<PAGE>

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

                                   FORM 10 - Q

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM _________ TO ___________


                         Commission File Number 0-11365
                                                -------

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

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

       Five Radnor Corporate Center, Suite 470, Radnor, Pennsylvania 19087
       -------------------------------------------------------------------
          (Address of principal executive offices, including zip code)

                                 (610) 971-9292
                                 --------------
              (Registrant's telephone number, including area code)




Indicated by check mark whether the registrant: (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days.
                                Yes __X__ No ___

The number of shares outstanding of the issuer's Common Stock as of May 10,
2002, was 24,204,953 shares.


<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                        PHOTOMEDEX, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS




                                                     March 31,     December 31,
ASSETS                                                 2002            2001
                                                   -------------   -------------
                                                    (Unaudited)

CURRENT ASSETS:
      Cash and cash equivalents                    $  2,502,971    $  4,066,820
      Accounts receivable, net                        1,609,963       1,694,493
      Inventories                                     2,371,814       2,558,846
      Prepaid expenses and other current assets          94,574         100,681
                                                   -------------   -------------
         Total current assets                         6,579,322       8,420,840
                                                   -------------   -------------

PROPERTY AND EQUIPMENT, NET                           2,942,429       3,298,154

GOODWILL, net of accumulated amortization
    of $452,992                                       2,944,423       2,944,423

DEVELOPED TECHNOLOGY, net of accumulated
    amortization of $143,603 and $111,600               693,397         725,400
PATENT COSTS, net of accumulated
    amortization of $59,465 and $57,377                  25,333          27,421

OTHER ASSETS                                            191,520         168,753
                                                   -------------   -------------
                                                   $ 13,376,424    $ 15,584,991
                                                   =============   =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
      Current portion of notes payable             $     28,347    $     65,017
      Accounts payable                                1,644,448       1,862,499
      Accrued compensation and related expenses         406,772         350,429
      Other accrued liabilities                         519,338         427,266
      Deferred revenues                                 159,750         170,100
                                                   -------------   -------------
         Total current liabilities                    2,758,655       2,875,311
                                                   -------------   -------------


STOCKHOLDERS' EQUITY:
      Common  Stock, $.01 par value, 50,000,000
        shares  authorized; 24,179,953
        shares issued and outstanding                   241,800         241,800
      Additional paid-in capital                     67,279,662      67,245,367
      Accumulated deficit                           (56,875,678)    (54,747,204)
      Deferred compensation                             (28,015)        (30,283)
                                                   -------------   -------------
         Total stockholders' equity                  10,617,769      12,709,680
                                                   -------------   -------------
                                                   $ 13,376,424    $ 15,584,991
                                                   =============   =============



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


                                        2

<PAGE>

                        PHOTOMEDEX, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)


                                                    For the Three Months Ended

                                                      March 31,      March 31,
                                                        2002           2001
                                                   -------------   -------------

REVENUES                                           $    952,373    $  1,220,602

COSTS AND EXPENSES:
    Cost of revenues, excluding depreciation            251,498         392,560
    Selling, general and administrative               2,226,614       3,789,750
    Research and development                            172,330         563,675
    Depreciation and amortization                       424,376         430,128
                                                   -------------   -------------


    Loss before interest and other
     (expense) income, net                           (2,122,445)     (3,955,511)


INTEREST (EXPENSE) INCOME, net                           (1,068)        112,149

OTHER (EXPENSE) INCOME, net                              (4,961)          2,389
                                                   -------------   -------------


NET LOSS                                           $ (2,128,474)   $ (3,840,973)
                                                   =============   =============


BASIC AND DILUTED NET LOSS PER SHARE               $      (0.09)   $      (0.21)
                                                   =============   =============

SHARES USED IN COMPUTING BASIC AND DILUTED
   NET LOSS PER SHARE                                24,179,953      17,916,009
                                                   =============   =============



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

                                        3

<PAGE>
<TABLE>

                                  PHOTOMEDEX, INC. AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                             (Unaudited)
<CAPTION>

                                                                       For the Three Months Ended

                                                                    March 31, 2002    March 31, 2001
                                                                   ----------------  ----------------
<S>                                                                <C>               <C>
OPERATING ACTIVITIES:
      Net loss                                                     $    (2,128,474)  $    (3,840,973)
      Adjustments to reconcile net loss to net cash used
         in operating activities -
              Depreciation and amortization                                424,376           430,128
              Stock options and warrants issued to
                consultants for services                                    34,295                --
              Amortization of deferred compensation                          2,268             3,033
      Changes in operating assets and liabilities -
         Accounts receivable                                                84,530        (1,054,277)
         Inventories                                                       187,032          (561,380)
         Prepaid expenses and other assets                                 (16,660)          112,125
         Accounts payable                                                 (218,051)        1,304,528
         Accrued compensation and related expenses                          56,343            33,342
         Other accrued liabilities                                          92,072           687,439
         Deferred revenues                                                 (10,350)          108,845
                                                                   ----------------  ----------------

