RADIANCY INC.

Condensed Consolidated Financial Statements

As of and for the nine-month period ended September 30, 2011 (Unaudited)

RADIANCY INC.

Condensed Consolidated Financial Statements

As of and for the nine months ended September 30, 2011 (Unaudited)

TABLE OF CONTENTS

RADIANCY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share and per share amounts)

The accompanying notes are an integral part of the financial statements.

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RADIANCY INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of US dollars)

The accompanying notes are an integral part of the financial statements.

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RADIANCY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands of US dollars, except share amounts)

The accompanying notes are an integral part of the financial statements.

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RADIANCY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars)

The accompanying notes are an integral part of the financial statements.

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL

In the past few years, the Company succeeded in taking professional technologies geared towards physicians and med-spas to the home use market utilizing a variety of channels including Direct Response, retail outlets and home shopping networks.

The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Basis of presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary (consisting of normal recurring adjustments) for a fair presentation of the Company’s financial position at September 30, 2011 and the results of its operations and cash flow for each of the three and nine month periods then ended.

The unaudited interim financial statements were prepared on a basis consistent with the Company’s annual financial statements for the year ended December 31, 2010. Results of operations for the three and nine month periods ended September 30, 2011 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2011.

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

(In thousands of US dollars)

NOTE 3 - SIGNIFICANT EVENTS DURING THE PERIOD AND SUBSEQUENT BALANCE SHEET DATE

In addition, on June 30, 2011, the Board of Directors of the Company approved a grant to certain directors, executives and employees of the Company of 732,292 stock options at an exercise price of US$ 0.01, to purchase shares of the Company’s common stock (each option is exercisable to 2.011 common stock). The contractual term of each option is 10 years from the date of grant.

The vesting terms of the options are as follows:

Upon consummation of the merger as described in Note 3B, the Board of Directors may accelerate the vesting periods so all outstanding options will become fully vested and call for conversion of the options into shares of common stock. Options that would not be exercised on the date of such acceleration would be forfeited. If such acceleration will not be determined by the Board of Directors, options that would not be exercised within the contractual term would be forfeited.

Out of the total options exercised into shares of common stock, the Company shall have the right to repurchase 532,253 shares of common stock at a price equal to the par value of such shares (US$ 0.005 par share) in the event of either the resignation or the termination for cause of the employment agreement of the employees with the Company or its subsidiary. The repurchase right will be subject to the vesting periods mentioned in section 1 above.

The fair value of options granted during the nine month period ended September 30, 2011 was determined on the date of the respective grant date using the Black-Scholes option-pricing model based on the following weighted average assumptions:

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

(In thousands of US dollars)

NOTE 3 - SIGNIFICANT EVENTS DURING THE PERIOD AND SUBSEQUENT BALANCE SHEET DATE (cont.)

The fair value estimation of the award was US$ 13.62 per option. The Company recorded a stock based compensation expense in the interim financial statements for the six and three month periods ended June 30, 2011, in an amount of US$ 27.1 million (including the cash bonus liability in an amount of US$ 12.3 million) in respect of the 2011 grants, regarding the entire grant to the Chief Executive Officer and regarding a grant of 66,667 options to a director since such grants were fully vested on the date of grant (June 30, 2011).

During the three month period ended September 30, 2011, the Company recorded stock based compensation in the amount of US$ 1.6 million in respect of 665,625 options to other directors, executives and employees.

The remaining grant to the other directors, executives and employees in an aggregate total amount of approximately US$ 7.4 million, will be recorded as a stock based compensation expense in future periods.

During the fourth quarter of 2011 due to the completion of the merger (see Note 3B) 1,362,543 options were exercised into 2,740,074 common shares.

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, PhotoMedex shall (i) cause to be paid or issued to stockholders of record of Radiancy newly issued common stock, par value US$0.01 per share, of PhotoMedex, in an amount equal to the sum of (A) three times the number of shares of PhotoMedex common stock that are issued and outstanding immediately prior to the consummation of the Merger (including, for these purposes, any shares of PhotoMedex common stock that are issuable upon conversion or exercise of any outstanding convertible securities at a conversion or exercise price that is less than US$25.00 per share, but excluding those certain options to purchase 95,200 shares of PhotoMedex common stock which are provided for in certain PhooMedex employees employment agreements), plus (B) 3,040,000 shares of PhotoMedex common stock, and (ii) cause to be paid or issued to the stockholders of record of PhotoMedex, warrants to purchase an aggregate of 846,467 shares of PhotoMedex common stock, and options to purchase 95,200 shares of PhotoMedex common stock in connection with certain employment agreements with the PhotoMedex. In additional 800,000 shares of Photomedex shall be deposited as escrow securities for indemnification purposes.

