   |                                                |           |   |   |   |   |   |   |
| Net loss                                |   | $                                                   | 8,232,696      |   |   | $ | 5,936,669 |   |   | $ | 2,296,027 |   |
|                                    |   |                                                |           |   |   |   |   |   |   |   |   |   |
| Components included in net loss:        |   |                                                |           |   |   |   |   |   |   |   |   |   |
| Acquisition expenses                    |   | $                                                   | ( 432,352 | ) |   | $ | - |   |   | $ | (432,352 | ) |
| Depreciation and amortization           |   |                                                | (3,409,245     | ) |   |   | (3,447,891 | ) |   |   | 38,646 |   |
| Stock-based compensation                |   |                                                | (1,247,324     | ) |   |   | (1,087,699 | ) |   |   | (159,625 | ) |
| Severance costs                         |   |                                                | (827,935       | ) |   |   | - |   |   |   | (827,935 | ) |
| Litigation costs                        |   |                                                | (379,313       | ) |   |   | (805,259 | ) |   |   | 425,946 |   |
| Interest expense, net                   |   |                                                | (1,738,567     | ) |   |   | (761,020 | ) |   |   | (977,547 | ) |
| Change in fair value of warrants        |   |                                                | 1,205,178      |   |   |   | - |   |   |   | 1,205,178 |   |
| Loss on sale of discontinued operations |   |                                                | -              |   |   |   | (414,658 | ) |   |   | 414,658 |   |
|                                    |   | $                                                   | (6,829,558     | ) |   | $ | (6,516,527 | ) |   | $ | (313,031 | ) |

----

----

Quantitative 

----

|                                                       |   |                           |       |   | Pro-forma Information        |   |
|------------------------------------------------------------|--------|--------------------------------|------------|--------|------------------------------|--------|
|                                                       |   | As Reported September 30, 2009 |       |   | Common Stock Price Reduction |   |   | Common Stock Price Increase |   |
|                                                       |   |                           |       |   |                         |   |   |   |   |
| Common stock price                                         |   | $                              | 0.71       |   |                         | $      | 0.46 |   |   | $ | 0.96 |   |
|                                                       |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Condensed Consolidated Balance Sheet:                      |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Derivative financial instruments                           |   | $                              | 345,133    |   |                         | $      | 189,549 |   |   | $ | 516,639 |   |
|                                                       |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Change in fair value of derivative financial instruments   |   | $                              | -          |   |                         | $      | (155,584 | ) |   | $ | 171,506 |   |
|                                                       |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Condensed Consolidated Statement of Operations:            |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Decrease in fair value of derivative financial instruments |   | $                              | (1,205,178 | )      |                         | $      | (1,360,762 | ) |   | $ | (1,033,672 | ) |
|                                                       |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Net loss attributable to common stockholders               |   | $                              | (8,232,696 | )      |                         | $      | (8,077,112 | ) |   | $ | (8,404,202 | ) |

Controls 

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Legal 

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Risk 

S
ubmission 

Other 

Exhibits

| 4.7    |     Secured Convertible Promissory Note dated September 1, 2009 in favor of Perseus Partners VII, L.P.                                                                                                                         |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1   |     Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer                                                                                                                              |
| 31.2        |     Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer                                                                                                                                   |
| 32.1   |     Certificate of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2        |     Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002           |

SIGNATURES

|                         |   |                                                            |
|------------------------------|--------|-----------------------------------------------------------------|
|                         |   |                                                            |   |
| Date  November 16, 2009 | By:    | /s/ Dennis M. McGrath                                      |   |
|                         |   | Name  Dennis M. McGrath                                    |   |
|                         |   | Title    President & Chief Executive Officer |   |
|                         |   |                                                            |   |

|                              |   |                                            |
|-----------------------------------|--------|-------------------------------------------------|
|                              |   |                                            |   |
| Date  November 16, 2009 | By:    | /s/ Christina L. Allgeier                  |   |
|                              |   | Name  Christina L. Allgeier           |   |
|                              |   | Title    Chief Financial Officer |   |
|                              |   |                                            |   |

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