              Net cash used in operating activities                     (1,492,619)       (2,777,190)
                                                                   ----------------  ----------------

INVESTING ACTIVITIES:
      Purchases of property and equipment                                  (32,560)          (83,092)
      Lasers placed into service                                            (2,000)       (1,191,965)
                                                                   ----------------  ----------------

              Net cash used in investing activities                        (34,560)       (1,275,057)
                                                                   ----------------  ----------------

FINANCING ACTIVITIES:
      Proceeds from issuance of common stock, net                               --         5,573,156
      Proceeds from issuance of notes payable                                4,000           156,978
      Payments on notes payable                                            (40,670)          (59,659)
                                                                   ----------------  ----------------

              Net cash (used in) provided by financing activities          (36,670)        5,670,475
                                                                   ----------------  ----------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    (1,563,849)        1,618,228

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                           4,066,820         7,561,040
                                                                   ----------------  ----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                           $     2,502$971   $     9,179,268
                                                                   ================  ================
</TABLE>

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

                                                  4

<PAGE>

                        PHOTOMEDEX, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

THE COMPANY

Background
----------

         PhotoMedex, Inc. and subsidiaries ("the Company") changed its name from
Laser Photonics, Inc. on August 8, 2000. The Company develops, manufactures and
markets therapeutic excimer laser-based instrumentation designed to treat
psoriasis, vitiligo and atopic dermatitis. The Company is also developing
technology for the treatment of other skin disorders. In January 2000, the
Company received the first Food and Drug Administration ("FDA") approval to
market an excimer laser system, the XTRAC system, for the treatment of
psoriasis. In March 2001, the Company received FDA approval to treat vitiligo
and in August 2001, the Company received FDA approval to treat atopic
dermatitis. The Company commercially launched the XTRAC phototherapy treatment
system in the United States in August 2000. The Company is also developing such
lasers and equipment and technologies to treat other medical problems and for
non-medical applications.

Liquidity
---------

         The Company has incurred significant losses and has had negative cash
flows from operations since emerging from bankruptcy in May 1995. To date, the
Company has dedicated most of its financial resources to research and
development and general and administrative expenses and in the fourth quarter of
2000 began to market the XTRAC system for commercial sale. The Company has
historically financed its activities from borrowings and the private placement
of debt and equity securities. As of March 31, 2002, the Company had an
accumulated deficit of $56,875,678.

         The Company expects to incur operating losses for at least the next
twelve months because it plans to spend substantial amounts on the marketing of
its psoriasis, vitiligo and atopic dermatitis treatment products and expansion
of its operations. The Company cannot assure that it will market any products
successfully, operate profitably in the future, or that it will not require
significant additional financing in order to accomplish its business plan.

         The Company's future revenues and success depends upon its excimer
laser systems for the treatment of a variety of skin disorders. The Company's
excimer laser system for the treatment of psoriasis, vitiligo, and atopic
dermatitis is currently generating revenues in both the United States and 16
countries around the world. The Company's ability to successfully introduce new
products based on its new business focus and the expected benefits to be
obtained from these products may be adversely affected by a number of factors,
such as unforeseen costs and expenses, technological change, economic downturns,
competitive factors or other events beyond the Company's control. Consequently,
the Company's historical operating results cannot be relied upon as indicators
of future performance, and the Company cannot predict whether it will obtain or
sustain positive operating cash flow or generate net income in the future.

         Cash and cash equivalents were $2,502,971 as of March 31, 2002. The
Company believes that the existing cash balance together with its existing
financial resources, and any revenues from its sales, distribution, licensing
and manufacturing relationships, will be sufficient to meet its operating and

                                        5

<PAGE>

capital requirements into the first quarter of 2003. The Company has decided to
limit its domestic placement of lasers until it obtains broader approval for
reimbursement for treatments using its laser system. However, depending upon the
Company's rate of growth and other operating factors, the Company may require
additional equity or debt financing to meet its working capital requirements or
capital expenditure needs. There can be no assurance that additional financing,
if needed, will be available when required or, if available, on terms
satisfactory to the Company.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Quarterly Financial Information and Results of Operations

         The financial statements as of March 31, 2002 and for the three months
ended March 31, 2002 and 2001, are unaudited and, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of March 31, 2002, and the
results of operations and cash flows for the three months ended March 31, 2002
and 2001. The results for the three months ended March 31, 2002 are not
necessarily indicative of the results to be expected for the entire year. While
management of the Company believes that the disclosures presented are adequate
to make the information not misleading, these consolidated financial statements
should be read in conjunction with the consolidated financial statements and the
notes included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001.


Principles of Consolidation
---------------------------

         The consolidated financial statements include the accounts of the
Company and its subsidiaries, including Acculase, Inc. ("Acculase") (see Note
2). All significant intercompany accounts and transactions have been eliminated.

