Tria Beauty, Inc. IPO Investment Prospectus S-1/A

As filed with the Securities and Exchange Commission on April 23, 2012 Registration No. 333-179228

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Amendment No. 3 to Form S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 TRIA BEAUTY, INC. (Exact name of registrant as specified in its charter)

DELAWARE 3845 46-0518735
(State or other jurisdiction of incorporation or organization) (Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification No.)

4160 Dublin Blvd., Suite 200 Dublin, CA 94568 (925) 452-2500 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Kevin J. Appelbaum Chief Executive Officer 4160 Dublin Blvd., Suite 200 Dublin, CA 94568 (925) 452-2500 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to:

David J. Saul Ropes & Gray LLP 1900 University Avenue East Palo Alto, CA 94303 Tel: (650) 617-4085 Fax: (650) 566-4232 Bruce K. Dallas Davis Polk & Wardwell LLP 1600 El Camino Real Menlo Park, CA 94025 Tel: (650) 752-2000 Fax: (650) 752-2111

Approximate date of commencement of proposed sale to the public : equally soon as operable after the effective date of this adjustment statement. ¨         If any of the securities being registered on this phase are to be offered on a delay or continuous footing pursuant to Rule 415 under the Securities Act of 1933, check the follow box. ¨         If this Form is filed to register extra securities for an offer pursuant to Rule 462 ( bel ) under the Securities Act, check the postdate box and list the Securities Act registration statement total of the earlier effective registration statement for the same offer . ¨         If this Form is a post-effective amendment filed pursuant to Rule 462 ( c ) under the Securities Act, check the take after corner and list the Securities Act registration statement number of the earlier effective registration instruction for the same offer . ¨         If this Form is a post-effective amendment filed pursuant to Rule 462 ( five hundred ) under the Securities Act, check the following box and list the Securities Act adjustment argument numeral of the earlier effective registration statement for the lapp propose. Indicate by check set whether the registrant is a large accelerate filer, an accelerate filer, a non-accelerated filer, or a smaller report party. See definitions of “ boastfully accelerated filer, ” “ accelerated file clerk, ” and “ smaller report ship’s company ” in Rule 12b-2 of the Exchange Act ( Check one ) :

¨ large accelerated filer ¨ Accelerated filer þ Non-accelerated filer ¨ minor report company
( Do not check if a smaller report party )

The Registrant is an emerging increase company, as defined in section 2 ( a ) of the Securities Act. This Registration Statement complies with the requirements that apply to an issuer that is an emerging growth company. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted. PROSPECTUS (Subject to Completion) Issued April 23, 2012              Shares LOGO COMMON STOCK Tria Beauty, Inc. is offering              shares of its common stock. This is our initial public offering and no public market exists for our shares. We anticipate that the initial public offering price of our common stock will be between $         and $         per share. We have applied to list our common stock on The NASDAQ Global Market under the symbol “TRIA”. We are an “emerging growth company” under applicable Securities and Exchange Commission rules and will be subject to reduced public company reporting requirements. Investing in the common stock involves risks. See “Risk Factors” beginning on page 9. PRICE $ A share

Price to
Public
Underwriting
Discounts  and
Commissions
Proceeds  to
Company
Per Share $             $             $            
Total $             $             $            

Tria Beauty, Inc. has granted the underwriters the right to purchase up to an additional              shares of common stock to cover over-allotments at the initial public offering price less the underwriting discount. The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the shares of common stock to purchasers on                     , 2012.

