----

----

|   | 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, 2010 (unaudited) and December 31, 2009 | 3 |
|                           |                                                                                                           |   |   |
|                           | b.                                                                                                             | Consolidated Statements of Operations for the three months ended September 30, 2010 and 2009 (unaudited) | 4 |
|                           |                                                                                                           |   |   |
|                           | c.                                                                                                             | Consolidated Statements of Operations for the nine months ended September 30, 2010 and 2009 (unaudited) | 5 |
|                           |                                                                                                           |   |   |
|                           | d.                                                                                                             | Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2010 (unaudited) | 6 |
|                           |                                                                                                           |   |   |
|                           | e.                                                                                                             | Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited) | 7 |
|                           |                                                                                                           |   |   |
|                           | f.                                                                                                             | Notes to Consolidated Financial Statements (unaudited) | 8 |
|                           |                                                                                                           |   |   |
|                           | ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 |
|                           |                                                                                                           |   |   |
|                           | ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk                                   | 49 |
|                           |                                                                                                           |   |   |
|                           | ITEM 4.  Controls and Procedures                                                                     | 50 |
|                           |                                                                                                           |   |   |
| Part II. Other Information:    |                                                                                                           |
|                           |                                                                                                           |   |   |
|                           | ITEM 1.  Legal Proceedings                                                                           | 51 |
|                           |                                                                                                           |   |   |
|                           | ITEM 5.   Other Information                                                                     | 52 |
|                           |                                                                                                           |   |   |
|                           | ITEM 6.  Exhibits                                                                                    | 52 |
|                           |                                                                                                           |   |   |
|                           |                                                                                                           | Signatures | 53 |
|                           |                                                                                                           |   |   |
|                           |                                                                                                           | Certifications | E-31.1 |

----

ONSOLID

|                                                                                                                                                                        |   | September 30, 2010 |            |   | December 31, 2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------------|--------|-------------------|--------|
|                                                                                                                                                                        |   | (Unaudited)        |            |   |              |   |
| ASSETS                                                                                                                                                                      |   |               |            |   |              |   |
|                                                                                                                                                                        |   |               |            |   |              |   |
| Current assets:                                                                                                                                                             |   |               |            |   |              |   |
| Cash and cash equivalents                                                                                                                                                   |   | $                  | 2,517,636       |   |              | $      | 2,116,788 |   |
| Restricted cash                                                                                                                                                             |   |               | 153,228         |   |              |   | 78,000 |   |
| Accounts receivable, net of allowance for doubtful accounts of $420,000 and $400,000, respectively                                                                          |   |               |  4,236,915 |   |              |   | 3,998,785 |   |
| Inventories, net                                                                                                                                                            |   |               | 6,457,105       |   |              |   | 7,002,850 |   |
| Prepaid expenses and other current assets                                                                                                                                   |   |               | 656,085         |   |              |   | 345,673 |   |
| Total current assets                                                                                                                                                        |   |               | 14,020,969      |   |              |   | 13,542,096 |   |
|                                                                                                                                                                        |   |               |            |   |              |   |   |   |
| Property and equipment, net                                                                                                                                                 |   |               | 7,651,850       |   |              |   | 9,293,482 |   |
| Patents and licensed technologies, net                                                                                                                                      |   |               | 7,042,305       |   |              |   | 7,751,662 |   |
| Goodwill                                                                                                                                                                    |   |               | 19,569,200      |   |              |   | 19,472,686 |   |
| Other intangible assets, net                                                                                                                                                |   |               | 1,753,353       |   |              |   | 2,020,625 |   |
| Other assets                                                                                                                                                                |   |               | 956,559         |   |              |   | 1,087,595 |   |
| Total assets                                                                                                                                                                |   | $                  | 50,994,236      |   |              | $      | 53,168,146 |   |
|                                                                                                                                                                        |   |               |            |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                        |   |               |            |   |              |   |   |   |
|                                                                                                                                                                        |   |               |            |   |              |   |   |   |
| Current liabilities:                                                                                                                                                        |   |               |            |   |              |   |   |   |
| Current portion of notes payable                                                                                                                                            |   | $                  | 211,876         |   |              | $      | 129,696 |   |
| Current portion of long-term debt                                                                                                                                           |   |               | 3,455,025       |   |              |   | 3,179,469 |   |
| Accounts payable                                                                                                                                                            |   |               | 3,622,453       |   |              |   | 4,171,707 |   |
| Accrued compensation and related expenses                                                                                                                                   |   |               | 864,125         |   |              |   | 1,133,346 |   |
| Accrued interest payable                                                                                                                                                    |   |               | 343,411         |   |              |   | 499,200 |   |
| Customer deposits                                                                                                                                                           |   |               | 255,444         |   |              |   | - |   |
| Other accrued liabilities                                                                                                                                                   |   |               | 1,814,267       |   |              |   | 1,601,414 |   |
| Deferred revenues                                                                                                                                                           |   |               | 617,107         |   |              |   | 612,757 |   |
| Total current liabilities                                                                                                                                                   |   |               | 11,183,708      |   |              |   | 11,327,589 |   |
| Long-term liabilities:                                                                                                                                                      |   |               |            |   |              |   |   |   |
| Notes payable                                                                                                                                                               |   |               | 22,166          |   |              |   | 46,477 |   |
| Long-term debt                                                                                                                                                              |   |               | 34,849          |   |              |   | 760,783 |   |
| Convertible debt                                                                                                                                                            |   |               | 19,126,457      |   |              |   | 17,369,943 |   |
| Warrants related to convertible debt                                                                                                                                        |   |               | 874,320         |   |              |   | 741,525 |   |
| Total liabilities                                                                                                                                                           |   |               | 31,241,500      |   |              |   | 30,246,317 |   |
|                                                                                                                                                                        |   |               |            |   |              |   |   |   |
| Stockholders’ equity:                                                                                                                                                 |   |               |            |   |              |   |   |   |
| Common stock, $.01 par value, 35,000,000 shares authorized; 2,772,637 and 2,238,153 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively |   |               |  27,726    |   |              |   | 22,382 |   |
| Additional paid-in capital                                                                                                                                                  |   |               | 142,395,848     |   |              |   | 138,639,143 |   |
| Accumulated deficit                                                                                                                                                         |   |               | (122,752,246    | )      |              |   | (115,840,931 | ) |
| Accumulated other comprehensive income                                                                                                                                      |   |               | 81,408          |   |              |   | 101,235 |   |
| Total stockholders’ equity                                                                                                                                            |   |               | 19,752,736      |   |              |   | 22,921,829 |   |
| Total liabilities and stockholders’ equity                                                                                                                            |   | $                  | 50,994,236      |   |              | $      | 53,168,146 |   |

----

SOLID

|                                                          |   | For the Three Months Ended September 30, |        |
|---------------------------------------------------------------|--------|------------------------------------------|-------------|
|                                                          |   | 2010                                     |        |   | 2009 |   |
|                                                          |   |                                     |        |   |   |   |
| Revenues:                                                     |   |                                     |        |   |   |   |
| Product sales                                                 |   | $                                        | 7,197,163   |   |   | $ | 6,118,941 |   |
| Services                                                      |   |                                     | 2,387,885   |   |   |   | 2,478,051 |   |
|                                                          |   |                                     | 9,585,048   |   |   |   | 8,596,992 |   |
|                                                          |   |                                     |        |   |   |   |   |   |
| Cost of revenues:                                             |   |                                     |        |   |   |   |   |   |
| Product cost of revenues                                      |   |                                     | 4,207,639   |   |   |   | 3,349,218 |   |
| Services cost of revenues                                     |   |                                     | 1,422,766   |   |   |   | 1,531,839 |   |
|                                                          |   |                                     | 5,630,405   |   |   |   | 4,881,057 |   |
|                                                          |   |                                     |        |   |   |   |   |   |
| Gross profit                                                  |   |                                     | 3,954,643   |   |   |   | 3,715,935 |   |
|                                                          |   |                                     |        |   |   |   |   |   |
| Operating expenses:                                           |   |                                     |        |   |   |   |   |   |
| Selling and marketing                                         |   |                                     | 2,981,405   |   |   |   | 3,159,903 |   |
| General and administrative                                    |   |                                     | 1,637,773   |   |   |   | 1,882,649 |   |
| Engineering and product development                           |   |                                     | 272,013     |   |   |   | 311,181 |   |
|                                                          |   |                                     | 4,891,191   |   |   |   | 5,353,733 |   |
|                                                          |   |                                     |        |   |   |   |   |   |
| Loss from operations                                          |   |                                     | (936,548    | ) |   |   | (1,637,798 | ) |
|                                                          |   |                                     |        |   |   |   |   |   |
| Other income (loss):                                          |   |                                     |        |   |   |   |   |   |
| Interest expense, net                                         |   |                                     | (863,713    | ) |   |   | (654,721 | ) |
| Change in fair value of warrants                              |   |                                     | (34,839     | ) |   |   | 281,462 |   |
|                                                          |   |                                     |        |   |   |   |   |   |
| Net loss                                                      |   | $                                        | ( 1,835,100 | ) |   | $ | ( 2,011,057 | ) |
|                                                          |   |                                     |        |   |   |   |   |   |
|                                                          |   |                                     |        |   |   |   |   |   |
| Basic and diluted net loss per share                          |   | $                                        | (0.66       | ) |   | $ | (1.34 | ) |
|                                                          |   |                                     |        |   |   |   |   |   |
| Shares used in computing basic and diluted net loss per share |   |                                     | 2,772,637   |   |   |   | 1,505,529 |   |

----

LIDAT

|                                                          |   | For the Nine Months Ended September 30, |        |
|---------------------------------------------------------------|--------|-----------------------------------------|-------------|
|                                                          |   | 2010                                    |        |   | 2009 |   |
|                                                          |   |                                    |        |   |   |   |
| Revenues:                                                     |   |                                    |        |   |   |   |
| Product sales                                                 |   | $                                       | 17,116,750  |   |   | $ | 16,982,601 |   |
| Services                                                      |   |                                    | 7,166,263   |   |   |   | 7,426,043 |   |
|                                                          |   |                                    | 24,283,013  |   |   |   | 24,408,644 |   |
|                                                          |   |                                    |        |   |   |   |   |   |
| Cost of revenues:                                             |   |                                    |        |   |   |   |   |   |
| Product cost of revenues                                      |   |                                    | 9,034,874   |   |   |   | 8,464,916 |   |
| Services cost of revenues                                     |   |                                    | 4,275,137   |   |   |   | 4,119,858 |   |
|                                                          |   |                                    | 13,310,011  |   |   |   | 12,584,774 |   |
|                                                          |   |                                    |        |   |   |   |   |   |
| Gross profit                                                  |   |                                    | 10,973,002  |   |   |   | 11,823,870 |   |
|                                                          |   |                                    |        |   |   |   |   |   |
| Operating expenses:                                           |   |                                    |        |   |   |   |   |   |
| Selling and marketing                                         |   |                                    | 9,001,702   |   |   |   | 10,701,822 |   |
| General and administrative                                    |   |                                    | 5,456,161   |   |   |   | 7,971,767 |   |
| Engineering and product development                           |   |                                    | 891,102     |   |   |   | 849,588 |   |
|                                                          |   |                                    | 15,348,965  |   |   |   | 19,523,177 |   |
|                                                          |   |                                    |        |   |   |   |   |   |
| Loss from operations                                          |   |                                    | (4,375,963  | ) |   |   | (7,699,307 | ) |
|                                                          |   |                                    |        |   |   |   |   |   |
| Other income (loss):                                          |   |                                    |        |   |   |   |   |   |
| Interest expense, net                                         |   |                                    | (2,402,557  | ) |   |   | (1,738,567 | ) |
| Change in fair value of warrants                              |   |                                    | (132,795    | ) |   |   | 1,205,178 |   |
|                                                          |   |                                    |        |   |   |   |   |   |
| Net loss                                                      |   | $                                       | ( 6,911,315 | ) |   | $ | ( 8,232,696 | ) |
|                                                          |   |                                    |        |   |   |   |   |   |
|                                                          |   |                                    |        |   |   |   |   |   |
| Basic and diluted net loss per share                          |   | $                                       | (2.74       | ) |   | $ | (5.48 | ) |
|                                                          |   |                                    |        |   |   |   |   |   |
| Shares used in computing basic and diluted net loss per share |   |                                    | 2,523,838   |   |   |   | 1,502,683 |   |