Management's Use of Estimates
-----------------------------

         The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The critical estimates and judgments made by management in the preparation of
the financial statements relate to revenue recognition, impairments of
long-lived assets and adequacy of accounts receivable reserves.

Cash and Cash Equivalents
-------------------------

         For the purposes of the consolidated statements of cash flows, the
Company considers investment instruments purchased with an original maturity of
three months or less to be cash equivalents. As of March 31, 2002 and December
31, 2001, cash equivalents are primarily comprised of investments in a money
market fund.

                                        6

<PAGE>

Inventories
-----------

         Inventories are stated at the lower of cost or market, determined by
the first-in, first-out method and consist of the following:
                                                 March 31,         December 31,
                                                    2002               2001
                                               --------------     --------------
         Raw materials                         $   1,995,816      $   2,074,174
         Work-in-process                             375,998            484,672
                                               --------------     --------------
                                               $   2,371,814      $   2,558,846
                                               ==============     ==============

         The Company's psoriasis treatment equipment will either be (i) placed
in a physician's office and remain the property of the Company or (ii) be sold
to distributors or physicians directly. With respect to the equipment placed in
a physician's office, the Company earns revenue each time the laser is used for
a patient treatment.

         Throughout the laser manufacturing process, the related production
costs are recorded within inventory. Once the laser is completed and placed in a
physician's office, the cost is transferred from inventory to "lasers in
service" within property and equipment. Lasers that are completed and not placed
in a physician's office are maintained in inventory until the unit is sold.

Property and Equipment
----------------------

         Property and equipment are stated at cost. Depreciation is calculated
on a straight-line basis over the estimated useful lives of the assets, which
range from three to seven years. Improvements and betterments are capitalized,
while maintenance and repair costs are charged to expense as incurred. Upon
retirement or disposition, the applicable property amounts are relieved from the
accounts and any gain or loss is recorded in the consolidated statements of
operations. Property and equipment consists of the following:

                                                  March 31,        December 31,
                                                    2002               2001
                                               --------------     --------------
         Lasers in service                     $   4,231,280      $   4,229,280
         Computer hardware and software              246,179            213,619
         Furniture and fixtures                      151,637            151,637
         Machinery and equipment                      58,714             58,714
         Leasehold improvements                       78,716             78,716
                                               --------------     --------------
                                                   4,766,526          4,731,966
         Accumulated depreciation and
           amortization                           (1,824,097)        (1,433,812)
                                               --------------     --------------

                                               $   2,942,429      $   3,298,154
                                               ==============     ==============

         Lasers in service represent psoriasis treatment equipment currently
located in physician offices. Lasers in service are depreciated over an
estimated useful life of three years. The Company began to generate revenues
from these lasers in the fourth quarter of 2000.

         The Company evaluates the realizability of property and equipment based
on estimates of undiscounted future cash flows over the remaining useful life of
the asset. If the amount of such estimated undiscounted future cash flows is
less than the net book value of the asset, the asset is written down to the net
realizable value. As of March 31, 2002, no such write-down was required.

                                        7

<PAGE>

Intangible Assets
-----------------

         Intangible assets consist of goodwill, developed technology and
patents, which are carried at cost less accumulated amortization. Patents are
amortized on a straight-line basis over the estimated useful lives of eight to
twelve years. Developed technology relates to the purchase of the minority
interest of Acculase (see Note 2) and is being amortized on a straight-line
basis over seven years. Goodwill relates to the purchase of the minority
interest of Acculase was amortized on a straight-line basis over 10 years in
2001.

         The Company evaluates the realizability of intangible assets based on
estimates of undiscounted future cash flows over the remaining useful life of
the asset. If the amount of such estimated undiscounted future cash flows is
less than the net book value of the asset, the asset is written down to the net
realizable value. As of March 31, 2002, no such write-down was required.

Accrued Warranty Costs
----------------------

         The Company offers a warranty on product sales for a one-year period.
The Company provides for the estimated future warranty claims on the date the
product is sold.

Revenue Recognition
-------------------

         The Company has two distribution channels for its phototherapy
treatment equipment. The Company will either (i) sell the laser through a
distributor or directly to a physician or (ii) place the laser in a physician's
office (at no charge to the physician) and charge the physician a fee for each
time the laser is used for a patient treatment. When the Company sells a laser
to a distributor or directly to a physician, revenue is recognized upon shipment
of the product. The Company does not allow products to be returned by its
distributors. When the Company places the laser in a physician's office, service
revenues are recognized each time the laser is used for a patient treatment. The
physician purchases a treatment card that allows performance of a specified
number of treatments. This amount is included in deferred revenues on the
accompanying consolidated balance sheets until the treatment occurs.

Research and Development
------------------------

         Research and development expenses are charged to operations in the
period incurred.

Net Loss Per Share
------------------

         The Company computes net loss per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No.
128 requires dual presentation of basic and diluted net income (loss) per share
for complex capital structures on the face of the statements of operations.
According to SFAS No. 128, basic net income (loss) per share is calculated by
dividing net income (loss) available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted net income
(loss) per share reflects the potential dilution from the exercise or conversion
of securities into common stock, such as stock options and warrants.