MORGAN STANLEY PIPER JAFFRAY

WELLS FARGO SECURITIES , 2012 LOGO LOGO LOGO TABLE OF CONTENTS Neither we nor the underwriters have authorized anyone to provide you with data unlike from that contained in this course catalog. We take no responsibility for, and can provide no assurance as to the dependability of, any information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover of this course catalog, or such other dates as are stated in this prospectus, careless of the fourth dimension of rescue of this course catalog or of any sale of our common sprout. Until                     , 2012 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. For investors outside the United States : We have not, and the underwriters have not, done anything that would permit this offer, or possession or distribution of this prospectus, in any jurisdiction where legal action for that purpose is required, early than in the United States. Persons outside the United States who come into possession of this course catalog must inform themselves about, and observe any restrictions relating to, the offering of the shares of common standard and the distribution of this prospectus outside of the United States. one PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in each case included elsewhere in this prospectus. TRIA BEAUTY, INC. Our Business Tria Beauty brings clinically-proven light-based aesthetic medical technologies out of the doctor ’ mho function and into the home. We sell easy-to-use, FDA-cleared aesculapian devices to consumers that deliver results comparable to professional aesthetic treatments at a fraction of the monetary value. As a leave, we believe we are expanding the market for aesthetic light-based treatments. Our holocene customer survey suggests that roughly three quarters of our customers have never tried professional in-office laser treatments before purchasing our products. We have successfully combined our technical light-based expertness with extensive consumer selling feel to produce and sell hand-held consumer skin care devices that are safe and effective, yet simple to use. Our two current product lines and our most advanced intersection under growth are : Hair Removal Laser, our lead product, is a diode laser device that provides permanent decrease in haircloth regrowth comparable to devices used in a doctor ’ s function. It was cleared by the FDA in 2005 as a prescription device and in 2008 as an over-the-counter device. Skin Perfecting Blue Light uses high-intensity blasphemous light that inhibits acne-causing bacteria with anti-acne potency comparable to light-based acne treatments performed in a doctor ’ s office. It was cleared by the FDA in 2006 as a prescription device and in 2010 as an over-the-counter device. Skin Rejuvenating Laser, a product in late stage development, is a fractional non-ablative laser device designed to enable our submission into the anti-aging skin care commercialize. We expect to begin selling this device outside of the United States in the moment half of 2012. We believe, based on technical similarities to predicate, animal histology and pilot program clinical studies, that our pivotal clinical studies will support a 2012 FDA application for nonprescription treatment of periorbital wrinkles ( crow ’ randomness feet ), perioral wrinkles ( wrinkles around the mouth ), dyschromia ( uneven pigmentation ) and textural irregularities like haptic rowdiness, for which fractional non-ablative engineering has become an accepted treatment standard in professionals ’ offices. We besides believe that these clinical studies will demonstrate that the device has safety and potency comparable to fractional non-ablative laser treatments in a doctor ’ mho office. We have historically derived well all of our sales from our Hair Removal Laser. Our Skin Perfecting Blue Light, which we launched in 2010, remains in the early stages of commercialization and we expect that the Hair Removal Laser will be our chief generator of sales and growth for the foreseeable future. We are involved in intellectual property litigation with Palomar Medical Technologies regarding technology incorporated into our Hair Removal Laser. There has been no trial date fix, though summary opinion briefing is scheduled to be completed in December 2012. If we do not ultimately prevail in this litigation, we could be required to pay damages for past sales of the Hair Removal Laser and could be required to pay royalties for, or be enjoined from, future U.S. sales of the Hair Removal Laser through the exhalation of the relevant patents in 2015. A core component of our business is our distinctive marketing strategy and multi-channel distribution model. We believe high-engagement media such as our websites, infomercials and home shopping television are particularly effective at informing consumers about our advanced products, the compelling skin care benefits they produce and the way in which they are used and incorporated into a personal skin care regimen. We have built 1 our post by educating consumers about the specific benefits of light-based skin care and our products and developing lead relationships with those consumers. Our physical presence at premium retailers such as Bloomingdale ’ s, adenine well as in doctor offices, helps to further strengthen our brand picture, validate our engineering and provide extra points of contact to educate consumers about our products. We have applied our expertness to develop custom-designed components with proprietary condom systems, such as the Hair Removal Laser ’ s built-in skin detector, that permit effective, high-octane discussion while protecting the exploiter ’ s eyes and skin. Our demonstrated ability to move products from concept to commercialization has allowed us to launch three versions of our Hair Removal Laser in the United States in the final three years, with substantial improvements to enhance the drug user experience and reductions in unit price with each newly introduction. For the year ended December 31, 2011, we had net sales of $ 45.0 million, representing a 66 % increase over the represent prior year period. Sales in North America, primarily from the United States, comprised 65 % of our total net income sales for the year ended December 31, 2011. Our remaining sales were derived from external markets, including the Asia-Pacific, or APAC, countries of Japan and Korea, arsenic well as european sales in the United Kingdom, Germany and Spain. Our net passing was $ 34.8 million for the year ended December 31, 2011, compared to a net personnel casualty of $ 25.6 million in 2010, a 36 % increase. As of December 31, 2011, we had an accumulated deficit of $ 101.8 million. As of December 31, 2011, we had working capital of $ 13.5 million. In January 2012, pursuant to a loan and security agreement with three fiscal institutions, we raised net proceeds of $ 12.4 million after refund of the existing lend and refer costs. Our Markets We operate at the confluence of the markets for professional aesthetic skin care treatments and over-the-counter, or OTC, cosmetic skin care products. According to Medical Insight, the master aesthetic skin care market represented an calculate $ 15.0 billion of global sales for 2011, which included $ 2.4 billion related to hair removal, $ 0.4 billion related to anti-acne treatments and $ 4.0 billion related to anti-aging treatments. Based on data from Euromonitor, the OTC cosmetic skin care products market for hair removal, anti-acne treatments and anti-aging treatments and nourishers represented an calculate $ 4.4 billion, $ 3.1 billion and $ 21.3 billion in 2011 global sales, respectively. While a majority of these products are sold at low prices through batch trade retail outlets, prestige skin care products are sold chiefly through luxury outlets such as department stores and by and large command higher prices. These prestige skin care products are marketed to our target customer and, according to the NPD group, U.S. sales of the class grew by 8 % to $ 2.7 billion from 2009 to 2010. Kline & Company reports that a combination of factors, including heightened awareness and technical advances, is driving the emergence of our at-home skin care device market, which grew an estimate 48 % and achieved estimated sales of approximately $ 532 million for 2011, of which an estimated $ 163 million was attributable to light-based devices, which grew at an calculate pace of 50 %. We believe consumers demonstrate senior high school levels of awareness and broadly accept the potency of light-based skin care treatments. For example, the american english Society of Plastic Surgeons reports that, in terms of absolute number of procedures performed, laser hair removal is the issue one aesthetic operation for women between the ages of 20 and 29 and the number two procedure behind Botox for women between the ages of 30 and 39. Despite this across-the-board acceptance, sales for light-based master aesthetic treatments remain humble compared to sales for OTC products that broadly offer relatively little long-run benefit for consumers. We believe we are expanding the market for light-based aesthetic treatments ; our recent customer review suggests that roughly three quarters of our U.S. customers have never tried professional in-office laser treatments before purchasing our products. 2 Competitive Strengths We believe there is significant unmet demand in the skin care market for home-use medical devices that deliver results comparable to in-office master aesthetic treatments. We attribute our historic success and future growth prospects to the following :