----

OLIDATE

|                                                          |   |         |      |   |       |   |   |        |   |   | Accumulated   |   |   |   |         |
|---------------------------------------------------------------|--------|--------------|-----------|--------|------------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------|--------------|
|                                                          |   |         |      |   | Additional |   |   |        |   |   | Other         |   |   |   |         |
|                                                          |   | Common Stock |      |   | Paid-In    |   |   | Accumulated |   |   | Comprehensive |   |   |   |         |
|                                                          |   | Shares       |      |   | Amount     |   |   | Capital     |   |   | Deficit       |   |   | Income |         |   | Total |   |
| BALANCE, JANUARY 1, 2010                                      |   |         | 2,238,157 |   |       | $      | 22,382 |        |   | $      | 138,639,143   |   |   | $      | (115,840,931 | ) |   | $ | 101,235 |   |   | $ | 22,921,829 |   |
| Round up for fractional shares due to the reverse stock split |   |         |  480 |   |       |   | 4      |        |   |   | (4            | )      |   |   | -            |   |   |   | - |   |   |   | - |   |
| Issuance of warrants related to debt financing                |   |         | -         |   |       |   | -      |        |   |   | 769,754       |   |   |   | -            |   |   |   | - |   |   |   | 769,754 |   |
| Stock options issued to consultants for services              |   |         | -         |   |       |   | -      |        |   |   | 92,908        |   |   |   | -            |   |   |   | - |   |   |   | 92,908 |   |
| Share-based compensation related to restricted stock          |   |         | -         |   |       |   | -      |        |   |   | 162,244       |   |   |   | -            |   |   |   | - |   |   |   | 162,244 |   |
| Change in cumulative translation adjustments                  |   |         | -         |   |       |   | -      |        |   |   | -             |   |   |   | -            |   |   |   | (19,827 | ) |   |   | (19,827 | ) |
| Share-based compensation expense related to employee options  |   |         | -         |   |       |   | -      |        |   |   | 276,309       |   |   |   | -            |   |   |   | - |   |   |   | 276,309 |   |
| Issuance of common stock in connection with a public offering |   |         | 534,000   |   |       |   | 5,340  |        |   |   | 3,198,660     |   |   |   | -            |   |   |   | - |   |   |   | 3,204,000 |   |
| Registration costs in connection with a public offering       |   |         | -         |   |       |   | -      |        |   |   | (743,166      | )      |   |   | -            |   |   |   | - |   |   |   | (743,166 | ) |
| Net loss for the nine months ended September 30, 2010         |   |         | -         |   |       |   | -      |        |   |   | -             |   |   |   | (6,911,315   | ) |   |   | - |   |   |   | (6,911,315 | ) |
| BALANCE, SEPTEMBER 30, 2010                                   |   |         | 2,772,637 |   |       | $      | 27,726 |        |   | $      | 142,395,848   |   |   | $      | (122,752,246 | ) |   | $ | 81,408 |   |   | $ | 19,752,736 |   |

----

CONSOLIDATED STATEMENTS 

|                                                                              |   | For the Nine Months EndedSeptember 30, |          |
|-----------------------------------------------------------------------------------|--------|----------------------------------------|---------------|
|                                                                              |   | 2010                                   |          |   | 2009 |   |
| Cash Flows From Operating Activities:                                             |   |                                   |          |   |   |   |
| Net loss                                                                          |   | $                                      | ( 6,911,315   | ) |   | $ | ( 8,232,696 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:       |   |                                   |          |   |   |   |   |   |
| Depreciation and amortization                                                     |   |                                   | 3,342,548     |   |   |   | 3,409,245 |   |
| Stock options issued to consultants for services                                  |   |                                   | 92,908        |   |   |   | 42,533 |   |
| Share-based compensation expense related to employee options and restricted stock |   |                                   |  438,553 |   |   |   |  1,204,791 |   |
| Provision for bad debts                                                           |   |                                   | 53,205        |   |   |   | 55,088 |   |
| Loss on disposal of assets                                                        |   |                                   | 2,306         |   |   |   | - |   |
| Change in estimated fair value of warrant liability                               |   |                                   | 132,795       |   |   |   | (1,205,178 | ) |
| Changes in operating assets and liabilities:                                      |   |                                   |          |   |   |   |   |   |
| Accounts receivable                                                               |   |                                   | (291,335      | ) |   |   | 1,733,253 |   |
| Inventories                                                                       |   |                                   | 607,423       |   |   |   | 1,059,263 |   |
| Prepaid expenses and other assets                                                 |   |                                   | 662,147       |   |   |   | 98,453 |   |
| Accounts payable                                                                  |   |                                   | (549,253      | ) |   |   | 3,885 |   |
| Accrued compensation and related expenses                                         |   |                                   | (269,221      | ) |   |   | 46,121 |   |
| Other accrued liabilities                                                         |   |                                   | 212,852       |   |   |   | 155,143 |   |
| Interest accrued on convertible debt                                              |   |                                   | 1,399,771     |   |   |   | 844,800 |   |
| Customer deposits                                                                 |   |                                   | 255,444       |   |   |   | - |   |
| Deferred revenues                                                                 |   |                                   | 4,350         |   |   |   | (538,488 | ) |
| Net cash used in operating activities                                             |   |                                   | (816,822      | ) |   |   | (1,323,787 | ) |
|                                                                              |   |                                   |          |   |   |   |   |   |
| Cash Flows From Investing Activities:                                             |   |                                   |          |   |   |   |   |   |
| Purchases of property and equipment                                               |   |                                   | (85,213       | ) |   |   | (61,511 | ) |
| Lasers placed into service                                                        |   |                                   | (633,002      | ) |   |   | (1,908,338 | ) |
| Acquisition costs, net of cash received                                           |   |                                   | (96,514       | ) |   |   | (12,578,022 | ) |
| Net cash used in investing activities                                             |   |                                   | (814,729      | ) |   |   | (14,547,871 | ) |
|                                                                              |   |                                   |          |   |   |   |   |   |
| Cash Flows From Financing Activities:                                             |   |                                   |          |   |   |   |   |   |
| Registration costs                                                                |   |                                   | (743,166      | ) |   |   | (83,313 | ) |
| Payments on notes payable                                                         |   |                                   | (346,756      | ) |   |   | (261,756 | ) |
| Issuance of restricted stock                                                      |   |                                   | -             |   |   |   | 280 |   |
| Proceeds from issuance of common stock                                            |   |                                   | 3,204,000     |   |   |   | - |   |
| Proceeds from term debt                                                           |   |                                   | 2,500,000     |   |   |   | - |   |
| Repayments on line of credit                                                      |   |                                   | (2,486,738    | ) |   |   | (3,684,784 | ) |
| Proceeds from convertible debt                                                    |   |                                   | -             |   |   |   | 18,000,000 |   |
| Increase in restricted cash and cash equivalents                                  |   |                                   | (75,228       | ) |   |   | - |   |
| Net cash provided by financing activities                                         |   |                                   | 2,052,112     |   |   |   | 13,970,427 |   |
| Effect of exchange rate changes on cash                                           |   |                                   | (19,713       | ) |   |   | 82,249 |   |
| Net increase (decrease) in cash and cash equivalents                              |   |                                   | 400,848       |   |   |   | (1,818,982 | ) |
|                                                                              |   |                                   |          |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                                    |   |                                   | 2,116,788     |   |   |   | 3,658,607 |   |
|                                                                              |   |                                   |          |   |   |   |   |   |
| Cash and cash equivalents, end of period                                          |   | $                                      | 2,517,636     |   |   | $ | 1,839,625 |   |

----

UNAUDITED CONSOLIDATED 

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

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

----

|   | • | The Company combined the aggregate outstanding obligations under the Convertible Notes into two convertible notes. Each note matures on February 27, 2014 and is identical to the original form of convertible note except as noted below;                                                                                                                                                                                                                                                                                                                     |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | The larger note, the Series B-2 Note, has a principal amount of $16,746,270. This note remains subject to the same down-round anti-dilution adjustment to the conversion price which was in the unmodified notes. The interest rate of this note was increased from 8% to 10%. The incremental 2% increase in the interest rate may be paid in cash, or, pursuant to the vote of our stockholders at the Annual Meeting of Stockholders on October 28, 2010, may be paid in convertible PIK notes;                                                             |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | The smaller note, the Series B-1 Note, has a principal amount of $2,800,406. The conversion price of this note was reduced to $11.26 and the down-round anti-dilution adjustment to the conversion price was removed. The interest rate of this note was increased from 8% to 10%. The full amount of the accrued interest remains payable in cash or convertible PIK notes;                                                                                                                                                                                   |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | The collateral securing the Convertible Notes was expanded by adding a first-priority lien against all of the Company’s assets other than the assets pledged with first-priority liens to CIT and to Clutterbuck Funds. When assets are released from the lien of CIT, such assets will become subject to the first-priority lien of Clutterbuck Funds and a second-priority lien of the Investor. Finally, when assets are released from the lien of Clutterbuck Funds, such assets will become subject to the first-priority lien of the Investor; and |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | • | Three of the Company’s subsidiaries (ProCyte Corporation, Photo Therapeutics, Inc. and SLT Technology, Inc.) have guaranteed the Company’s obligations under the modified Convertible Notes.                                                                                                                                                                                                                                                                                                                                                       |

----

----

|   | • | 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 that we 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, 2010 |    |   | 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) |   | $                                   | 874,320 |   |                                                          | $      | -      |                                         |   | $      | -                                        |   |   | $ | 874,320 |   |
|                                       |   |                                |    |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |   |
|                                       |   | Fair Value as of December 31, 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) |   | $                                   | 741,525 |   |                                                          | $      | -      |                                         |   | $      | -                                        |   |   | $ | 741,525 |   |

