Note 2

Acquisition:

On July 1, 2013, PhotoMedex’ wholly-owned subsidiary, Radiancy, Inc., completed the acquisition of 100% of the shares of LK Technology Importaçăo E Exportaçăo LTDA (“LK”), a privately-held distributor in Brazil.

LK brings to PhotoMedex all required licenses, authorizations and permits to immediately begin its consumer business operating locally. LK was founded in 2003 and is based in Sao Paulo. LK has been operating for several years selling Radiancy’s professional line of products in Brazil. The local manager of LK will remain in his position.

The total consideration was $181, consisting of $100 consideration and $81 (a contingent consideration component) liability for an estimated amount to be due for the profit to be earned on the remaining inventory at acquisition date. Such contingent amount is expected to be paid during the year 2014. Of the $100 consideration, $41 was a cash down payment and the balance of $59 is to be paid in 2014.

The fair value of the assets acquired and liabilities assumed were based on management estimates. Based on the initial purchase price allocation, the following table summarizes the fair value amounts of the assets acquired and liabilities assumed at the date of the acquisition:

Cash and cash equivalents	$	125
Accounts receivable		1
Inventories		20
Prepaid expenses and other current assets		2
Total assets acquired at fair value		148

Accounts payable		(75	)
Accrued compensation and related expenses		(2	)
Other accrued liabilities		(11	)
Total liabilities assumed		(88	)

Net assets acquired	$	60

The purchase price exceeded the fair value of the net assets acquired by $121, which was recorded as goodwill.

The consolidated results of operations do not include any revenues or expenses related to the LK business on or prior to July 1, 2013, the consummation date of the acquisition. The amounts of revenue and earnings of LK since the acquisition date through December 31, 2013 included in the consolidated statement of comprehensive income were immaterial. Assuming the acquisition of LK had occurred on January 1, 2012, the impact on the Company’s results for the years ended December 31, 2013 and 2012 would have been immaterial. However this determination does not purport to be indicative of the results of operations which would have actually resulted had the acquisition occurred on January 1, 2012, nor to be indicative of future results of operations.

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 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 of Pre Merged PhotoMedex as of December 13, 2011.

The consolidated results of operations did 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 years ended December 31, 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 that were acquired in the transaction:

	Year Ended December 31, 2011
	(unaudited)

Net revenues	$	162,341
Net income (loss)		(13,077	)
Net income (loss) per share:
Basic	$	(0.91	)
Diluted	$	(0.91	)
Shares used in calculating net income (loss) per share:
Basic		14,445,184
Diluted		14,445,184

These unaudited pro-forma information 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.