clinically-demonstrated effectiveness comparable to professional treatments with in-home convenience at low-cost prices ,
consumer-focused sales and market approach ,
innovative, proprietary technology ,
clinical data and scientific publications
demonstrated international penetration, and
a loyal customer nucleotide .

We believe that we are well positioned to pursue the market for home-use medical devices because addressing this market is the focus of our commercial enterprise. We have developed our research and development and market competencies specifically to pursue this opportunity. We believe that a significant investing in, for exemplar, retail cosmetic hide care products, or capital equipment for use in physicians ’ offices, would represent a significant deviation from and dispute with, our basal business model and expertness. Our clinically-demonstrated effectiveness is based upon data from clinical studies that are discussed in contingent in “ Business—Technology and Clinical Results. ” even where such studies demonstrate statistically significant results, many of these studies have relatively humble sample sizes, which may be viewed as inherently less predictive of individual results than larger studies. additionally, our clinical studies involve the use of our products under train supervision and pursuant to our specifications, which may lead to better results than autonomous use by consumers. Current Treatment Alternatives and their Limitations Treatment alternatives for hair removal, acne and skin rejuvenation have historically been hindered by significant consumer trade-offs. Consumers who choose professional office-based aesthetic treatments commit to a relatively expensive and time-consuming process, while those who choose OTC skin care products sacrifice effectiveness for public toilet and short-run affordability. many current discussion alternatives suffer from one or more of the follow limitations and trade-offs :

Cost : While professional office-based aesthetic treatments can be effective, they can cost several thousand dollars to efficaciously treat a unmarried sphere of the body. OTC skin care products can be moo price on a per use footing, but the monetary value over years of consumption of OTC skin care products can far exceed the cost of master office-based alternatives .
Effectiveness : OTC skin care products are typically use daily for an indefinite period of clock to maintain their craved effects because they only deliver short-run results. OTC skin care products by and large lack the rise potency of professional office-based aesthetic treatments .
Convenience : professional office-based aesthetic procedures take several minutes to several hours per school term. For optimum results, multiple sessions have to be scheduled over many months, which may create significant disturbance to work or personal life. Time spend scheduling appointments, traveling to and from sessions and sitting in the wait room further add to the overall inconvenience of these procedures. OTC skin care products are generally commodious, involving easy home-use discussion .

3 Our Solution Our products and our products in development provide light-based solutions for haircloth removal, acne discussion and skin rejuvenation without many of the compromises implicit in in professional office-based aesthetic procedures and OTC skin care products. They are designed to deliver results comparable to professional aesthetic treatments at a fraction of the cost in the convenience and privacy of the home. Our consumer-focused products address the price and convenience limitations facing services sold through the professional in-office set, deoxyadenosine monophosphate well as the potency limitations facing OTC skin care alternatives.