----

----

----

|                                  |   | Nine Months Ended September 30, 2010(unaudited) |     |   | Year EndedDecember 31, 2009 |   |
|---------------------------------------|--------|-------------------------------------------------|----------|--------|-----------------------------|--------|
| Accrual at beginning of period        |   | $                                               | 773,628  |   |                        | $      | 442,527 |   |
| Additions due to PTL acquisition      |   |                                            | -        |   |                        |   | 227,334 |   |
| Additions charged to warranty expense |   |                                            | 389,748  |   |                        |   | 369,081 |   |
| Expiring warranties                   |   |                                            | (156,589 | )      |                        |   | (53,149 | ) |
| Claims satisfied                      |   |                                            | (186,783 | )      |                        |   | (212,165 | ) |
| Accrual at end of period              |   | $                                               | 820,004  |   |                        | $      | 773,628 |   |

|                                        |   | Three Months Ended September 30, (unaudited) |       |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------------------------|--------|----------------------------------------------|------------|--------|---------------------------------------------|--------|
|                                        |   | 2010                                         |       |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Net loss                                    |   | $                                            | (1,835,100 | )      |                                        | $      | (2,011,057 | ) |   | $ | (6,911,315 | ) |   | $ | (8,232,696 | ) |
| Change in cumulative translation adjustment |   |                                         | (85,047    | )      |                                        |   | (29,987 | ) |   |   | (19,827 | ) |   |   | 78,378 |   |
| Comprehensive loss                          |   | $                                            | (1,920,147 | )      |                                        | $      | (2,041,044 | ) |   | $ | (6,931,142 | ) |   | $ | (8,154,318 | ) |

----

----

| Cash and cash equivalents                 |   | $      | 421,978    |   |
|-------------------------------------------|--------|--------|------------|--------|
| Accounts receivable                       |   |   | 843,007    |   |
| Inventories                               |   |   | 1,883,469  |   |
| 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       |   |   | 12,316,148 |   |
|                                      |   |   |       |   |
| 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                       |   | $      | 10,348,608 |   |

|                                                        |   | Three Months Ended September 30, 2009 |       |   | Nine Months Ended September 30, 2009 |   |
|-------------------------------------------------------------|--------|---------------------------------------|------------|--------|--------------------------------------|--------|
|                                                        |   |                                  |       |   |                                 |   |
| Net revenues                                                |   | $                                     | 8,596,992  |   |                                 | $      | 25,236,052 |   |
| Net loss                                                    |   | $                                     | (2,011,057 | )      |                                 | $      | (8,945,859 | ) |
| Basic and diluted loss per share                            |   | $                                     | (1.34      | )      |                                 | $      | (5.95 | ) |
| Shares used in calculating basic and diluted loss per share |   |                                  | 1,505,529  |   |                                 |   | 1,502,683 |   |

----

|                               |   | September 30, 2010 |      |   | December 31, 2009 |   |
|------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
|                               |   | (unaudited)             |      |   |                   |   |
| Raw materials and work-in-progress |   | $                       | 4,354,328 |   |                   | $      | 4,082,593 |   |
| Finished goods                     |   |                    | 2,102,777 |   |                   |   | 2,920,257 |   |
| Total inventories                  |   | $                       | 6,457,105 |   |                   | $      | 7,002,850 |   |

|                                      |   | September 30, 2010 |       |   | December 31, 2009 |   |
|-------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                      |   | (unaudited)        |       |   |              |   |
| Lasers in service                         |   | $                  | 15,138,004 |   |              | $      | 16,436,529 |   |
| Computer hardware and software            |   |               | 361,728    |   |              |   | 368,668 |   |
| Furniture and fixtures                    |   |               | 727,780    |   |              |   | 683,573 |   |
| Machinery and equipment                   |   |               | 835,780    |   |              |   | 845,856 |   |
| Leasehold improvements                    |   |               | 339,423    |   |              |   | 262,395 |   |
|                                      |   |               | 17,402,715 |   |              |   | 18,597,021 |   |
| Accumulated depreciation and amortization |   |               | (9,750,865 | )      |              |   | (9,303,539 | ) |
| Property and equipment, net               |   | $                  | 7,651,850  |   |              | $      | 9,293,482 |   |

|                                                                                                                                                               |   | September 30, 2010 |      |   | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                                                                                                                                               |   | (unaudited)        |      |   |              |   |
| Patents, owned and licensed, at gross costs of $8,023,136 and $8,019,351, net of accumulated amortization of $1,619,392 and $1,025,400, respectively.              |   | $                  | 6,403,744 |   |              | $      | 6,993,951 |   |
| Other licensed or developed technologies, at gross costs of $2,337,326 and $2,332,364, net of accumulated amortization of $1,698,765 and $1,574,653, respectively. |   |               | 638,561   |   |              |   | 757,711 |   |
|                                                                                                                                                               |   | $                  | 7,042,305 |   |              | $      | 7,751,662 |   |

----

|                                                                                                                             |   | September 30, 2010 |      |   | December 31, 2009 |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                                                                                                             |   | (unaudited)        |      |   |              |   |
| Customer Relationships, at gross cost of $2,200,000, net of accumulated amortization of $1,779,167 and $1,669,398, respectively. |   | $                  | 420,833   |   |              | $      | 530,602 |   |
| Tradename, at gross cost of $2,100,000, net of accumulated amortization of $767,480 and $609,977, respectively.                  |   |               | 1,332,520 |   |              |   | 1,490,023 |   |
|                                                                                                                             |   | $                  | 1,753,353 |   |              | $      | 2,020,625 |   |

|                                           |   | September 30, 2010 |    |   | December 31, 2009 |   |
|------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                           |   | (unaudited)        |    |   |              |   |
| Accrued payroll and related taxes              |   | $                  | 190,384 |   |              | $      | 260,280 |   |
| Accrued vacation                               |   |               | 245,158 |   |              |   | 129,026 |   |
| Accrued commissions and bonus                  |   |               | 428,583 |   |              |   | 341,685 |   |
| Accrued severance                              |   |               | -       |   |              |   | 402,355 |   |
| Total accrued compensation and related expense |   | $                  | 864,125 |   |              | $      | 1,133,346 |   |

----

|                                      |   | September 30, 2010 |      |   | December 31, 2009 |   |
|-------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                      |   | (unaudited)        |      |   |              |   |
| Accrued professional and consulting fees  |   | $                  | 520,007   |   |              | $      | 552,990 |   |
| Accrued warranty                          |   |               | 820,004   |   |              |   | 773,627 |   |
| Accrued sales return – CVS/pharmacy |   |               | 169,171   |   |              |   | - |   |
| Accrued excise taxes and other expenses   |   |               | 305,085   |   |              |   | 274,797 |   |
| Total other accrued liabilities           |   | $                  | 1,814,267 |   |              | $      | 1,601,414 |   |

|                                                                                                                                                 |   | September 30, 2010 |     |   | December 31, 2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|----------|--------|-------------------|--------|
|                                                                                                                                                 |   | (unaudited)        |     |   |              |   |
| Note payable – unsecured creditor, interest at 3.78%, payable in monthly principal and interest installments of $45,278 through February 2011. |   | $                  | 179,699  |   |              | $      | - |   |
|                                                                                                                                                 |   |               |     |   |              |   |   |   |
| Note payable – unsecured creditor, interest at 5.43%, payable in monthly principal and interest installments of $49,803 through February 2010. |   |               | -        |   |              |   | 98,934 |   |
|                                                                                                                                                 |   |               |     |   |              |   |   |   |
| Note payable – unsecured creditor, interest at 6%, payable in monthly principal and interest installments of $2,880 through June 2012.         |   |               | 54,343   |   |              |   | 77,239 |   |
|                                                                                                                                                 |   |               |     |   |              |   |   |   |
|                                                                                                                                                 |   |               | 234,042  |   |              |   | 176,173 |   |
| Less: current maturities                                                                                                                             |   |               | (211,876 | )      |              |   | (129,696 | ) |
| Notes payable, net of current maturities                                                                                                             |   | $                  | 22,166   |   |              | $      | 46,477 |   |

----

|                                                                                                               |   | September 30, 2010 |       |   | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                                                                                               |   | (unaudited)        |       |   |              |   |
| Term note, net of unamortized debt discount of $548,190                                                            |   | $                  | 1,951,810  |   |              | $      | - |   |
| Total borrowings on term note credit facility, net of unamortized debt discount of $7,163 and $33,744 respectively |   |               | 1,484,393  |   |              |   | 3,940,252 |   |
| Capital lease obligations                                                                                          |   |               | 53,671     |   |              |   | - |   |
| Less: current portion                                                                                              |   |               | (3,455,025 | )      |              |   | (3,179,469 | ) |
| Total long-term debt                                                                                               |   | $                  | 34,849     |   |              | $      | 760,783 |   |

|                                 |   | March 2010 |    |
|--------------------------------------|--------|------------|---------|
|                                 |   |       |    |
| Number of shares underlying warrants |   |       | 102,180 |   |
| Exercise price                       |   | $          | 7.34    |   |
| Fair value of warrants               |   | $          | 769,754 |   |
| Volatility                           |   |       | 87.68   | % |
| Risk-free interest rate              |   |       | 2.48    | % |
| Expected dividend yield              |   |       | 0       | % |
| Expected warrant life                |   | 5 years    |    |

----

|                                 |   | December 2007 |    |   | September 2008 |   |
|--------------------------------------|--------|---------------|---------|--------|---------------------|--------|
|                                 |   |          |    |   |                |   |
| Number of shares underlying warrants |   |          | 11,216  |   |                |   | 4,589 |   |
| Exercise price                       |   | $             | 47.04   |   |                | $      | 18.48 |   |
| 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             |   |

----

| Last three months of 2010                  |   | $      | 826,394   |   |
|--------------------------------------------|--------|--------|-----------|--------|
| Year Ended December 31, 2011               |   |   | 3,576,455 |   |
| Year Ended December 31, 2012               |   |   | 24,575    |   |
| Year Ended December 31, 2013               |   |   | 8,192     |   |
| Total minimum payments                     |   |   | 4,435,616 |   |
|                                       |   |   |      |   |
| Less: interest                             |   |   | (390,389  | )      |
| Less: unamortized warrant discount         |   |   | (555,353  | )      |
|                                       |   |   |      |   |
| Present value of total minimum obligations |   | $      | 3,489,874 |   |

|                                         |   | September 30, 2010 |       |   | December 31, 2009 |   |
|----------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                         |   | (unaudited)        |       |   |              |   |
| Total borrowings, net of discounts and costs |   | $                  | 19,126,457 |   |              | $      | 17,369,943 |   |
| Less: current portion                        |   |               | -          |   |              |   | - |   |
| Total convertible debt                       |   | $                  | 19,126,457 |   |              | $      | 17,369,943 |   |

----

|   | • | The Company combined the aggregate outstanding obligations under the Convertible Notes into two convertible notes. Each note matures on February 27, 2014 and is identical to the original form of convertible note except as noted below;                                                                                                                                                                                                                                                                                                                                      |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | • | The larger note has a principal amount of $16,746,270. This note remains subject to the same down-round anti-dilution adjustment to the conversion price which was in the unmodified notes. The interest rate of this note was increased from 8% to 10%. The incremental 2% increase in the interest rate may be paid in cash, or, pursuant to the vote of our stockholders at the Annual Meeting of Stockholders on October 28, 2010, may be paid in convertible PIK notes;                                                                                                    |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | • | The smaller note has a principal amount of $2,800,406. The conversion price of this note was reduced to $11.26 and the down-round anti-dilution adjustment to the conversion price was removed. The interest rate of this note was increased from 8% to 10%. The full amount of the accrued interest remains payable in cash or convertible PIK notes;                                                                                                                                                                                                                          |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | • | The collateral securing the Convertible Note was expanded by adding a first-priority lien against all of the Company’s assets other than the assets pledged with first-priority liens to CIT Healthcare and to Clutterbuck Funds. When assets are released from the lien of CIT Healthcare, such assets will become subject to the first-priority lien of Clutterbuck Funds and a second-priority lien of the Holder. Finally, when assets are released from the lien of Clutterbuck Funds, such assets will become subject to the first-priority lien of the Holder; and |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | • | Three of the Company’s subsidiaries (ProCyte Corporation, Photo Therapeutics, Inc. and SLT Technology, Inc.) have guaranteed the Company’s obligations under the Convertible Notes.                                                                                                                                                                                                                                                                                                                                                                                 |

