Management Commentary

Dr. Dolev Rafaeli, PhotoMedex CEO, commented, “We are pleased to deliver another quarter of strong financial results with revenues increasing 63% over last year, gross profit increasing 71% and net income increasing 79%. Revenues for the first nine months of 2012 exceed revenues for all of 2011. Our consumer marketing programs continue to deliver outstanding results, while the steps we have taken to reduce costs, such as using ocean freight more often to deliver products and consolidating manufacturing, have contributed to margin expansion as well.

“Yesterday we reported that sales of no!no! Hair™ once again broke home television shopping sales records in the U.S. at a 24-hour beauty event held this past weekend despite the fact that the Northeast, a major target market, was still suffering from the effects of the recent hurricane. We beat our own record, which was established over this past Fourth of July holiday. The products for this event were shipped in the fourth quarter, while the products for the Fourth of July holiday were shipped in the second quarter.”

Dr. Rafaeli concluded, “In the coming months we are looking forward to expanding our consumer marketing in the U.S. for XTRAC® for the treatment of psoriasis and Neova® to help reverse the effects of sun-damaged skin, and to expanding our international market for the no!no! family of products.”

Reported Financial Results

Revenues for the third quarter of 2012 were $56.7 million, an increase of 63% over the same period last year. Included in this amount is $6.4 million in revenues from pre-merged PhotoMedex. This compares with revenues for the third quarter of 2011 of $34.7 million, which included no revenues from pre-merged PhotoMedex.

Net income for the third quarter of 2012 was $7.5 million or $0.35 per diluted share, which included $1.5 million in stock-based compensation expense and $1.4 million in depreciation and amortization expenses. This compares with net income for the third quarter of 2011 of $4.2 million or $0.32 per diluted share, which included $1.6 million in stock-based compensation expense and $0.1 million in depreciation and amortization expenses.

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