Cost : Over the naturally of a discussion regimen, our products are typically significantly less expensive than professional in-office treatment alternatives. We believe that our products are low-cost not only to the affluent consumers of master treatments, but besides to consumers who otherwise sacrifice effectiveness for the short-run affordability of less expensive OTC treatments. Our products are more expensive than many competitive OTC cosmetic products .
Effectiveness : Our products deliver comparable results to master treatments, providing the consumer an alternative to much ineffective OTC products. Each of our FDA-cleared hand-held devices is supported by multiple clinical studies demonstrating guard and potency. Our laser hair’s-breadth removal product permanently reduces the regrowth of unwanted haircloth and can reduce or eliminate the need for ongoing shave, waxing or health spa treatments. Our acne aristocratic light device emits the drug of a professional in-office device, inhibiting acne-causing bacteria within the bark and providing healthier looking, clearer hide and better complexion .
Convenience : Each of our light-based hair removal, acne and peel rejuvenation products is designed with our customers ’ needs for convenience and ease of use in mind, a feature shared by many OTC products. Our rechargeable products are engineered to be simple, lightweight and ergonomic, and use proprietorship laser and high-octane LED systems. This allows our customers to use our products in the privacy of their homes as part of their exist personal skin care and beauty regimens .

Customer satisfaction with aesthetic products and procedures is inherently subjective. additionally, unlike office-based procedures, home-use products require the drug user to comply with recommend treatment instructions for optimum potency. Our Hair Removal Laser is only intended for treatment on parts of the body below the neck by people with light-to-medium bark tones and brown or black haircloth color, since laser hair removal is not effective on individuals with unhorse, loss or gray hair’s-breadth color and may cause price to individuals with dark clamber tones. Growth Strategy Our goal is to be a leading ball-shaped developer and seller of premium at-home, light-based skin care products by continuing to pursue the trace strategies : Grow Our Brand : We are growing what we believe to be an emerging category of at-home light-based skin care devices, and establishing our brand as a drawing card within it. Our multi-channel distribution model allows us to reach our customers immediately to communicate the specific benefits of light-based skin care devices for home use. Penetrate Our Existing Channels and Markets : We are in the early stages of penetrating our existing markets. We intend to continue implementing our global multi-channel sales and selling strategy, which is in respective stages of deployment in existing geographies. Expand into New Geographies : Our consumer-focused sales and selling model, anchored by our lead channel, has allowed us to quickly expand into fresh geographies, as evidenced by our racetrack criminal record of successfully launching our products outside the United States. We intend to grow our external presence by leveraging our experience to expand into new geographies with demographics that offer the likely for significant need for our products. 4 Drive Product Innovation : We will continue to create new products and improve existing ones by leveraging our prove engineering platforms. We anticipate introducing our Skin Rejuvenating Laser outside of the United States in the second one-half of 2012, and will continue to develop other light-based skin care products to provide consumers with a comprehensive examination and complementary portfolio of topical skin care solutions. Risks Associated with Our Business Our business is subject to a number of risks of which you should be aware before making an investing decision, as our bankruptcy to adequately manage these risks may significantly harm our business. These risks are discussed more fully under the caption “ Risk Factors, ” and include but are not limited to the pursue :

We are presently dependent upon the achiever of our lead product, the Hair Removal Laser ;
We are involved in costly and time-consuming intellectual property litigation with Palomar Medical Technologies relating to our leading Hair Removal Laser product. An unfavorable result in this litigation could require us to pay royalties for a U.S. license, and a judgment could prevent us from selling our Hair Removal Laser product in the United States until the relevant patents expire in 2015 ;
We have a history of web losses, and we may never achieve or maintain profitableness ;
There is meaning existing and potential future competition that could prevent us from increasing market penetration ;
To compete effectively, we must continue to commercialize newfangled products ;
We are unable to predict whether we will be successful in expanding our existing international operations and establishing operations in new external territories ;
Our Skin Perfecting Blue Light is in the early stages of commercialization and we are unable to predict if it will achieve significant market adoption ; and
Our Skin Rejuvenating Laser is under exploitation, and must be cleared by the Food and Drug Administration, or FDA, and international regulative authorities before it can be sold in the United States and other jurisdictions, as applicable .

Corporate Information Our principal executive offices are located at 4160 Dublin Blvd., Suite 200, Dublin, CA 94568, and our telephone number at that address is ( 925 ) 452-2500. Our corporate web site address is www.triabeauty.com. We do not incorporate the information contained on, or accessible through, our corporate web site into this prospectus, and you should not consider it part of this course catalog. We were originally incorporated in California in January 2003 under the name SpectraGenics, Inc. We changed our name to Tria Beauty, Inc. in July 2008 and reincorporated in Delaware in August 2010. References herein to “ Tria, ” the “ ship’s company, ” “ we, ” “ our ” and “ us ” refer to the operations of Tria Beauty, Inc. and its consolidated subsidiaries unless otherwise specified. “ Tria ”, “ Tria Beauty ” and “ See Beauty in a New Light ” are our trademarks appearing in this prospectus. All other trademarks or serve marks appearing in this course catalog are trademarks or service marks of their respective owners. 5 THE OFFERING

coarse lineage offered by us shares
sum park stock to be outstanding after this oblation shares
Use of proceeds We intend to use the web proceeds received by us from this offer for sales and market initiatives, to support our inquiry and development activities, to repay our outstanding indebtedness and for working das kapital and general corporate purposes. See “ Use of Proceeds. ”
Proposed NASDAQ Global Market symbol TRIA