----

|                                 |   | September 30, 2010 |    |   | December 31, 2009 |   |    | September 30, 2009 |   |
|--------------------------------------|--------|--------------------|---------|--------|-------------------|--------|---------|--------------------|--------|
| Number of shares underlying warrants |   |               | 293,611 |   |              |   | 244,251 |               |   |   | 174,367 |   |
| Exercise price                       |   | $                  | 18.39   |   |              | $      | 22.108  |               |   | $ | 30.96 |   |
| Fair value of warrants               |   | $                  | 874,320 |   |              | $      | 741,525 |               |   | $ | 345,133 |   |
| Volatility                           |   |               | 83.12   | %      |              |   | 79.23   | %                  |   |   | 82.18 | % |
| Risk-free interest rate              |   |               | 1.91    | %      |              |   | 3.39    | %                  |   |   | 2.93 | % |
| Expected dividend yield              |   |               | 0       | %      |              |   | 0       | %                  |   |   | 0 | % |
| Expected warrant life                |   | 6.42 years         |    |   | 7.17 years        |   |    | 7.42 years         |   |

----

| Warrant liability:                 |   |   |    |
|------------------------------------|--------|--------|---------|
| Balance as of January 1, 2010      |   | $      | 741,525 |   |
| Increase in fair value of warrants |   |   | 132,795 |   |
| Balance as of September 30, 2010   |   | $      | 874,320 |   |

|                                       |   | Number of Options |    |   | Weighted AverageExercise Price |   |
|--------------------------------------------|--------|-------------------|---------|--------|--------------------------------|--------|
| Outstanding, January 1, 2010               |   |              | 158,304 |   |                           | $      | 57.42 |   |
| Granted                                    |   |              | 16,250  |   |                           |   | 7.15 |   |
| Cancelled                                  |   |              | (34,645 | )      |                           |   | 81.18 |   |
| Outstanding, September 30, 2010            |   |              | 139,909 |   |                           | $      | 45.68 |   |
| Options excercisable at September 30, 2010 |   |              | 98,373  |   |                           | $      | 55.48 |   |

| Assumptions for Option Grants | Nine Months Ended September 30, (unaudited) |
|-------------------------------|---------------------------------------------|
|                          | 2010                                        |   | 2009 |
| Risk-free interest rate       | 3.67%                                       |   | 3.46% |
| Volatility                    | 84.31%                                      |   | 88.67% |
| Expected dividend yield       | 0%                                          |   | 0% |
| Expected life                 | 8.1 years                                   |   | 8.1 years |
| Estimated forfeiture rate     | 17%                                         |   | 12% |

----

----

|                                |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |
|-------------------------------------|--------|-------------------|-----------|--------|--------------------------|--------|-----------|---------------|--------|--------|------------------|--------|--------|--------|-----------|
|                                |   | PHYSICIANDOMESTIC |      |   | PHYSICIAN INTERN’L |   |      | OTHERCHANNELS |   |   | SURGICALPRODUCTS |   |   | TOTAL  |      |
| Revenues                            |   | $                 | 5,171,196 |   |                     | $      | 2,715,582 |          |   | $      | 524,830          |   |   | $      | 1,173,440 |   |   | $ | 9,585,048 |   |
| Costs of revenues                   |   |              | 2,577,683 |   |                     |   | 2,144,915 |          |   |   | 315,237          |   |   |   | 592,570   |   |   |   | 5,630,405 |   |
| Gross profit                        |   |              | 2,593,513 |   |                     |   | 570,667   |          |   |   | 209,593          |   |   |   | 580,870   |   |   |   | 3,954,643 |   |
| Gross profit %                      |   |              | 50.1      | %      |                     |   | 21.0      | %             |   |   | 40.0             | %      |   |   | 49.5      | % |   |   | 41.3 | % |
|                                |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Allocated operating expenses:       |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Selling, general and administrative |   |              | 2,657,812 |   |                     |   | 195,894   |          |   |   | 149,957          |   |   |   | 71,776    |   |   |   | 3,075,439 |   |
| Engineering and product development |   |              | 96,487    |   |                     |   | 80,641    |          |   |   | 64,131           |   |   |   | 30,754    |   |   |   | 272,013 |   |
|                                |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Unallocated operating expenses      |   |              | -         |   |                     |   | -         |          |   |   | -                |   |   |   | -         |   |   |   | 1,543,739 |   |
|                                |   |              | 2,754,299 |   |                     |   | 276,535   |          |   |   | 214,088          |   |   |   | 102,530   |   |   |   | 4,891,191 |   |
| Income (loss) from operations       |   |              | (160,786  | )      |                     |   | 294,132   |          |   |   | (4,495           | )      |   |   | 478,340   |   |   |   | (936,548 | ) |
|                                |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Interest expense, net               |   |              | -         |   |                     |   | -         |          |   |   | -                |   |   |   | -         |   |   |   | (863,713 | ) |
| Change in fair value of warrant     |   |              | -         |   |                     |   | -         |          |   |   | -                |   |   |   | -         |   |   |   | (34,839 | ) |
|                                |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |   |   |   |   |   |
| Net (loss) income                   |   | $                 | (160,786  | )      |                     | $      | 294,132   |          |   | $      | (4,495           | )      |   | $      | 478,340   |   |   | $ | (1,835,100 | ) |
|                                |   |              |      |   |                     |   |      |          |   |   |             |   |   |   |      |   |   |   |   |   |

|                                |   | PHYSICIANDOMESTIC |      |   | PHYSICIAN INTERN’L |   |      | OTHERCHANNELS |   | SURGICALPRODUCTS |      |   | TOTAL  |   |
|-------------------------------------|--------|-------------------|-----------|--------|--------------------------|--------|-----------|---------------|--------|------------------|-----------|--------|--------|--------|
| Revenues                            |   | $                 | 4,983,279 |   |                     | $      | 1,647,031 |          |   | $                | 1,019,166 |   |   | $      | 947,516 |   |   | $ | 8,596,992 |   |
| Costs of revenues                   |   |              | 2,664,821 |   |                     |   | 1,018,393 |          |   |             | 500,623   |   |   |   | 697,220 |   |   |   | 4,881,057 |   |
| Gross profit                        |   |              | 2,318,458 |   |                     |   | 628,638   |          |   |             | 518,543   |   |   |   | 250,296 |   |   |   | 3,715,935 |   |
| Gross profit %                      |   |              | 46.5      | %      |                     |   | 38.2      | %             |   |             | 50.9      | %      |   |   | 26.4 | % |   |   | 43.2 | % |
|                                |   |              |      |   |                     |   |      |          |   |             |      |   |   |   |   |   |   |   |   |   |
| Allocated operating expenses:       |   |              |      |   |                     |   |      |          |   |             |      |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative |   |              | 2,808,941 |   |                     |   | 378,799   |          |   |             | 148,152   |   |   |   | 40,814 |   |   |   | 3,376,706 |   |
| Engineering and product development |   |              | 77,647    |   |                     |   | 52,078    |          |   |             | 61,126    |   |   |   | 120,330 |   |   |   | 311,181 |   |
|                                |   |              |      |   |                     |   |      |          |   |             |      |   |   |   |   |   |   |   |   |   |
| Unallocated operating expenses      |   |              | -         |   |                     |   | -         |          |   |             | -         |   |   |   | - |   |   |   | 1,665,846 |   |
|                                |   |              | 2,886,588 |   |                     |   | 430,877   |          |   |             | 209,278   |   |   |   | 161,144 |   |   |   | 5,353,733 |   |
| Income (loss) from operations       |   |              | (568,130  | )      |                     |   | 197,761   |          |   |             | 309,265   |   |   |   | 89,152 |   |   |   | (1,637,798 | ) |
|                                |   |              |      |   |                     |   |      |          |   |             |      |   |   |   |   |   |   |   |   |   |
| Interest expense, net               |   |              | -         |   |                     |   | -         |          |   |             | -         |   |   |   | - |   |   |   | (654,721 | ) |
| Change in fair value of warrants    |   |              | -         |   |                     |   | -         |          |   |             | -         |   |   |   | - |   |   |   | 281,462 |   |
|                                |   |              |      |   |                     |   |      |          |   |             |      |   |   |   |   |   |   |   |   |   |
| Net (loss) income                   |   | $                 | (568,130  | )      |                     | $      | 197,761   |          |   | $                | 309,265   |   |   | $      | 89,152 |   |   | $ | (2,011,057 | ) |
|                                |   |              |      |   |                     |   |      |          |   |             |      |   |   |   |   |   |   |   |   |   |

----

|                                |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |
|-------------------------------------|--------|-------------------|------------|--------|--------------------------|--------|-----------|---------------|--------|--------|-------------------|--------|--------|--------|-----------|
|                                |   | PHYSICIANDOMESTIC |       |   | PHYSICIAN INTERN’L |   |      | OTHERCHANNELS |   |   | SURGICAL PRODUCTS |   |   | TOTAL  |      |
| Revenues                            |   | $                 | 14,435,947 |   |                     | $      | 5,142,357 |          |   | $      | 1,943,717         |   |   | $      | 2,760,992 |   |   | $ | 24,283,013 |   |
| Costs of revenues                   |   |              | 7,080,523  |   |                     |   | 3,697,988 |          |   |   | 1,108,468         |   |   |   | 1,423,032 |   |   |   | 13,310,011 |   |
| Gross profit                        |   |              | 7,355,424  |   |                     |   | 1,444,369 |          |   |   | 835,249           |   |   |   | 1,337,960 |   |   |   | 10,973,002 |   |
| Gross profit %                      |   |              | 51.0       | %      |                     |   | 28.1      | %             |   |   | 43.0              | %      |   |   | 48.5      | % |   |   | 45.2 | % |
|                                |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |   |   |   |   |   |
| Allocated operating expenses:       |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |   |   |   |   |   |
| Selling, general and administrative |   |              | 8,035,983  |   |                     |   | 734,184   |          |   |   | 479,037           |   |   |   | 142,886   |   |   |   | 9,392,090 |   |
| Engineering and product development |   |              | 319,424    |   |                     |   | 244,019   |          |   |   | 232,652           |   |   |   | 95,007    |   |   |   | 891,102 |   |
|                                |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |   |   |   |   |   |
| Unallocated operating expenses      |   |              | -          |   |                     |   | -         |          |   |   | -                 |   |   |   | -         |   |   |   | 5,065,773 |   |
|                                |   |              | 8,355,407  |   |                     |   | 978,203   |          |   |   | 711,689           |   |   |   | 237,893   |   |   |   | 15,348,965 |   |
| Income (loss) from operations       |   |              | (999,983   | )      |                     |   | 466,166   |          |   |   | 123,560           |   |   |   | 1,100,067 |   |   |   | (4,375,963 | ) |
|                                |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |   |   |   |   |   |
| Interest expense, net               |   |              | -          |   |                     |   | -         |          |   |   | -                 |   |   |   | -         |   |   |   | (2,402,557 | ) |
| Change in fair value of warrant     |   |              | -          |   |                     |   | -         |          |   |   | -                 |   |   |   | -         |   |   |   | (132,795 | ) |
|                                |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |   |   |   |   |   |
| Net (loss) income                   |   | $                 | (999,983   | )      |                     | $      | 466,166   |          |   | $      | 123,560           |   |   | $      | 1,100,067 |   |   | $ | (6,911,315 | ) |
|                                |   |              |       |   |                     |   |      |          |   |   |              |   |   |   |      |   |   |   |   |   |

