Reverse Acquisition

9 Months Ended

Sep. 30, 2012

Reverse Acquisition [Abstract]

Reverse Acquisition

Note 2

Reverse Acquisition:

On December 13, 2011, PhotoMedex closed the merger acquisition with Radiancy, Inc. in a transaction that was accounted for as a reverse acquisition, with Radiancy treated as the accounting acquirer. Radiancy was considered the accounting acquirer even though PhotoMedex was the issuer of common stock in the transaction, such that upon completion of the merger, the Company had 18,820,852 shares of common stock issued and outstanding, with the Pre-merged PhotoMedex, Inc. stockholders collectively owning approximately 20%, and the former Radiancy, Inc. stockholders owning approximately 80%, of the outstanding common stock of the Company. The 80%/20% ratio reflects the fact that warrants or options are not treated as equivalent outstanding common stock. Accordingly, the financial statements of Radiancy, Inc. are treated as the historical financial statements of the Company, with the results of the entities defined as Pre-merged PhotoMedex, Inc. included only from December 14, 2011 and thereafter.

The consideration transferred was $82,562, and included $1,842 of assumed debt, for the Pre-merged PhotoMedex assets. This amount was determined based on the amount of equity interest (shares, options and warrants) that Radiancy would have had to issue to PhotoMedex shareholders in order to provide, as agreed upon in the merger document, a 75%/25% ownership ratio on a fully converted basis. Consistent with this formula all warrants and options were treated as equivalent, share for share, with outstanding common stock. The fair value of the consideration effectively transferred by Radiancy was based on the market price of Pre-merged PhotoMedex shares which was $15.60 per-share (closing price) on December 13, 2011, the day on which the reverse acquisition became effective. This consideration transferred also included $20 million in cash, which Pre-merged PhotoMedex, used to liquidate its convertible debt, prior to the acquisition. The $82,562 of consideration transferred was adjusted down during the measurement period of the reverse acquisition from the previously reported period by $1,353 to due to a change in valuation on unvested restricted stock as of December 13, 2011.

The fair value of the assets acquired and liabilities assumed were based on management estimates and values derived from an outside independent appraisal. During the measurement period of the reverse acquisition, provisional amounts have been retroactively adjusted to reflect new information obtained about facts and circumstances that existed as of the acquisition date in connection with certain tax positions of the acquired entity and as a result of such data in connection with certain tax election decisions concerning the sale of Photo Therapeutics Ltd. to Radiancy Ltd., the foreign subsidiary within the group and to the related realignment of its intellectual property prior to the reverse acquisition. As a result of the aforementioned, the net allocations to deferred tax assets were increased by $1,467 and were increased to taxes payable by $122 during the current period. The Company expects to complete in the fourth quarter 2012, its analysis of the usability of the net operating loss carry-forwards of Pre-merged PhotoMedex. According to the Company's best conjecture, the analysis is not expected to result in a material change to goodwill.

Based on the provisional purchase price allocation, the following table summarizes the estimated provisional fair value amounts of the assets acquired and liabilities assumed at the date of the acquisition:

Cash and cash equivalents	$	1,271
Accounts receivable		1,873
Inventories		7,136
Prepaid expenses and other current assets		639
Property and equipment		4,543
Patents and licensed technologies		13,500
Other intangible assets		12,000
Other assets		41
Deferred tax assets		28,589
Total assets acquired at fair value		69,592
Accounts payable		(6,333	)
Accrued compensation and related expenses		(1,554	)
Other accrued liabilities		(2,592	)
Deferred revenues		(556	)
Total liabilities assumed		(11,035	)
Net assets acquired	$	58,557

The purchase price exceeded the fair value of the net assets acquired by $24,005, which was recorded as goodwill.

The consolidated results of operations do not include any revenues or expenses related to the Pre-merged PhotoMedex business on or prior to December 13, 2011, the consummation date of the reverse acquisition. The Company's unaudited pro-forma results for the three and nine months ended September 30, 2011 summarize the combined results of the Radiancy and PhotoMedex in the following table, assuming the reverse acquisition had occurred on January 1, 2011 and after giving effect to the reverse acquisition adjustments, including amortization of the tangible and intangible assets which were acquired in the transaction:

	Three Months Ended September 30, 2011		Nine Months Ended September 30, 2011
	(unaudited)		(unaudited)
Net revenues	$	42,876	$	128,093
Net income		2,002		(3,911	)
Net income per share:
Basic	$	0.13	$	(0.28	)
Diluted	$	0.12	$	(0.27	)
Shares used in calculating net income per share:
Basic		15,357,408		13,970,895
Diluted		16,198,503		14,689,820

These unaudited pro-forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have actually resulted had the reverse acquisition occurred on January 1, 2011, nor to be indicative of future results of operations.