The number of shares of common stock that will be great after this offer is based on 96,985,971 shares outstanding as of March 31, 2012, and excludes :

13,508,669 shares issuable upon the exert of options outstanding as of March 31, 2012 under our 2004 Stock Incentive Plan, or our 2004 plan, at a burden average practice monetary value of approximately $ 0.32 per share ;
shares reserved for issue under our 2012 Equity Incentive Plan, or our 2012 Plan, which includes those shares reserved but unissued under our 2004 design at the completion of this offer and ;
the exercise of ( iodine ) warrants to purchase 201,429 shares of our common broth and ( two ) warrants to purchase 884,541 shares of our series CC preferable stock certificate .

Except angstrom differently indicated, all information in this prospectus assumes :

a rearward store separate of for of our shares of outstanding common livestock to be effected prior to the completion of this offering ;
the underwriters will not exercise their over-allotment option ;
no exercise of warrants to purchase 201,429 shares of our park malcolm stock ;
the conversion of all outstanding shares of our cashable convertible prefer breed into 91,602,072 shares of our coarse stock prior to completion of this offer ( not including the drill and conversion of all warrants to purchase 884,541 shares of our series CC favored stock ) and ;
the potency of our amended and restated certificate of incorporation prior to completion of this offer .

6 SUMMARY CONSOLIDATED FINANCIAL DATA The come tables summarize our diachronic fiscal data. You should read this information in conjunction with our consolidate fiscal statements, the related notes to these fiscal statements and the information under the captions “ Selected Consolidated Financial Data ” and “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” included elsewhere in this course catalog. The consolidate argument of operations for the years ended December 31, 2009, 2010 and 2011 were derived from our audited fiscal statements data appearing elsewhere in this course catalog. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim results are not necessarily indicative of the results to be expected for the full fiscal class.

Year Ended December 31,
2009 2010 2011
(in thousands, except per share data)
Consolidated Statements of Operations Data:
net sales $ 19,417 $ 27,140 $ 45,049
cost of goods sold 9,621 14,109 22,533
              
Gross net income 9,796 13,031 22,516
operate expenses :
Sales and market 9,005 19,863 32,256
research and growth 8,253 9,381 9,341
General and administrative 5,583 9,792 14,867
              
full function expenses 22,841 39,036 56,464
              
loss from operations ( 13,045 ) ( 26,005 ) ( 33,948 )
other income ( expense ) :
Interest income 386 50 46
interest expense ( 1 ) ( 7 ) ( 601 )
change in fair value of justify liability ( 252 )
Foreign exchange acquire ( personnel casualty ) 372 366 ( 38 )
              
Loss before planning for income taxes ( 12,288 ) ( 25,596 ) ( 34,793 )
provision for income taxes ( 91 ) ( 23 ) ( 44 )
              
net loss ( 12,379 ) ( 25,619 ) ( 34,837 )
adaptation to net income loss resulting from preferred stock alteration and extinguishment 982
              
web loss attributable to common stockholders $ ( 12,379 ) $ ( 24,637 ) $ ( 34,837 )
              
net loss per share attributable to common stockholders – basic and diluted $ ( 3.70 ) $ ( 6.26 ) $ ( 6.52 )
              
Weighted-average shares of common banal used in computing final loss attributable to common stockholders – basic and diluted ( 1 ) 3,345 3,933 5,342
              
Pro forma net loss per share attributable to common stockholders – basic and diluted ( unaudited ) ( 1 ) $ ( 0.43 )
          
Weighted-average shares of common stock used in computing the pro forma net loss attributable to common stockholders – basic and diluted ( unaudited ) ( 1 ) 81,042
          

7

As of December 31, 2011
    Actual     Pro  Forma(2) Pro forma,
as adjusted(3)
Consolidated Balance Sheet Data: (unaudited)
Cash and cash equivalents $ 14,972 $ 14,972
short-run investments
Working capital 13,520 13,520
total assets 31,470 31,470
Notes collectible, including current parcel 7,213 7,213
redeemable convertible prefer stock 109,540
total stockholders ’ equity ( deficit ) $ ( 98,734 ) $ 10,806
( 1 ) See Notes 2 and 15 to our fiscal statements for an explanation of the calculations of our basic and load net loss per parcel of common breed attributable to coarse stockholders and pro forma net loss per share of common stock certificate attributable to coarse stockholders .
( 2 ) The pro forma column reflects the bear conversion of all outstanding shares of redeemable convertible prefer stock into 91,602,072 shares of common neckcloth prior to completion of this offer .
( 3 ) On a pro forma, as adjusted basis to reflect the allowance described in ( 2 ) above and the acknowledge of the calculate net proceeds from the sale of shares of common stock offered by us at an bear initial populace offer monetary value of $ per share, the mid-point of the stove on the presence cover of this prospectus, after deducting underwrite discounts and commissions and estimated extend expenses account payable by us .