         Diluted net loss per share is the same as basic net loss per share as
no additional shares for the potential dilution from the exercise of securities
into common stock are included in the denominator since the result would be
anti-dilutive.

                                        8

<PAGE>

Fair Value of Financial Instruments
-----------------------------------

         The estimated fair values for financial instruments under SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The fair value of
cash is based on its demand value, which is equal to its carrying value. The
fair values of notes payable are based on borrowing rates that are available to
the Company for loans with similar terms, collateral and maturity. The estimated
fair values of notes payable approximate the carrying values. Additionally, the
carrying value of all other monetary assets and liabilities is equal to the fair
value due to the short-term nature of these instruments.

Income Taxes
------------

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

New Accounting Pronouncements
-----------------------------

         In June 2001, the Financial Accounting Standards Board ("FASB")
approved SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of
interest method of accounting for business combinations initiated after June 30,
2001. SFAS No. 142 required companies to cease amortizing goodwill on December
31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001
is not amortized. SFAS No. 142 also establishes a new method of testing goodwill
for impairment on an annual basis or on an interim basis if an event occurs or
circumstances change that would reduce the fair value of a reporting unit below
its carrying value. The adoption of SFAS No. 142 has resulted in the Company's
discontinuation of amortization of its goodwill; however, the Company is
required to test goodwill for impairment under the new standard beginning in
2002, which could have an adverse effect on the Company's future results of
operations if an impairment occurs. The net book value of intangible assets at
March 31, 2002 was $3,637,820.

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires that the fair value of a
liability associated with an asset retirement be recognized in the period in
which it is incurred, with the associated retirement costs capitalized as part
of the carrying amount of the long-lived asset and subsequently depreciated over
its useful life. The adoption of SFAS No. 143 will not have any impact on the
Company's financial position or results of operations.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which establishes a single
accounting model, based on the framework established in SFAS No. 121, for
long-lived assets to be disposed of and clarifies certain issues related to SFAS
No. 121. SFAS No. 144 supercedes SFAS No. 121 and APB Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company was required to adopt SFAS No. 144 for fiscal year
2002. The adoption of SFAS No. 144 did not have a material impact on the results
of operations.

                                        9

<PAGE>

2. ACQUISITION:
   ------------

         Effective August 31, 2000, the Company issued 300,000 shares of common
stock for the remaining 23.9% of Acculase, which the Company did not already
own. The Company granted certain registration rights with respect to the shares
issued. The transaction was accounted for as a purchase. The Company has
historically consolidated the results of Acculase in its financial statements
and has recognized all of Acculase's losses as the Company has historically
funded the operations. In addition, due to the significant historical losses of
Acculase, the Company did not have any investment recorded for its 76.1%
ownership of Acculase. Accordingly, the total purchase price of $4,234,415,
including transaction costs of $409,415, was allocated to Acculase's net
tangible and intangible assets based on their estimated fair values as of the
date of the transaction. Based upon an independent valuation, $837,000 of the
purchase price has been allocated to developed technology and the remaining
$3,397,415 has been allocated to goodwill. Beginning January 1, 2002, the
developed technology is being amortized over seven years on a straight-line
basis. For the years ended December 31, 2001 and 2000, developed technology was
being amortized over 10 years on a straight-line basis. For the three months
ended March 31, 2002 and 2001, amortization of developed technology was $32,003
and $20,925, respectively. For the years ended December 31, 2001 and 2000,
goodwill was being amortized over 10 years on a straight-line basis. As of
January 1, 2002, consistent with SFAS No. 142 (see Note 1), goodwill is no
longer amortized; rather, it is subject to certain impairment tests.
Amortization of goodwill for the three months ended March 31, 2001, was $84,935.
Excluding amortization of goodwill, basic and diluted net loss per share for the
three months ended March 31, 2001 remained the same.



3. OTHER ACCRUED LIABILITIES:
   --------------------------

         Other accrued liabilities consist of the following:

                                                       March 31,   December 31,
                                                         2002          2001
                                                    -------------  -------------

         Accrued professional and consulting fees   $    150,000   $    128,000

         Accrued warranty                                213,335        267,714

         Other accrued expenses                          156,003         31,552
                                                    -------------  -------------

                                                    $    519,338   $    427,266
                                                    =============  =============

                                       10

<PAGE>
<TABLE>
<CAPTION>

4. NOTES PAYABLE:
   --------------

         Notes payable consists of the following:
                                                                                      March 31,     December 31,
                                                                                        2002            2001
                                                                                   -------------   -------------
<S>                                                                                <C>             <C>
         Note payable - lessor, interest at 10%, payable in monthly principal
         and interest installments of $1,775 through
         2002, unsecured.                                                          $     15,332    $     20,195


         Note payable - unsecured creditor, interest at 9.0%, payable in monthly
         principal and interest installments of
         $461 through 2002.                                                               4,000              --