|                                |   | PHYSICIANDOMESTIC |       |   | PHYSICIAN INTERN’L |   |      | OTHER CHANNELS |   |   | SURGICAL PRODUCTS |   |   | TOTAL  |      |
|-------------------------------------|--------|-------------------|------------|--------|--------------------------|--------|-----------|----------------|--------|--------|-------------------|--------|--------|--------|-----------|
| Revenues                            |   | $                 | 14,218,521 |   |                     | $      | 4,859,620 |           |   | $      | 2,706,463         |   |   | $      | 2,624,040 |   |   | $ | 24,408,644 |   |
| Costs of revenues                   |   |              | 6,775,882  |   |                     |   | 2,804,223 |           |   |   | 1,088,495         |   |   |   | 1,916,174 |   |   |   | 12,584,774 |   |
| Gross profit                        |   |              | 7,442,639  |   |                     |   | 2,055,397 |           |   |   | 1,617,968         |   |   |   | 707,866   |   |   |   | 11,823,870 |   |
| Gross profit %                      |   |              | 52.3       | %      |                     |   | 42.3      | %              |   |   | 59.8              | %      |   |   | 27.0      | % |   |   | 48.4 | % |
|                                |   |              |       |   |                     |   |      |           |   |   |              |   |   |   |      |   |   |   |   |   |
| Allocated operating expenses:       |   |              |       |   |                     |   |      |           |   |   |              |   |   |   |      |   |   |   |   |   |
| Selling, general and administrative |   |              | 9,498,548  |   |                     |   | 1,147,833 |           |   |   | 469,066           |   |   |   | 217,265   |   |   |   | 11,332,712 |   |
| Engineering and product development |   |              | 253,102    |   |                     |   | 115,333   |           |   |   | 132,761           |   |   |   | 348,392   |   |   |   | 849,588 |   |
|                                |   |              |       |   |                     |   |      |           |   |   |              |   |   |   |      |   |   |   |   |   |
| Unallocated operating expenses      |   |              | -          |   |                     |   | -         |           |   |   | -                 |   |   |   | -         |   |   |   | 7,340,877 |   |
|                                |   |              | 9,751,650  |   |                     |   | 1,263,166 |           |   |   | 601,827           |   |   |   | 565,657   |   |   |   | 19,523,177 |   |
| Income (loss) from operations       |   |              | (2,309,011 | )      |                     |   | 792,231   |           |   |   | 1,016,141         |   |   |   | 142,209   |   |   |   | (7,699,307 | ) |
|                                |   |              |       |   |                     |   |      |           |   |   |              |   |   |   |      |   |   |   |   |   |
| Interest expense, net               |   |              | -          |   |                     |   | -         |           |   |   | -                 |   |   |   | -         |   |   |   | (1,738,567 | ) |
| Change in fair value of warrants    |   |              | -          |   |                     |   | -         |           |   |   | -                 |   |   |   | -         |   |   |   | 1,205,178 |   |
|                                |   |              |       |   |                     |   |      |           |   |   |              |   |   |   |      |   |   |   |   |   |
| Net (loss) income                   |   | $                 | (2,309,011 | )      |                     | $      | 792,231   |           |   | $      | 1,016,141         |   |   | $      | 142,209   |   |   | $ | (8,232,696 | ) |
|                                |   |              |       |   |                     |   |      |           |   |   |              |   |   |   |      |   |   |   |   |   |

----

|                                 |   | September 30, 2010 |       |   | December 31, 2009 |   |
|--------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                 |   | (unaudited)        |       |   |              |   |
| Assets:                              |   |               |       |   |              |   |
| Total assets for reportable segments |   | $                  | 47,178,660 |   |              | $      | 49,890,944 |   |
| Other unallocated assets             |   |               | 3,815,576  |   |              |   | 3,277,202 |   |
| Consolidated total                   |   | $                  | 50,994,236 |   |              | $      | 53,168,146 |   |

|     |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|----------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|     |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Domestic |   | $                                            | 6,869,853 |   |                                        | $      | 6,512,236 |   |   | $ | 19,143,687 |   |   | $ | 18,098,780 |   |
| Foreign  |   |                                         | 2,715,195 |   |                                        |   | 2,084,756 |   |   |   | 5,139,326 |   |   |   | 6,309,864 |   |
|     |   | $                                            | 9,585,048 |   |                                        | $      | 8,596,992 |   |   | $ | 24,283,013 |   |   | $ | 24,408,644 |   |

|   | • | The election of our Board of Directors;                                                                                                                                                                                                                                                                                                                                                  |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | To change our state of incorporation from Delaware to Nevada;                                                                                                                                                                                                                                                                                                                            |
|   | • | To increase the number of shares of our common stock reserved under the 2005 Equity Plan to 650,000 and otherwise amend the terms of the plan;                                                                                                                                                                                                                                           |
|   | • | To increase the number of shares of our common stock reserved under the Non-Employee Director Plan to 60,000 and otherwise amend the terms of the plan;                                                                                                                                                                                                                                  |
|   | • | To allow a one-time option exchange program whereby certain optionees holding options with exercise prices greater than $10.00 per share may opt to exchange such options for shares of the Company’s common stock reserved under the 2005 Equity Plan; and                                                                                                                        |
|   | • | To pay all interest accruing under Series B-2 Secured Convertible Note to the holder of the note through the issuance of additional convertible promissory notes whereby the Company has issued to the Investor an additional Convertible Note, effective September 1, 2010, in payment of interest accruing at 2% on the Series B-2 Convertible Note from March 19, 2010 to August 31, 2010. |

----

TE

|   | • | Physician Domestic;      |
|--------|---------|--------------------------|
|   | • | Physician International; |
|   | • | Other Channels; and      |
|   | • | Surgical Products.       |

----

----

----

|                                         |   | Three Months EndedSeptember 30, (unaudited) |      |   | Nine Months EndedSeptember 30, (unaudited) |   |
|----------------------------------------------|--------|---------------------------------------------|-----------|--------|--------------------------------------------|--------|
|                                         |   | 2010                                        |      |   | 2009                                       |   |   | 2010 |   |   | 2009 |   |
| Physician Domestic Revenues                  |   | $                                           | 5,171,196 |   |                                       | $      | 4,983,279 |   |   | $ | 14,435,947 |   |   | $ | 14,218,521 |   |
| Physician International Revenues             |   |                                        | 2,715,582 |   |                                       |   | 1,647,031 |   |   |   | 5,142,357 |   |   |   | 4,859,620 |   |
| Other Channels Revenues                      |   |                                        | 524,830   |   |                                       |   | 1,019,166 |   |   |   | 1,943,717 |   |   |   | 2,706,463 |   |
|    Total Dermatology Revenues |   |                                        | 8,411,608 |   |                                       |   | 7,649,476 |   |   |   | 21,522,021 |   |   |   | 21,784,604 |   |
|                                         |   |                                        |      |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Surgical Products                            |   |                                        | 1,173,440 |   |                                       |   | 947,516 |   |   |   | 2,760,992 |   |   |   | 2,624,040 |   |
|                                         |   |                                        |      |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Total Revenues                               |   | $                                           | 9,585,048 |   |                                       | $      | 8,596,992 |   |   | $ | 24,283,013 |   |   | $ | 24,408,644 |   |

|                              |   | Three Months EndedSeptember 30, (unaudited) |      |   | Nine Months EndedSeptember 30, (unaudited) |   |
|-----------------------------------|--------|---------------------------------------------|-----------|--------|--------------------------------------------|--------|
|                              |   | 2010                                        |      |   | 2009                                       |   |   | 2010 |   |   | 2009 |   |
| XTRAC treatments                  |   | $                                           | 2,355,078 |   |                                       | $      | 2,467,887 |   |   | $ | 7,109,932 |   |   | $ | 7,140,514 |   |
| XTRAC laser sales                 |   |                                        | 1,354,665 |   |                                       |   | 1,078,890 |   |   |   | 2,645,911 |   |   |   | 2,240,875 |   |
| Skincare products                 |   |                                        | 1,148,818 |   |                                       |   | 1,086,847 |   |   |   | 3,704,715 |   |   |   | 3,919,312 |   |
| PTL products                      |   |                                        | 236,325   |   |                                       |   | 349,655 |   |   |   | 802,603 |   |   |   | 917,820 |   |
| Metvixia                          |   |                                        | 76,310    |   |                                       |   | - |   |   |   | 172,786 |   |   |   | - |   |
|                              |   |                                        |      |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Total Physician Domestic Revenues |   | $                                           | 5,171,196 |   |                                       | $      | 4,983,279 |   |   | $ | 14,435,947 |   |   | $ | 14,218,521 |   |

----

|                                                      |   | Three Months EndedSeptember 30, (unaudited) |      |   | Nine Months EndedSeptember 30, (unaudited) |   |
|-----------------------------------------------------------|--------|---------------------------------------------|-----------|--------|--------------------------------------------|--------|
|                                                      |   | 2010                                        |      |   | 2009                                       |   |   | 2010 |   |   | 2009 |   |
| Recognized treatment revenue                              |   | $                                           | 2,355,078 |   |                                       | $      | 2,467,887 |   |   | $ | 7,109,932 |   |   | $ | 7,140,514 |   |
| Change in deferred treatment revenue                      |   |                                        | (22,926   | )      |                                       |   | (120,558 | ) |   |   | 107,454 |   |   |   | (98,406 | ) |
| Net billed revenue                                        |   | $                                           | 2,332,152 |   |                                       | $      | 2,347,329 |   |   | $ | 7,217,386 |   |   | $ | 7,042,108 |   |
| Procedure volume total                                    |   |                                        | 36,267    |   |                                       |   | 38,478 |   |   |   | 115,173 |   |   |   | 112,850 |   |
| Less: Non-billed procedures                               |   |                                        | (1,441    | )      |                                       |   | (1,846 | ) |   |   | (4,232 | ) |   |   | (4,872 | ) |
| Net billed procedures                                     |   |                                        | 34,826    |   |                                       |   | 36,632 |   |   |   | 110,941 |   |   |   | 107,978 |   |
| Avg. price of treatments billed                           |   | $                                           | 66.97     |   |                                       | $      | 64.08 |   |   | $ | 65.06 |   |   | $ | 65.22 |   |
| Change in procedures with deferred treatment revenue, net |   |                                        | (342      | )      |                                       |   | (1,881 | ) |   |   | 1,652 |   |   |   | (1,509 | ) |