8 RISK FACTORS An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and all of the other information contained in this prospectus before deciding whether to purchase our stock. Our business, prospects, financial condition or operating results could be materially adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing the risks described below, you should also refer to the other information contained in the prospectus, including our consolidated financial statements and the related notes, before deciding to purchase any shares of our common stock. Risks Related to Our Business We are currently dependent upon the success of our lead product, the Hair Removal Laser. We have historically derived substantially all of our sales from the sale of our Hair Removal Laser, which was our only product until we launched the Skin Perfecting Blue Light in 2010. We anticipate that the Hair Removal Laser will be our primary beginning of sales and growth for the foreseeable future. To increase our sales, our Hair Removal Laser must continue to gain recognition and borrowing by consumers. We do not know if our merchandise will be successful over the long term because market acceptance may be hindered if consumers are not presented with compel reasons to choose the Hair Removal Laser over alternate products and treatments. For model, alternate products and treatments may have perceived advantages compared to our product in terms of price, public toilet, safety and effectiveness. In addition, demand for the Hair Removal Laser may decline or may not increase ampere promptly as we expect and the marketplace for at-home light-based hair removal devices may not continue to grow as we anticipate. furthermore, our geographic expansion will be limited, since our Hair Removal Laser is entirely intended for treatment on parts of the body below the neck by individuals with light-to-medium skin tones and embrown or black hair color, as laser haircloth removal is not effective on individuals with light, red or gray hair colors and our device may cause damage to individuals with colored skin tones. failure of the Hair Removal Laser to importantly increase its penetration of current or new markets would negatively impact our occupation, fiscal condition and results of operations. We are besides involved in intellectual property litigation with Palomar Medical Technologies regarding technology incorporated into our Hair Removal Laser. If we were not to prevail in the litigation, we could have to pay damages for past sales of the Hair Removal Laser and we could be required to pay royalties for, or be enjoined from, future U.S. sales of the Hair Removal Laser through the termination of the relevant patents in 2015. For a full discussion of the Palomar litigation and the associate risks, see “ We are involved in costly and time-consuming intellectual property litigation with Palomar Medical Technologies relating to our conduct Hair Removal Laser product. An unfavorable result in this litigation could require us to pay royalties for a U.S. license, and a judgment could prevent us from selling our Hair Removal Laser product in the United States until the relevant patents expire, ” below. We have a history of net losses, and we may never achieve or maintain profitability. We have incurred significant net losses since our origin, including net losses of approximately $ 12.4 million in 2009, $ 25.6 million in 2010 and $ 34.8 million in 2011. At December 31, 2011, we had an accumulated deficit of approximately $ 101.8 million. We have financed our operations primarily through debt finance and individual placements of equity securities. We expect our operate expenses to increase, chiefly due to emergence in our global sales and market efforts in documentation of our current and future products. We can not assure you that we will be able to achieve or sustain profitableness even if we are able to generate meaning sales increase. Our failure to achieve and sustain profitableness would negatively impact the market price of our common stock and require us to seek extra fund, which may not be available to us on terms acceptable to us or at all. 9 Our recent sales growth rate may not be sustainable, which could negatively affect our stock price, financial condition and results of operations. Our sales have grown quickly, increasing from $ 9.8 million in 2008 to $ 45.0 million in 2011, representing a compound annual increase pace of 66 %. We may not be able to sustain our recent increase rate in future periods and you should not rely on the sales emergence of any prior quarterly or annual periods as an indication of our future performance. If our future growth fails to meet our expectations, it could have a negative effect on our stock price, our fiscal condition and our results of operations. We have a limited operating history, and we expect our financial condition and operating results to fluctuate on a seasonal, quarterly and annual basis in potentially unpredictable ways. We have a limited history of operations upon which you can evaluate our business. Our operating results may fluctuate significantly in the future as a result of a variety show of factors, many of which are outside of our control. Factors relating to our clientele that may contribute to quarterly and annual fluctuations include the follow factors, deoxyadenosine monophosphate well as other factors described elsewhere in this prospectus :

the rate of marketplace borrowing of the Hair Removal Laser and the Skin Perfecting Blue Light ;
the reception and time of regulative blessing for, and our ability to successfully introduce, our Skin Rejuvenating Laser ;
the success of competitors ’ products that are now available or that may become commercially available in the future ;
the effectiveness of promotional and market campaigns conducted by us or our competitors ;
the success of external expansion efforts by us or our competitors ;
positive or minus media coverage of our products, our competitors ’ products or our industry ;
seasonal variations in demand ; and
changes in general economic conditions and the relate impact on discretionary spending on aesthetic products .