         Note payable - unsecured creditor, interest at 6.7%, payable in monthly
         principal and interest installments of
         $9,065 through 2002.                                                             9,015          44,822
                                                                                   -------------   -------------
                                                                                         28,347          65,017
         Less-current maturities                                                        (28,347)        (65,017)
                                                                                   -------------   -------------
                                                                                   $         --    $         --
                                                                                   =============   =============
</TABLE>

5. SIGNIFICANT ALLIANCES/AGREEMENTS:
   ---------------------------------


         In 1997, the Company executed a series of agreements with Edwards
Lifesciences Corp. ("Edwards"). Reference is made to the Company's Form 10K for
the period ended December 31, 2001 for further information on the agreements.

         There were no revenues recognized under this agreement for the three
months ended March 31, 2002 or 2001.

         In January 2001, Edwards stopped performance under the agreement and
began to commercialize a TMR product with an unrelated third party. Management
of the Company believes that Edwards has breached this agreement, and has
notified Edwards of its position regarding the agreement. The Company has
reserved all of its rights under the agreement and is considering what legal
action should be taken in this regard. Accordingly, the Company currently does
not have a strategic partner with whom to market its TMR laser. The Company does
not currently have sufficient financial resources to commercialize the TMR laser
on its own.

         On September 23, 1997, Edwards purchased from a third party rights to
related patents for the use of an excimer laser to ablate tissue in vascular and
cardiovascular applications for $4,000,000. The ablation technology underlying
the patents has been successfully used in other applications for many years. In
December 1997, the Company acquired a license to these patent rights from
Edwards thereby entitling the Company to sell an excimer laser and related
products for use in cardiovascular procedures. A license fee was recorded for
the $4,000,000 cash payment made by the Company to Edwards to acquire the
license.

         Due to the non-performance of Edwards under the Edwards Agreement
described above, the Company evaluated various alternatives for exploiting the
license. During the fourth quarter of 2001, the Company completed its evaluation

                                       11

<PAGE>

and concluded that the projected undiscounted cash flows expected to be derived
from this license are less than the carrying value of the license. Management of
the Company also believes that any operations relating to this license will
generate negative cash flows over the next several years due to the additional
costs that would need to be incurred to further develop and market products
based on this technology. Accordingly, the Company recorded an impairment charge
in the fourth quarter of 2001 of approximately $2,000,000 associated with the
write down of the license agreement with Edwards.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THIS QUARTERLY REPORT ON FORM 10-Q (THE "REPORT"), INCLUDING THE DISCLOSURES
BELOW, CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES. WHEN USED HEREIN, THE TERMS "ANTICIPATES," "EXPECTS,"
"ESTIMATES," "BELIEVES" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY
OR ITS MANAGEMENT, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS.
FORWARD-LOOKING STATEMENTS IN THIS REPORT OR HEREAFTER INCLUDED IN OTHER
PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION"), REPORTS TO THE STOCKHOLDERS OF PHOTOMEDEX, INC., A DELAWARE
CORPORATION ("WE", "US" OR "OUR") AND OTHER PUBLICLY AVAILABLE STATEMENTS ISSUED
OR RELEASED BY US INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH COULD CAUSE OUR ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR
OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE
(FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST
ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF
OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS SET FORTH
HEREIN AND IN SUCH OTHER DOCUMENTS FILED WITH THE COMMISSION, EACH OF WHICH
COULD ADVERSELY AFFECT OUR BUSINESS AND THE ACCURACY OF THE FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN. OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS.

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS
REPORT.


OVERVIEW OF BUSINESS OPERATIONS

         We are engaged in the development, manufacturing and marketing of
proprietary excimer laser and fiber optic equipment and techniques directed
toward the treatment of psoriasis, vitiligo and atopic dermatitis.

         Prior to November 1999, our former business strategy consisted of the
development of a wide range of laser products using different solid-state
lasers. Between 1986 and the date of this Report, we sold over 1,000 lasers,
usually on a private label basis, to other manufacturers. We also considered
pursuing a strategy of using our excimer laser technology for a photolithography
product, which was abandoned. Our former strategies proved to be unsuccessful,
in the opinion of then current management. Although we generated revenues from
the sale of our products, former management believed that we would never be able
to operate profitably in the markets where we were then doing business. We
currently believe that our excimer laser technology provides the basis for
reliable cost-effective systems that will increasingly be used in connection
with a variety of applications. Accordingly, we have discontinued our business
operations related to our former business strategy and are focused solely on
excimer laser products for various medical applications.