----

|                                   |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|----------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                   |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| International dermatology equipment    |   | $                                            | 2,150,175 |   |                                        | $      | 819,568 |   |   | $ | 3,449,437 |   |   | $ | 2,879,259 |   |
| Skincare products                      |   |                                         | 323,750   |   |                                        |   | 386,162 |   |   |   | 1,011,730 |   |   |   | 865,329 |   |
| PTL products                           |   |                                         | 241,657   |   |                                        |   | 441,301 |   |   |   | 681,190 |   |   |   | 1,115,032 |   |
|                                   |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Physician International Revenues |   | $                                            | 2,715,582 |   |                                        | $      | 1,647,031 |   |   | $ | 5,142,357 |   |   | $ | 4,859,620 |   |

|   | • | We sold 40 lasers to Amico Group, our distributor in the Middle East, as part of the multi-million dollar purchase order received in July 2010. We sold 10 lasers to Amico Group in the comparable nine month period in 2009; and                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | We also 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 two such lasers at an average price of $24,000 in the three months ended September 30, 2010, and sold 12 such lasers at an average price of $21,500 in the nine months ended September 30, 2010. We sold no such lasers in the three months ended September 30, 2009, and sold 4 such lasers at an average price of $32,500 in the nine months ended September 30, 2009; 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 below our competitors’ international dermatology equipment and below our XTRAC laser. In the three and nine months ended September 30, 2010, we sold 21 and 33 VTRAC systems, at an average price of $24,400 and $24,600, respectively. In the three and nine months ended September 30, 2009, we sold 10 and 23 VTRAC systems, at an average price of $25,000. |

|                                      |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                      |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Revenues                                  |   | $                                            | 2,150,175 |   |                                        | $      | 819,568 |   |   | $ | 3,449,437 |   |   | $ | 2,879,259 |   |
|    Less: part sales        |   |                                         | (175,425  | )      |                                        |   | (209,568 | ) |   |   | (560,687 | ) |   |   | (647,459 | ) |
| Laser/lamp revenues                       |   |                                         | 1,974,750 |   |                                        |   | 610,000 |   |   |   | 2,888,750 |   |   |   | 2,231,800 |   |
|    Laser/lamp systems sold |   |                                         | 62        |   |                                        |   | 18 |   |   |   | 93 |   |   |   | 58 |   |
| Average revenue per laser/lamp            |   | $                                            | 31,851    |   |                                        | $      | 33,889 |   |   | $ | 31,062 |   |   | $ | 38,479 |   |

|                          |   | Three Months Ended September 30, (unaudited) |    |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------------|--------|----------------------------------------------|---------|--------|---------------------------------------------|--------|
|                          |   | 2010                                         |    |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Skincare products             |   | $                                            | 255,976 |   |                                        | $      | 574,080 |   |   | $ | 1,035,672 |   |   | $ | 1,476,637 |   |
| PTL products                  |   |                                         | 268,854 |   |                                        |   | 445,086 |   |   |   | 908,045 |   |   |   | 1,229,826 |   |
|                          |   |                                         |    |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Other Channels revenues |   | $                                            | 524,830 |   |                                        | $      | 1,019,166 |   |   | $ | 1,943,717 |   |   | $ | 2,706,463 |   |

----

|                                        |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                                        |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Revenues                                    |   | $                                            | 1,173,440 |   |                                        | $      | 947,516 |   |   | $ | 2,760,992 |   |   | $ | 2,624,040 |   |
|    Laser systems sold        |   |                                         | 16        |   |                                        |   | 9 |   |   |   | 30 |   |   |   | 16 |   |
| Laser system revenues                       |   | $                                            | 444,295   |   |                                        | $      | 224,750 |   |   | $ | 792,485 |   |   | $ | 355,396 |   |
|    Average revenue per laser |   | $                                            | 27,768    |   |                                        | $      | 24,972 |   |   | $ | 26,416 |   |   | $ | 22,212 |   |

----

|                    |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                    |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Product:                |   |                                         |      |   |                                        |   |   |   |   |   |   |   |
| Physician Domestic      |   | $                                            | 1,186,844 |   |                                        | $      | 1,165,083 |   |   | $ | 2,901,595 |   |   | $ | 2,752,406 |   |
| Physician International |   |                                         | 2,144,915 |   |                                        |   | 1,018,393 |   |   |   | 3,697,988 |   |   |   | 2,804,223 |   |
| Other Channels          |   |                                         | 315,237   |   |                                        |   | 500,623 |   |   |   | 1,108,468 |   |   |   | 1,088,495 |   |
| Surgical Products       |   |                                         | 560,643   |   |                                        |   | 665,119 |   |   |   | 1,326,823 |   |   |   | 1,819,792 |   |
| Total Product costs     |   | $                                            | 4,207,639 |   |                                        | $      | 3,349,218 |   |   | $ | 9,034,874 |   |   | $ | 8,464,916 |   |
|                    |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Services:               |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Physician Domestic      |   | $                                            | 1,390,839 |   |                                        | $      | 1,499,744 |   |   | $ | 4,178,928 |   |   | $ | 4,023,483 |   |
| Surgical Products       |   |                                         | 31,927    |   |                                        |   | 32,095 |   |   |   | 96,209 |   |   |   | 96,375 |   |
| Total Services costs    |   | $                                            | 1,422,766 |   |                                        | $      | 1,531,839 |   |   | $ | 4,275,137 |   |   | $ | 4,119,858 |   |
|                    |   |                                         |      |   |                                        |   |   |   |   |   |   |   |   |   |   |   |
| Total Costs of Revenues |   | $                                            | 5,630,405 |   |                                        | $      | 4,881,057 |   |   | $ | 13,310,011 |   |   | $ | 12,584,774 |   |

----

| Company Profit Analysis     |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-----------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                        |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Revenues                    |   | $                                            | 9,585,048 |   |                                        | $      | 8,596,992 |   |   | $ | 24,283,013 |   |   | $ | 24,408,644 |   |
| Percent increase (decrease) |   |                                         | 11.5      | %      |                                        |   |   |   |   |   | (0.5 | %) |   |   |   |   |
| Cost of revenues            |   |                                         | 5,630,405 |   |                                        |   | 4,881,057 |   |   |   | 13,310,011 |   |   |   | 12,584,774 |   |
| Percent increase (decrease) |   |                                         | 15.4      | %      |                                        |   |   |   |   |   | (5.8 | %) |   |   |   |   |
| Gross profit                |   | $                                            | 3,954,643 |   |                                        | $      | 3,715,935 |   |   | $ | 10,973,002 |   |   | $ | 11,823,870 |   |
| Gross margin percentage     |   |                                         | 41.3      | %      |                                        |   | 43.2 | % |   |   | 45.2 | % |   |   | 48.4 | % |

|   | • | We sold approximately $276,000 more in domestic XTRAC lasers in the three months ended September 30, 2010 although the cost of sales associated with these sales decreased $124,000 between the comparable three month periods. The margin on these capital equipment sales was 61% in the three months ended September 30, 2010 compared to 39% in the comparable period in 2009. Certain of these lasers were being depreciated until the time of sale, since they were previously utilized as field placements.                                                                                                                                                                                                                                                                                                                                                                               |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | • | The revenues for Metvixia products of $76,310 for the three months ended September 30, 2010 have no associated cost of sales. There were no such revenues in the three months ended September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | • | Offsetting the above items that had a positive impact on gross profit, gross profit decreased as a result of the mix of units sold in the international dermatology equipment segment. In this segment, we sold 41 XTRAC laser systems and 21 VTRAC lamp-based excimer systems during the three months ended September 30, 2010 and 8 XTRAC laser systems and 10 VTRAC systems in the comparable period in 2009. Included in the 41 XTRAC lasers systems sold in the three months ended September 30, 2010 were 40 laser systems to Amico Group, our distributor in the Middle East, which had a lower average selling price and gross margin percentage. There were no such laser systems sold in the three months ended September 30, 2010. Consequently, gross profit decreased as a result of the mix of units sold. The gross margin percentage for the VTRAC is higher than for the XTRAC. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | • | There was additional excess and obsolete expense of $123,000 for the Skincare products due to discontinuation and/or reformulation of some of the products during the three months ended September 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|   | • | We sold 60 XTRAC laser systems and 33 VTRAC lamp-based excimer systems during the nine months ended September 30, 2010 and 35 XTRAC laser systems and 23 VTRAC systems in the comparable |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                     |

----

|   |    | period in 2009. Included in the 60 XTRAC lasers systems sold were 40 laser systems to Amico Group, our distributor in the Middle East and 12 used laser systems, both of which have a lower average selling price and gross margin percentage, compared to 4 used laser systems sold in the nine months ended September 30, 2009. Consequently, gross profit decreased as a result of the mix of units sold. The gross margin percentage for the VTRAC is higher than for the XTRAC.                                                                                                  |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | • | There were increases in certain allocable XTRAC manufacturing overhead costs due to an under-absorption of the overhead costs of approximately $560,000. These under-absorptions were due to delays in production during the first six months of 2010.                                                                                                                                                                                                                                                                                                                                |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | • | Revenues for the nine months ended September 30, 2009 included a milestone payment to us from a licensee of $213,000 under a certain licensing arrangement for the Clear U™ hand-held device.                                                                                                                                                                                                                                                                                                                                                                                   |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | • | There was additional excess and obsolete expense of $123,000 for the Skincare products due to discontinuation and/or reformulation of some of the products during the nine months ended September 30, 2010.                                                                                                                                                                                                                                                                                                                                                                           |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | • | Offsetting the above items that had a negative impact on gross profit, we sold approximately $405,000 more in domestic XTRAC lasers in the nine months ended September 30, 2010 although the cost of sales associated with these sales decreased $78,000 between the comparable nine month periods. The margin on these capital equipment sales was 65% in the nine months ended September 30, 2010 compared to 53% in the comparable period in 2009. Certain of these lasers were being depreciated until the time of sale, since they were previously utilized as field placements. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|   | • | The revenues for Metvixia products of $172,786 for the nine months ended September 30, 2010 have no associated cost of sales. There were no such revenues for the nine months ended September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                               |

| Physician Domestic Segment  |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|-----------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                        |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Revenues                    |   | $                                            | 5,171,196 |   |                                        | $      | 4,983,279 |   |   | $ | 14,435,947 |   |   | $ | 14,218,521 |   |
| Percent increase            |   |                                         | 3.8       | %      |                                        |   |   |   |   |   | 1.5 | % |   |   |   |   |
| Cost of revenues            |   |                                         | 2,577,683 |   |                                        |   | 2,664,827 |   |   |   | 7,080,523 |   |   |   | 6,775,889 |   |
| Percent (decrease) increase |   |                                         | (3.3      | %)     |                                        |   |   |   |   |   | 4.5 | % |   |   |   |   |
| Gross profit                |   | $                                            | 2,593,513 |   |                                        | $      | 2,318,452 |   |   | $ | 7,355,424 |   |   | $ | 7,442,632 |   |
| Gross margin percentage     |   |                                         | 50.2      | %      |                                        |   | 46.5 | % |   |   | 51.0 | % |   |   | 52.3 | % |

|   | • | We sold approximately $276,000 more in domestic XTRAC lasers in the three months ended September 30, 2010, although the cost of sales associated with these sales decreased $124,000 between the comparable three month periods. The margin on these capital equipment sales was 61% in the three months ended September 30, 2010 compared to 39% in the comparable period in 2009. Certain of these lasers were being depreciated until the time of sale, since they were previously utilized as field placements. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | • | There was a decrease in certain allocable XTRAC manufacturing overhead costs due to better absorption of the overhead costs of approximately $87,000. This decrease was due to greater production during the three months ended September 30, 2010.                                                                                                                                                                                                                                                                 |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