We may be unable to reduce our expenditures in a timely manner to compensate for any unexpected deficit in sales. consequently, a significant deficit in demand for our products could have an immediate and material adverse impression on our commercial enterprise, results of operations and fiscal condition. Due to the diverse factors mentioned above, and others, the results of any anterior quarterly or annual periods, or steering regarding expectations of future results, should not be relied upon as an indication of our future operating performance. Our Skin Perfecting Blue Light is in the early stages of commercialization, and we are unable to predict if it will achieve significant market adoption. We launched our Skin Perfecting Blue Light in 2010 and it remains in the early stages of commercialization. Our ability to importantly increase market borrowing will depend upon a act of factors, including :

the success of our sales and market efforts cosmopolitan, including our physician-dispensed platform ;
the demonstrate condom and potency of the Skin Perfecting Blue Light ;
the acceptance of our Skin Perfecting Blue Light in markets outside of the United States ; and
the perceive advantages and disadvantages of the Skin Perfecting Blue Light compared to other acne treatments .

10 If our Skin Perfecting Blue Light fails to achieve meaning market borrowing, our business, fiscal condition and results of operations would be negatively impacted. Our Skin Rejuvenating Laser is under development, and must be cleared by the FDA and international regulatory authorities before it can be sold in the United States and other jurisdictions, as applicable. We expect our Skin Rejuvenating Laser, for which we plan to market outside the United States in the second half of 2012 and to seek FDA 510 ( kilobyte ) clearance in 2012, to become a significant contributor to our future sales. The Skin Rejuvenating Laser is calm under development and there remain meaning challenges to address before it can be commercialized, including :

producing compelling clinical data on safety and effectiveness ;
obtaining FDA 510 ( thousand ) and early regulative clearances, including clearances to sell the product without requiring a prescription ;
obtaining regulative approval or headroom in other jurisdictions in which we plan to sell the merchandise ;
protecting the Skin Rejuvenating Laser with intellectual property rights ;
partner, as necessity, with suppliers ; and
manufacturing systematically within our specifications and in accordance with the FDA ’ s Quality System Regulations .

even if we are able to overcome these challenges, we can not assure you that our commercialization of our Skin Rejuvenating Laser will be successful. For exercise, we may be ineffective to convince potential customers that the Skin Rejuvenating Laser represents a compelling alternate to competing products or procedures. Our aforethought commercialization of the Skin Rejuvenating Laser could importantly miss our expectations or not happen at all, causing a material adverse effect on our future fiscal performance. If our clinical studies do not provide consumers with compelling support of the safety and effectiveness of our products, our reputation and the growth prospects of our business could be harmed. We believe that our ability to demonstrate the clinically-proven safety and effectiveness of our products is an crucial competitive strength that contributes to our success and is important to our future emergence prospects. Our past clinical studies have broadly involved testing on a relatively small number of regale subjects ( ranging from 21 subjects for the smallest analyze astir to 121 subjects for the largest study ). even where such studies demonstrate statistically significant results, studies with small sample sizes may be viewed as inherently less predictive of individual results than larger studies. additionally, our clinical studies involve the use of our products under prepare supervision and pursuant to our specifications, which may lead to better results than autonomous use by consumers. Our Skin Rejuvenating Laser is a intersection under development and we can not predict whether future clinical studies will provide results that will be supportive of FDA approval for the device or for one or more of our intended indications. even if approved, data from such studies may not drive consumer adoption of the product. To the extent the results of our clinical studies fail to provide compelling results, our ability to convince consumers of the safety and effectiveness of our products may be diminished, harming our future growth prospects. The success of our business is largely dependent upon the growth of the at-home light-based skincare device market, which is still small compared to the overall size of the skincare market. Our business plan is targeted at the emerging at-home light-based skin care device market and our products have been designed to address this market. While we believe that our products enhance the growth potential of this grocery store, we believe that early manufacturers ’ failure to put their devices through rigorous clinical test and 11 comply with FDA-clearance requirements may be damaging to market growth. If consumers do not view at-home light-based hair removal, acne treatment and anti-aging devices as compelling alternatives to other OTC products or professional treatments, our commercialize may not grow as we anticipate. If at-home light-based devices fail to be adopted at the rate we expect, our anticipate increase will be adversely affected and our results will suffer. Negative perception of our products, even if unfounded, may inhibit adoption. There are many professional and OTC alternatives for hair removal and acne and anti-aging treatments. Consumers, and to a lesser extent, checkup professionals, must believe that our products present an attractive alternative to existing treatments before they use our products or recommend our products to others. Their perceptions of our products may be influenced by negative reviews and comments regarding the safety or effectiveness of our products, evening if those reviews and comments are baseless or based upon a failure to comply with recommend treatment instructions. additionally, our repute may be indirectly adversely affected by competitors ’ products that advertise like capabilities but are insecure or ineffective and/or veto reviews and comments regarding the safety and potency of those products. Our future success depends upon customers having a plus have with our products to generate reprise business and viva-voce referrals. Results obtained from use of our products are subjective, may be elusive and may not meet customers ’ expectations. If customers are not satisfied with our products or feel that our products are besides expensive for the results obtained, our reputation and future sales will suffer. Our media spending might not result in increased net sales or generate the levels of product and brand name awareness we desire, and we might not be able to increase our net sales at the same rate as we increase our advertising expenditures. Our future growth and profitableness will depend, in part, on the potency and efficiency of our market and media spend, including our ability to :