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<PAGE>

         Our excimer laser power source was developed to perform a variety of
material processing applications. Our overall system, known as the pulsed
excimer laser, was approved by the FDA under an investigational device exemption
for use in the treatment of occlusive coronary artery disease, as an adjunct to
coronary artery bypass grant surgery. We chose not to pursue completion of the
exemption due to the lack of funds to pay the costs of, and to recruit patients
into, the necessary studies. In connection with the cardiovascular and vascular
uses of the excimer laser technology, on August 19, 1997, we entered into a
strategic alliance with Edwards for the manufacture and marketing of excimer
laser products for an experimental procedure known as transmyocardial
revascularization, or TMR. In 1997, we had paid Edwards $4,000,000 to acquire a
license related to this technology from Edwards. Our strategic relationship with
Edwards has terminated, and we have no current business plan to commercialize
our excimer laser system for TMR. We have evaluated the various alternatives for
exploiting the license. During the fourth quarter of 2001, we completed our
evaluation and concluded that the projected undiscounted cash flows expected to
be derived from this license are less than the carrying value of the license. We
also believe that any operations relating to this license will generate negative
cash flows over the next several years due to the additional costs that would
need to be incurred to further develop and market products based on this
technology. Accordingly, we recorded an impairment charge in the fourth quarter
of 2001 of approximately $2,000,000 associated with the write down of the
license agreement with Edwards.

         In connection with our current business plan, our initial medical
applications for our excimer laser technology are intended to be used in the
treatment of psoriasis, vitiligo and atopic dermatitis. In January 2000, we
received approval of our 510(k) submission from the FDA relating to the use of
our XTRAC system for the treatment of psoriasis. The 510(k) establishes that our
XTRAC system has been determined to be substantially equivalent to currently
marketed devices for purposes of treating psoriasis. On March 1, 2001, we
received the first FDA approval to market our XTRAC system for the treatment of
vitiligo. In August 2001, we received the first FDA approval to market our XTRAC
system for the treatment of atopic dermatitis.

         In August 2000, after significant progress toward completing beta
testing of our psoriasis products, we shipped our first four XTRAC systems to
dermatologists for commercial use. During fiscal 2001, we continued in our
concerted effort to commercialize the XTRAC phototherapy system by refining the
laser design and enhancing reliability. These efforts allowed us to obtain
certain levels of acceptance by the insurance reimbursement community. To date,
we have received approval from approximately 50 health plans in 30 states to
reimburse for claims submitted by patients or their doctors for treatment of
psoriasis utilizing our XTRAC system. We have also received approval from 8
insurers for reimbursement for treatment of vitiligo utilizing our XTRAC system.
As of March 31, 2002, we have generated cumulative revenues of $1,136,831 from
the phototherapy treatment system usage and $4,885,500 from sales of XTRAC
systems.

         As a part of our commercialization strategy in the United States, we
are providing our XTRAC system to targeted dermatologists at no capital cost to
them. We believe that this strategy will create substantial incentives for these
dermatologists to adopt our XTRAC system and will accelerate further market
penetration. We expect to receive a recurring stream of revenue from
per-treatment charges to dermatologists for use of our XTRAC system. However, we
have decided to limit our domestic placement of lasers until we obtain broader
approvals for reimbursement for treatment utilizing our XTRAC system. Outside of
the United States, our strategy includes selling XTRAC systems directly to
dermatologists through our distributors and placing XTRAC systems with
dermatologists to provide us with a usage-based revenue stream.

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<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001

         We generated revenues of $952,373 and $1,220,602 during the three
months ended March 31, 2002 and 2001, respectively. Of these amounts, $712,000
and $1,155,000 in the respective periods related to the sale of excimer lasers
and spare parts to distributors outside of the United States for the three
months ended March 31, 2002 and 2001, respectively. Additionally, for the three
months ended March 31, 2002 and 2001, we generated revenue of $240,373 and
$65,602, respectively, from treatments performed with our excimer laser in the
United States. As of March 31, 2002, we have a total of approximately 140
excimer laser systems at dermatologists offices' for commercial use throughout
the United States.

         Cost of revenues during the three months ended March 31, 2002 and 2001
were $251,498 and $392,560, respectively. Cost of revenues during these periods
relate primarily to the production costs of the of XTRAC laser equipment sold
outside of the United States.

         Selling, general and administrative expenses during the three months
ended March 31, 2002 decreased to $2,226,614 from $3,789,750 during the three
months ended March 31, 2001. This decrease relates primarily to the reductions
in our workforce and infrastructure to maximize the use of operating cash while
we continue to implement our business plan to commercialize our XTRAC system.
Specifically, these decreases included reductions in consulting and professional
fees related to marketing expenses, and reduction in staffing levels in various
administrative departments.

         Research and development during the three months ended March 31, 2002
decreased to $172,330 from $563,675 during the three months ended March 31,
2001. This decrease relates primarily to our focusing on refining the
operability of our phototherapy laser products during the three months ended
March 31, 2002. Research and development expenses for the three months ended
March 31, 2001 relates primarily to the continued development of our XTRAC laser
equipment.