----

|   | • | The revenues for Metvixia products of $76,310 for the three months ended September 30, 2010 have no associated cost of sales. There were no such revenues for the three months ended September 30, 2009.                                                                                                                                                              |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                  |
|   | • | Offsetting the above items that had a positive impact on gross profit, there was additional excess and obsolete expense for the Skincare products due to discontinuation and/or reformulation of some of the products during the three months ended September 30, 2010. The portion allocated to the physician domestic segment was approximately $81,000.            |
|   |    |                                                                                                                                                                                                                                                                                                                                                                  |
|   | • | For the three months ended September 30, 2010, PTL product revenues decreased $113,330 over the prior year period, while the cost of sales for these products decreased $51,572 for the same comparable periods. Due to the acquisition, an additional amortization of $185,000 is allocated to the segments based on each segment’s revenues for PTL products. |

|   | • | There was an increase in certain allocable XTRAC manufacturing overhead costs due to an under-absorption of the overhead costs of approximately $248,000. This increase was due to delays in production during the first half of 2010.                                                                                                                                                                                                                                                                                                                                                 |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | • | For the nine months ended September 30, 2010, PTL product revenues decreased $115,217 over the prior year period, while the cost of sales for these products increased $167,287 for the same comparable periods. This cost of sales was due to the acquisition of Photo Therapeutics which occurred on February 27, 2009, so there was only seven months’ activity in the comparable prior year period. Due to the acquisition, an additional amortization of $555,000 is allocated to the segments based on each segment’s revenues for PTL products.                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | • | There was additional excess and obsolete expense for the Skincare products due to discontinuation and/or reformulation of some of the products during the nine months ended September 30, 2010. The portion allocated to the physician domestic segment was approximately $81,000.                                                                                                                                                                                                                                                                                                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | • | Offsetting the above items that had a negative impact on gross profit, we sold approximately $405,000 more in domestic XTRAC lasers in the nine months ended September 30, 2010, although the cost of sales associated with these sales decreased $78,000 between the comparable nine month periods. The margin on these capital equipment sales was 65% in the nine months ended September 30, 2010 compared to 53% in the comparable period in 2009. Certain of these lasers were being depreciated until the time of sale, since they were previously utilized as field placements. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | • | The revenues for Metvixia products of $172,786 for the nine months ended September 30, 2010 have no associated cost of sales. There were no such revenues for the nine months ended September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                |

| Physician International Segment |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                            |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Revenues                        |   | $                                            | 2,715,582 |   |                                        | $      | 1,647,031 |   |   | $ | 5,142,357 |   |   | $ | 4,859,620 |   |
| Percent increase                |   |                                         | 64.9      | %      |                                        |   |   |   |   |   | 5.8 | % |   |   |   |   |
| Cost of revenues                |   |                                         | 2,144,915 |   |                                        |   | 1,018,393 |   |   |   | 3,697,988 |   |   |   | 2,804,223 |   |
| Percent increase                |   |                                         | 110.6     | %      |                                        |   |   |   |   |   | 31.9 | % |   |   |   |   |
| Gross profit                    |   | $                                            | 570,667   |   |                                        | $      | 628,638 |   |   | $ | 1,444,369 |   |   | $ | 2,055,397 |   |
| Gross margin percentage         |   |                                         | 21.0      | %      |                                        |   | 38.2 | % |   |   | 28.1 | % |   |   | 42.3 | % |

----

|   | • | We sold 41 XTRAC laser systems and 21 VTRAC lamp-based excimer systems during the three months ended September 30, 2010 and 8 XTRAC laser systems and 10 VTRAC systems in the comparable period in 2009. Included in the 41 XTRAC lasers systems sold in the three months ended September 30, 2010 were 40 laser systems to Amico Group, our distributor in the Middle East, which had a lower average selling price and gross margin percentage. There were no such laser systems sold in the three months ended September 30, 2010. Consequently, gross profit decreased as a result of the mix of units sold. 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, decreased 16% or $34,143 for the three months ended September 30, 2010 as compared to the same period in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | There was additional excess and obsolete expense for the Skincare products due to discontinuation and/or reformulation of some of the products during the nine months ended September 30, 2010. The portion allocated to the physician international segment was approximately $24,000.                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | For the three months ended September 30, 2010, PTL product revenues decreased $200,000 over the prior year period, while the cost of sales for these products decreased $106,000 for the same comparable periods. Due to the acquisition there is additional amortization of $185,000 that is allocated to the segments based on each segment’s revenues for PTL products.                                                                                                                                                                                                                                                                                                         |

|   | • | We sold 60 XTRAC laser systems and 33 VTRAC lamp-based excimer systems during the nine months ended September 30, 2010 and 35 XTRAC laser systems and 23 VTRAC systems in the comparable period in 2009. Included in the 60 XTRAC lasers systems sold were 40 laser systems to Amico Group, our distributor in the Middle East and 12 used laser systems, both of which have a lower average selling price and gross margin percentage, compared to 4 used laser systems sold in the nine months ended September 30, 2009. Consequently, gross profit decreased as a result of the mix of units sold. The gross margin percentage for the VTRAC is higher than for the XTRAC. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Gross profit for the nine months ended September 30, 2010 was negatively impacted by increases in certain allocable XTRAC manufacturing overhead costs that are charged against international dermatology equipment. These increased costs, which approximated $135,000, related to an under-absorption of manufacturing costs due to delays in production.                                                                                                                                                                                                                                                                                                                   |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | • | International part sales, which have a higher margin percentage than system sales, decreased 13% or $86,772 for the nine months ended September 30, 2010 as compared to the same period in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | • | For the nine months ended September 30, 2010, skincare product revenues increased $146,401 over the prior year period, while the cost of sales for these products increased $111,156 for the same comparable periods, including the additional excess and obsolete expense of approximately $24,000.                                                                                                                                                                                                                                                                                                                                                                          |

|   | • | For the nine months ended September 30, 2010, PTL product revenues decreased $433,842 over the prior year period, while the cost of sales for these products decreased $73,487 for the same comparable periods. This cost of sales was due to the acquisition of Photo Therapeutics which occurred on February 27, 2009, so there was only seven months’ activity in the comparable prior year period. Due to the acquisition there is additional amortization of $555,000 that is allocated to the segments based on each segment’s revenues for PTL products. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Other Channels Segment                              |   | Three Months Ended September 30,(unaudited) |    |   | Nine Months Ended September 30,(unaudited) |   |
|-----------------------------------------------------|--------|---------------------------------------------|---------|--------|--------------------------------------------|--------|
|                                                |   | 2010                                        |    |   | 2009                                       |   |   | 2010 |   |   | 2009 |   |
| Revenues                                            |   | $                                           | 524,830 |   |                                       | $      | 1,019,166 |   |   | $ | 1,943,717 |   |   | $ | 2,706,463 |   |
|     Percent decrease            |   |                                        | (94.2   | %)     |                                       |   |   |   |   |   | (28.2 | %) |   |   |   |   |
| Cost of revenues                                    |   |                                        | 315,237 |   |                                       |   | 500,623 |   |   |   | 1,108,468 |   |   |   | 1,088,495 |   |
|     Percent (decrease) increase |   |                                        | (37.0   | %)     |                                       |   |   |   |   |   | 1.8 | % |   |   |   |   |
| Gross profit                                        |   | $                                           | 209,593 |   |                                       | $      | 518,543 |   |   | $ | 835,249 |   |   | $ | 1,617,968 |   |
| Gross margin percentage                             |   |                                        | 39.9    | %      |                                       |   | 50.9 | % |   |   | 43.0 | % |   |   | 59.8 | % |

|   | • | For the three months ended September 30, 2010, skincare product revenues decreased $318,104 over the prior year period, while the cost of sales for these products decreased $97,319 for the same comparable periods. Included in the three months ended September 30, 2009 was $159,840 in bulk compound revenues. There was no corresponding revenue in the three months ended September 30, 2010. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | • | The cost of sales for the PTL business increased mainly due to the additional amortization of $185,000 that is allocated to the segments based on each segment’s revenues for PTL products.                                                                                                                                                                                                    |

|   | • | Revenues for the nine months ended September 30, 2009 included a milestone payment of $213,000 under a certain licensing arrangement for the Clear U™ hand-held device. There are no costs associated with this revenue stream.                                                                                                                                                              |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                               |
|   | • | For the nine months ended September 30, 2010, skincare product revenues decreased $461,465 over the prior year period, while the cost of sales for these products decreased $179,396 for the same comparable periods. Included in the nine months ended September 30, 2009 was $239,760 in bulk compound revenues. There was no corresponding revenue in the nine months ended September 30, 2010. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                               |
|   | • | The cost of sales for the PTL business increased mainly due to the fact that it was acquired on February 27, 2009, and consequently the comparable prior year period reflects only one month of activity. In addition, due to the acquisition there is additional amortization of $370,000 that is allocated to the segments based on each segment’s revenues for PTL products.              |

----

| Surgical Products Segment |   | Three Months Ended September 30, (unaudited) |      |   | Nine Months Ended September 30, (unaudited) |   |
|---------------------------|--------|----------------------------------------------|-----------|--------|---------------------------------------------|--------|
|                      |   | 2010                                         |      |   | 2009                                        |   |   | 2010 |   |   | 2009 |   |
| Revenues                  |   | $                                            | 1,173,440 |   |                                        | $      | 947,516 |   |   | $ | 2,760,992 |   |   | $ | 2,624,040 |   |
| Percent increase          |   |                                         | 23.8      | %      |                                        |   |   |   |   |   | 5.2 | % |   |   |   |   |
| Cost of revenues          |   |                                         | 592,570   |   |                                        |   | 697,214 |   |   |   | 1,423,032 |   |   |   | 1,916,167 |   |
| Percent decrease          |   |                                         | (15.0     | %)     |                                        |   |   |   |   |   | (25.7 | %) |   |   |   |   |
| Gross profit              |   | $                                            | 580,870   |   |                                        | $      | 250,302 |   |   | $ | 1,337,960 |   |   | $ | 707,873 |   |
| Gross margin percentage   |   |                                         | 49.5      | %      |                                        |   | 26.4 | % |   |   | 48.5 | % |   |   | 27.0 | % |

|   | • | 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, 2010 increased by $225,924 from the three months ended September 30, 2009. There were 7 additional laser systems sold in the three months ended September 30, 2010 than in the comparable period of 2009. Additionally, the lasers sold in the 2010 period were sold at higher prices than those sold in the comparable period in 2009. The increase in average price per laser was largely due to the mix of lasers sold and volume discounts in the prior year period. Included in the laser sales for the three months ended September 30, 2010 and 2009 were sales of diode lasers of $228,000, representing 10 systems, and $98,000, representing 6 systems respectively, which have substantially lower list sales prices than our other types of surgical lasers. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | • | Beginning in 2010, the various allocable manufacturing costs of the Pennsylvania facility are allocated to surgical products, skincare and PTL products. In prior years, these costs were allocated to surgical products only. During 2009 we relocated our skincare and PTL facilities into our Pennsylvania facility and are now able to spread these fixed costs over many product lines.                                                                                                                                                                                                                                                                                                                                                                                                                               |

|   | • | 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 nine months ended September 30, 2010 increased by $136,952 from the nine months ended September 30, 2009. There were 14 additional laser systems sold in the nine months ended September 30, 2010 than in the comparable period of 2009. Additionally, the lasers sold in the 2010 period were sold at higher prices than those sold in the comparable period in 2009. The increase in average price per laser was largely due to the mix of lasers sold and volume discounts. Included in the laser sales for the nine months ended September 30, 2010 and 2009 were sales of diode lasers of $525,000, representing 23 systems, and $189,000, representing 12 systems respectively, which have substantially lower list sales prices than our other types of surgical lasers. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | • | Beginning in 2010, the various allocable manufacturing costs of the Pennsylvania facility are allocated to surgical products, skincare and PTL products. In prior years, these costs were allocated to surgical products only. During 2009 we relocated our skincare and PTL facilities into our Pennsylvania facility and are now able to spread these fixed costs over many product lines.                                                                                                                                                                                                                                                                                                                                                                                                     |