On October 31, 2011, Radiancy and PhotoMedex have agreed to enter into an Amended and Restated Agreement and Plan of Merger. The amended terms of the Merger Agreement provide, among other terms, that the section regarding the “Escrow” of the executed merger agreement shall be omitted and as a result the parties will not enter into an escrow agreement and no PhotoMedex shares will be deposited as escrow securities for indemnification purposes. The amended terms also provide that on the date of the closing and in addition to the merger consideration previously agreed, Photomedex shall cause to be paid or issued the 800,000 shares originally planned to be deposited as escrow securities, in the following manner:

(i) 600,000 shares of PhotoMedex Common Stock to stockholder of record of Radiancy in addition to the 3,040,000 shares of PhotoMedex common stock .

and

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

(In thousands of US dollars)

NOTE 3 - SIGNIFICANT EVENTS DURING THE PERIOD AND SUBSEQUENT BALANCE SHEET DATE (cont.)

(ii) 179,800 warrants to purchase shares of PhotoMedex Common Stock to the stockholders of record of PhotoMedex, in addition to the 846,467 warrants and options to purchase 20,200 shares of PhotoMedex common stock in connection with certain employment agreements by and between PhotoMedex and certain employees of PhotoMedex in addition to the 95,200 options.

The Merger Agreement contains certain termination rights for both Radiancy and PhotoMedex and provides that, under certain circumstances, each of Radiancy and PhotoMedex, as the case may be, may be required to pay a termination fee. If either party terminates the Merger Agreement because of a change in board recommendation or if such party’s board of directors has approved an acquisition proposal or a superior offer, then such terminating party is required to pay a termination fee of US$3,000,000 to the other party. In addition, if there is a termination of the Merger Agreement due to a failure to satisfy certain of the conditions to closing of the Merger, the party so failing to satisfy such condition is required to pay to the other party a termination fee equal to US$1,500,000 plus reimbursement of the other party’s expenses. In addition, either party may terminate the Merger Agreement if the Merger is not consummated by January 31, 2012.

Following the merger agreement as described above, the company recognized a liability in the amount of $1 million according to a settlement agreement between Radiancy and Mr. Shalev and Dr. Azar (“former employees”) from August 7, 2006, as further described, in Note 8B (2) to the company’s annual consolidated financial statements for the 2010 year.

On December 13, 2011 Radiancy and PhotoMedex announced that their respective stockholders have voted to approve the adoption of the Amended and Restated Agreement and Plan of Merger, (the “Agreement”), dated as of October 31, 2011, among PhotoMedex, Radiancy, and PHMD Merger Sub, Inc. (“Merger Sub”), a wholly owned subsidiary of PhotoMedex. Pursuant to the Agreement, Merger Sub will merge with and into Radiancy, and Radiancy became a majority owned subsidiary of PhotoMedex. In connection with the Merger, PhotoMedex (i) caused to be paid or issued to stockholders of record of the Company, common and preferred (except with respect to treasury shares held by the Company subsidiary), an aggregate of 15,084,370 newly issued common stock, par value $0.01 per share, of Photomedex (the “Merger Consideration”), in exchange for their shares of the Company, reflecting an exchange ratio of 2.011 per share of the Company. In accordance with ASC Topic 805 - 40, Business Combinations - Reverse Acquisitions, the Company, whice is the legal acquiree in the Merger, was identified for accounting purposes as the accounting acquirer and therefore the transaction is considered for accounting purposes as “Reverse Acquisition”. See also note 1B above.

NOTE 4 - INCOME TAXES

The Company’s effective tax rate is dependent upon the geographic distribution of our earnings or losses (mainly between US and Israel).

The difference between the Company’s effective tax rates for the nine and three month periods ended September 30, 2011 and the statutory rate (40.5%) resulted primarily from share-based compensation expense in US which affected the earnings of Radiancy, Inc. (see Note 3A) and the increase of unrecognized tax benefits associated with uncertain tax positions, offset by the Israeli subsidiary earnings taxed at rates lower than the federal statutory rate.

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RADIANCY INC.

The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous and the Company is required to make many subjective assumptions and judgments regarding its income tax exposures. In addition, interpretations of and guidance surrounding income tax laws and regulations are subject to change over time. Any changes in the Company’s subjective assumptions and judgments could materially affect amounts recognized in its consolidated balance sheets and statements of income.

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

(In thousands of US dollars)

NOTE 5 - EARNINGS PER COMMON SHARE

The net income and the weighted average number of shares used in computing basic and diluted earnings per common share for the three and nine month periods ended September 30, 2011 and 2010, are as follows:

NOTE 6 - SEGMENT INFORMATION

The Company has no inter-segment transactions.

The Group analyzes segment performance based on revenue and gross profit, but does not allocate operating expenses or assets to segments. Accordingly, the Company has presented only the revenues and the gross profits derived by the segments.

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

(In thousands of US dollars)

NOTE 6 - SEGMENT INFORMATION

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RADIANCY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

(In thousands of US dollars)

NOTE 6 - SEGMENT INFORMATION

Sales

Long-lived assets

Geographic information for sales is determined based on customer location.

Long-lived assets were classified based on major geographic areas in which the group operates.

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