         Depreciation and amortization during the three months ended March 31,
2002 decreased to $424,376 from $430,128 during the three months ended March 31,
2001. This decrease relates to the elimination of the amortization of goodwill
associated with our purchase of the remaining 23.9% of Acculase, Inc., a
California corporation, or Acculase, our wholly-owned subsidiary, on August 31,
2000 and the elimination of the amortization of the license fee which was
written off through an impairment charge in the fourth quarter of 2001. This
decrease was offset by the additional depreciation associated with higher
property and equipment balances.

         Net interest expense during the three months ended March 31, 2002 was
$1,068, as compared to net interest income of $112,149 for the three months
ended March 31, 2001. This decrease in net interest income relates primarily to
our lower cash balances and investments during the three months ended March 31,
2002, as compared with that of the three months ended March 31, 2001.

         Other expense during the three months ended March 31, 2002 was $4,961,
as compared to other income of $2,389 during the three months ended March 31,
2001.

         As a result of the foregoing, we incurred a net loss of $2,128,474
during the three months ended March 31, 2002, as compared to a net loss of
$3,840,973 during the three months ended March 31, 2001.

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         We have historically financed our operations through the use of working
capital provided from loans and equity and debt financing.

         In 1997 our strategy changed to focus our efforts on our excimer laser
technology. We began to develop a broad base of excimer laser and excimer laser
delivery products for both medical and non-medical applications.

         On March 27, 2001, we completed a private offering of 1,230,000 shares
of our common stock at $5.00 per share and received gross proceeds of
$6,150,000. The closing price of the common stock on the date that the
transaction was negotiated was $5.75 per share and on March 27, 2001, the
closing date of the transaction, the closing price was approximately $4.875 per
share. We paid Pacific Growth Equities, Inc. a commission of 6.5% of the gross
proceeds, or approximately $400,000. We have used the proceeds of this financing
to pay for the marketing of our products (including our psoriasis treatment
products), research and development expenses and working capital.

         On October 24, 2001, we completed a private offering of 5,040,714
shares of common stock at $1.05 per share and warrants to purchase 1,260,179
shares of common stock at $1.16 per share. We have filed a registration
statement for the securities issued in the private placement. We based the per
share purchase price of the shares on the closing sale price of our common stock
on October 12, 2001, or $1.05. We received gross proceeds of $5,292,750. We paid
Investec PMG Capital and Emerging Growth Equities Limited a commission of
approximately $322,000. We have used and intend to continue to use the proceeds
of this financing to pay for working capital and other general corporate
purposes.

         At March 31, 2002, the ratio of current assets to current liabilities
was 2.38 to 1.00 compared to 2.93 to 1.00 at December 31, 2001. As of March 31,
2002, we had $3,820,667 of working capital.

         Cash and cash equivalents were $2,502,971 as of March 31, 2002, as
compared to $4,066,820 as of December 31, 2001. This decrease was primarily
attributable to operating expenses made during the three months ended March 31,
2002.

         We believe that our existing cash balance, together with our existing
financial resources, and any revenues from our sales, distribution, licensing
and manufacturing relationships, will be sufficient to meet our operating and
capital requirements into the first quarter of 2003. We have decided to limit
its domestic placement of lasers until it obtains broader approvals for
reimbursement for treatments using its laser system. However, depending upon our
rate of growth and other operating factors, we may require additional equity or
debt financing to meet our working capital requirements or capital expenditure
needs. There can be no assurance that additional financing, if needed, will be
available when required or, if available, on terms satisfactory to us.

         As of March 31, 2002, we had borrowings in the aggregate amount of
$28,347. As of December 31, 2001, we had borrowings in the aggregate amount of
$65,017. The decrease in borrowings relates to the normal scheduled repayment of
the obligations.

         Net cash used in operating activities was $1,492,619 and $2,777,190 for
the three months ended March 31, 2002 and 2001, respectively. Net cash used in
operating activities during the three months ended March 31, 2002 and 2001
primarily consisted of net losses, increases in current assets (2001 only) and
decreases in current liabilities (2002 only). These uses were offset by
depreciation and amortization, decreases in current assets (2002 only) and
increases in current liabilities (2001 only).

                                       15

<PAGE>

         Net cash used in investing activities was $34,560 and $1,275,057 for
the three months ended March 31, 2002 and 2001, respectively. In the three
months ended March 31, 2002, we utilized $32,560 to acquire equipment to support
our excimer laser operations. We also used $2,000 associated with the
construction of our psoriasis treatment lasers. In the three months ended March
31, 2001, we utilized $83,092 to acquire equipment to support our excimer laser
operations and $1,191,965 associated with the construction of our psoriasis
treatment lasers.

         Net cash used in financing activities was $36,670 as compared to net
cash provided by financing activities of $5,670,475 during the three months
ended March 31, 2002 and 2001, respectively. In the three months ended March 31,
2002, we received $4,000 from the issuance of notes payable, which was offset by
the utilization of $40,670 for the payment of certain debts. In the three months
ended March 31, 2001, we received $5,573,156 from the net proceeds of the sale
of 1,230,000 shares of common stock in connection with the March 27, 2001
financing and $156,978 of proceeds from the issuance of notes payable, which was
offset by the utilization of $59,659 for the payment of certain debts.