----

|   | • | Offsetting the above items that had a positive impact on gross profit, 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 13% between the comparable nine-month periods ended September 30, 2010 and 2009. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | There was a $107,000 decrease in salaries, benefits and travel expenses associated with a decrease in the sales and marketing force over the comparable prior year period. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                       |
|   | • | There was a decrease of approximately $131,000 in legal costs in the current three-month period.                                                                           |
|   |    |                                                                                                                                                                       |
|   | • | There was also a decrease in marketing expense of $40,000 which resulted from improved control over marketing efforts.                                                     |
|   |    |                                                                                                                                                                       |
|   | • | Additionally, there was a decrease in amortization expense of $85,000 related to intangibles that are fully amortized.                                                     |

|   | • | There was a decrease related to a $1,110,000 decrease in salaries, benefits and travel expenses associated with a decrease in the sales and marketing force.                                                                                                                                                                                                                                                                                             |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | In the nine months ended September 30, 2009, we expensed $432,000 of legal and transaction costs under ASC Topic 718 incurred in connection with the acquisition of Photo Therapeutics. There was no such corresponding expense in the nine months ended September 30, 2010.                                                                                                                                                                             |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | We expensed approximately $987,000 during the nine months ended September 30, 2009 related to severance and accelerated vesting of restricted stock and options in connection with the termination of our former chief executive officer. In addition there was a decrease in stock compensation expense of $136,000, mainly due to this termination and a decrease in general and administrative salary and benefit expenses of approximately $194,000. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | There was a decrease of approximately $438,000 in legal costs in the current nine-month period.                                                                                                                                                                                                                                                                                                                                                          |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | There was also a decrease in marketing expense of $296,000 which resulted from improved control over marketing efforts.                                                                                                                                                                                                                                                                                                                                  |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | • | Additionally, there was a decrease in amortization expense of $158,000 related to intangibles that are fully amortized.                                                                                                                                                                                                                                                                                                                                  |

----

|                 |   | Three Months Ended September 30, (unaudited) |    |
|----------------------|--------|----------------------------------------------|---------|
|                 |   | 2010                                         |    |   | 2009 |   |   | Change |   |
|                 |   |                                         |    |   |   |   |   |   |   |
| Interest expense     |   | $                                            | 870,088 |   |   | $ | 655,518 |   |   | $ | 214,570 |   |
| Interest income      |   |                                         | (6,375  | ) |   |   | (797 | ) |   |   | (5,578 | ) |
| Net interest expense |   | $                                            | 863,713 |   |   | $ | 654,721 |   |   | $ | 208,992 |   |

|                 |   | Nine Months Ended September 30, (unaudited) |      |
|----------------------|--------|---------------------------------------------|-----------|
|                 |   | 2010                                        |      |   | 2009 |   |   | Change |   |
|                 |   |                                        |      |   |   |   |   |   |   |
| Interest expense     |   | $                                           | 2,409,301 |   |   | $ | 1,745,993 |   |   | $ | 663,308 |   |
| Interest income      |   |                                        | (6,744    | ) |   |   | (7,426 | ) |   |   | 682 |   |
| Net interest expense |   | $                                           | 2,402,557 |   |   | $ | 1,738,567 |   |   | $ | 663,990 |   |

----

|                             |   | For the three months ended September 30, (unaudited) |       |
|----------------------------------|--------|------------------------------------------------------|------------|
|                             |   | 2010                                                 |       |   | 2009 |   |   | Change |   |
|                             |   |                                                 |       |   |   |   |   |   |   |
| Net loss                         |   | $                                                    | 1,835,100  |   |   | $ | 2,011,057 |   |   | $ | 175,957 |   |
|                             |   |                                                 |       |   |   |   |   |   |   |   |   |   |
| Components included in net loss: |   |                                                 |       |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization    |   | $                                                    | (1,084,055 | ) |   | $ | (1,221,778 | ) |   | $ | 137,723 |   |
| Stock-based compensation         |   |                                                 | (154,945   | ) |   |   | (146,932 | ) |   |   | (8,013 | ) |
| Interest expense, net            |   |                                                 | (863,713   | ) |   |   | (654,721 | ) |   |   | (208,992 | ) |
| Change in fair value of warrants |   |                                                 | (34,839    | ) |   |   | 281,462 |   |   |   | (316,301 | ) |
|                             |   | $                                                    | (2,137,552 | ) |   | $ | (1,741,969 | ) |   | $ | ( 395,583 | ) |

|                             |   | For the nine months ended September 30, (unaudited) |       |
|----------------------------------|--------|-----------------------------------------------------|------------|
|                             |   | 2010                                                |       |   | 2009 |   |   | Change |   |
|                             |   |                                                |       |   |   |   |   |   |   |
| Net loss                         |   | $                                                   | 6,911,315  |   |   | $ | 8,232,696 |   |   | $ | 1,321,381 |   |
|                             |   |                                                |       |   |   |   |   |   |   |   |   |   |
| Components included in net loss: |   |                                                |       |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization    |   | $                                                   | (3,342,548 | ) |   | $ | (3,409,245 | ) |   | $ | 66,697 |   |
| Stock-based compensation         |   |                                                | (531,461   | ) |   |   | (1,247,324 | ) |   |   | 715,863 |   |
| Acquisition expenses             |   |                                                | -          |   |   |   | (432,352 | ) |   |   | 432,352 |   |
| Interest expense, net            |   |                                                | (2,402,557 | ) |   |   | (1,738,567 | ) |   |   | (663,990 | ) |
| Change in fair value of warrants |   |                                                | (132,795   | ) |   |   | 1,205,178 |   |   |   | (1,337,973 | ) |
|                             |   | $                                                   | (6,409,361 | ) |   | $ | (5,622,310 | ) |   | $ | ( 787,051 | ) |

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|   | • | We combined the aggregate outstanding obligations under the Convertible Notes into two convertible notes. Each note matures on February 27, 2014 and is identical to the original form of convertible note except as noted below;                                                                                                                                                                                                                                                                                                             |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | • | The larger note has a principal amount of $16,746,270. The note remains subject to the same down-round anti-provision adjustment to the conversion price which was in the unmodified notes. The interest rate of this note was increased from 8% to 10%. The incremental 2% increase in the interest rate may be paid in cash, and may not be paid in convertible PIK notes unless and until our stockholders vote to approve payment in the form of a convertible PIK note, which the stockholders have done on October 28, 2010;            |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | • | The smaller note has a principal amount of $2,800,406. The conversion price of this note was reduced to $11.25850 and the down-round anti-dilution adjustment to the conversion price was removed. The interest rate of this note was increased from 8% to 10%. The full amount of the accrued interest remains payable in cash or convertible PIK notes;                                                                                                                                                                                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | • | The collateral securing the Convertible Note was expanded by adding a first-priority lien against all of our assets other than the assets pledged with first-priority liens to CIT and to Clutterbuck Funds. When assets are released from the lien of CIT, such assets will become subject to the first-priority lien of Clutterbuck Funds and a second-priority lien of the Investor. Finally, when assets are released from the lien of Clutterbuck Funds, such assets will become subject to the first-priority lien of the Investor; and |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | • | Three of our subsidiaries (ProCyte Corporation, Photo Therapeutics, Inc. and SLT Technology, Inc.) have guaranteed our obligations under the modified Convertible Notes.                                                                                                                                                                                                                                                                                                                                                                      |

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M 

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|                                                                  |   |                           |       |   | Pro-forma Information        |   |
|-----------------------------------------------------------------------|--------|--------------------------------|------------|--------|------------------------------|--------|
|                                                                  |   | As Reported September 30, 2010 |       |   | Common Stock Price Reduction |   |   | Common Stock Price Increase |   |
|                                                                  |   |                           |       |   |                         |   |   |   |   |
| Common stock price                                                    |   | $                              | 5.52       |   |                         | $      | 4.02 |   |   | $ | 7.02 |   |
|                                                                  |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Condensed Consolidated Balance Sheet:                                 |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Derivative financial instruments                                      |   | $                              | 874,320    |   |                         | $      | 571,088 |   |   | $ | 1,197,618 |   |
|                                                                  |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Change in fair value of derivative financial instruments              |   | $                              | -          |   |                         | $      | (303,232 | ) |   | $ | 323,298 |   |
|                                                                  |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Condensed Consolidated Statement of Operations:                       |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Increase (decrease) in fair value of derivative financial instruments |   | $                              | 34,839     |   |                         | $      | (268,393 | ) |   | $ | 358,137 |   |
|                                                                  |   |                           |       |   |                         |   |   |   |   |   |   |   |
| Net loss attributable to common stockholders                          |   | $                              | (1,835,100 | )      |                         | $      | (1,531,868 | ) |   | $ | (2,158,398 | ) |

ITEM 4.  Controls 

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ITEM 1. Legal 

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ITEM 5. 

TEM 

| 4.16   | Secured Convertible Promissory Note dated September 1, 2010 in favor of Perseus Partners VII, L.P. (Series B-1 at 10%)                                                                                                                                          |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.17   | Secured Convertible Promissory Note dated September 1, 2010 in favor of Perseus Partners VII, L.P. (Series B-2 at 8%)                                                                                                                                           |
| 31.1   | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer                                                                                                                                                                 |
| 31.2   | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer                                                                                                                                                                 |
| 32.1   | Certification 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   | Certification 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 |

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NAT

|                                    |  PHOTOMEDEX, INC. |                                                                       |
|-----------------------------------------|------------------------|----------------------------------------------------------------------------|
|                                    |                   |                                                                       |   |
| Date   November 15, 2010 | By:                    | /s/ Dennis M. McGrath         |   |
|                                    |                   | Name  Dennis M. McGrath                                               |   |
|                                    |                   | Title    President & Chief Executive Officer            |   |

| Date   November 15, 2010 | By:    | /s/ Christina L. Allgeier         |   |
|-----------------------------------------|--------|--------------------------------------------------------------------------------|--------|
|                                    |   | Name  Christina L. Allgeier                                          |   |
|                                    |   | Title    Chief Financial Officer                                |   |

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