         Our ability to expand our business operations is currently dependent on
financing from external sources. There can be no assurance that changes in our
manufacturing, marketing or research and development plans or other changes
affecting our operating expenses and business strategy will not result in the
expenditure of such resources before such time or that we will be able to
develop profitable operations prior to such date, or at all, or that we will not
require additional financing at or prior to such time in order to continue
operations. There can be no assurance that additional capital will be available
on terms favorable to us, if at all. To the extent that additional capital is
raised through the sale of additional equity or convertible debt securities, the
issuance of such securities could result in additional dilution to our
stockholders. Moreover, our cash requirements may vary materially from those now
planned because of results of marketing, product testing, changes in the focus
and direction of our marketing programs, competitive and technological advances,
the level of working capital required to sustain our planned growth, litigation,
operating results, including the extent and duration of operating losses, and
other factors. In the event that we experience the need for additional capital,
and are not able to generate capital from financing sources or from future
operations, management may be required to modify, suspend or discontinue our
business plan.

IMPACT OF INFLATION

         We have not operated in a highly inflationary period, and our
management does not believe that inflation has had a material effect on sales or
expenses.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board ("FASB")
approved SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 141 prospectively prohibits the pooling of
interest method of accounting for business combinations initiated after June 30,
2001. SFAS No. 142 required companies to cease amortizing goodwill on December
31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001
is not amortized. SFAS No. 142 also establishes a new method of testing goodwill
for impairment on an annual basis or on an interim basis if an event occurs or
circumstances change that would reduce the fair value of a reporting unit below
its carrying value. The adoption of SFAS No. 142 has resulted in the Company's
discontinuation of amortization of its goodwill; however, the Company is
required to test its goodwill for impairment under the new standard beginning in
2002, which could have an adverse effect on the Company's future results of
operations if an impairment occurs. The net book value of intangible assets at
March 31, 2002 was $3,637,820.

                                       16

<PAGE>

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires that the fair value of a
liability associated with an asset retirement be recognized in the period in
which it is incurred, with the associated retirement costs capitalized as part
of the carrying amount of the long-lived asset and subsequently depreciated over
its useful life. The adoption of SFAS No. 143 will not have any impact on the
Company's financial position or results of operations.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which establishes a single
accounting model, based on the framework established in SFAS No. 121, for
long-lived assets to be disposed of and clarifies certain issues related to SFAS
No. 121. SFAS No. 144 supercedes SFAS No. 121 and APB Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company was required to adopt SFAS No. 144 for fiscal year
2002. The adoption of SFAS No. 144 did not have a material impact on the results
of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         We are not currently exposed to market risks due to changes in interest
rates and foreign currency rates and therefore, we do not use derivative
financial instruments to address treasury risk management issues in connection
with changes in interest rates and foreign currency rates.


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Reference is made to Item 3, Legal Proceedings, in our Annual Report on
Form 10-K for the year ended December 31, 2001 for descriptions of our legal
proceedings.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Recent Issuances of Unregistered Securities

         During the three months ended March 31, 2002, we granted options to
purchase up to an aggregate of 144,000 shares of Common Stock to various of our
directors, employees and consultants, as follows: (i) options to purchase up to
23,000 shares of common stock under our 2000 Stock Option Plan at a weighted
average exercise price of $1.74 per share; (ii) options to purchase up to
100,000 shares of common stock under our Non-Employee Director Stock Option Plan
at a weighted average exercise price of $1.85 per share; and (iii) options to
purchase up to 21,000 shares of common stock to members of our Scientific
Advisory Board at a weighted average exercise price of $1.85 per share.

         We believe that all of the foregoing issuances of securities were made
in transactions exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS

        None.

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ITEM 5. OTHER INFORMATION

        None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        None.

                       DOCUMENTS INCORPORATED BY REFERENCE

         We are currently subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549; at its New York
Regional Office, 233 Broadway, New York, New York 10297; and its Chicago
Regional Office, 175 West Jackson Boulevard, Suite 900, Chicago, Illinois 60604,
and copies of such materials can be obtained from the Public Reference Section
of the Commission at its principal office in Washington, D.C., at prescribed
rates. In addition, such materials may be accessed electronically at the
Commission's site on the World Wide Web, located at http://www.sec.gov. We
intend to furnish our stockholders with annual reports containing audited
financial statements and such other periodic reports as we determine to be
appropriate or as may be required by law.



                                   SIGNATURES

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



                                      PHOTOMEDEX, INC.



Date:  May 10, 2002                   By:  /s/  Jeffrey F. O'Donnell
                                           ---------------------------
                                           Jeffrey F. O'Donnell
                                           President and Chief Executive Officer


Date:  May 10, 2002                   By:  /s/  Dennis M. McGrath
                                           ---------------------------
                                           Dennis M. McGrath
                                           Chief Financial Officer


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