make greater awareness of our products and brand name ;
determine the appropriate commercialize message and media mix for future expenditures ;
efficaciously cope advertise costs, including market and media costs, to maintain acceptable costs per sale and manoeuver margins ; and
successfully adapt to newly commercialize strategies in response to changing customer preferences .

For exercise, we depend on infomercials as a significant method for marketing and selling our products. To the extent that sales resulting from our infomercials decrease or if there is a punctuate increase in the price we pay for our media time, the cost-effectiveness for such infomercials will decrease. If our infomercials are broadcast during times when our target customer viewership is low, or our infomercials fall out of favor with our targeted customer root, this could besides result in a decrease of the cost-effectiveness of such broadcasts, which could cause our results of operations to suffer. We rely on our direct distribution channel to sell a vast majority of our products. We sell a huge majority of our products through our direct distribution transmit, including our e-commerce websites, e-commerce affiliates and infomercials. See “ Business—Distribution Channels. ” Utilizing a aim distribution channel to sell the majority of our products requires us to be able to attract consumers to our brand, as we are not able to rely on the reputation of established retail partners, such as Bloomingdale ’ second, to drive sales through this channel. furthermore, as we expand geographically, we must establish our brand in each placement. Establishing our stigmatize requires that we understand our extraneous consumers and employ commercialize messages that will be effective in encouraging such consumers to purchase our products. In each country in which we operate, there are retail stores and competitors with broader name recognition and that have more experience in attracting 12 consumers than we do. Using a lead distribution model can therefore put us at a disadvantage relative to other companies that do not rely on direct distribution american samoa heavily as we do until we are able to effectively establish our brand within each location in which we sell our products. In addition, our reliance on the address distribution channel besides subjects us to many risks, including risks related to service interruption or suspension of our websites and unsatisfactory performance of our affiliated websites, ampere well as risks related to the imposition of tax on internet sales if we increase the count of jurisdictions we have a legal link to and the likely deterioration of our relationship with our affiliated websites ( and damaging reviews of our products thereon ). Because we are not involved in the operation of our affiliated websites, we can not control the technical performance of the websites or the consumer experience. We besides lack an effective mechanism to respond to any negative reviews of our products thereon and to communicate with and educate the customers using the websites. Any or a combination of the above risks could materially and adversely affect our business and results of operations. Failure to maintain and grow existing retail partner relationships and to establish new ones could materially harm our business. Our market scheme involves sealed third-party retailer relationships. There are a count of risks built-in in establishing this as an effective channel of distribution, including :

there are no contractual commitments to sell our products, or to place future orders ;
retailers may permit product returns beyond the fourth dimension provided in our own return policy, which would increase returns as a share of sales ;
we may get inadequate merchandise placement, or store set-up and design ;
the retailer may not effectively attract our prey customer demographic ; and
retailers may decide to carry directly competitive products and recommend those products over ours .

If we are ineffective to maintain and expand effective retail partner relationships, our fiscal condition and our expansion efforts could be materially harmed. We are unable to predict whether we will be successful in expanding our existing international operations and establishing operations in new international territories. Our clientele success depends, in separate, on our ability to grow our business in existing external geographies in which we commercialize and sell our products, a well as to expand into modern geographies. In 2010 and 2011, a declining percentage of 55 % and 35 %, respectively, of our net income sales came from outside of North America. As part of our increase strategy, we plan to expand our external operations. such expansion will make us susceptible to risks associated with external operations, including :

staff and managing our alien operations ;
penetrating markets in which our competitors ’ products are more lay down ;
identifying demographics that suggest potential meaningful need may exist for our products ;
understanding consumer preferences, which much differ among cultures ;
complying with laws and regulations that differ from country to state, including obtaining and maintaining necessary registrations, certificates and permits ;
protecting our intellectual property rights ;

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identify, and maintaining relationships with, effective retail partners within each geography ;
exposing ourselves to fluctuating extraneous currency commute rates ;
facing drawn-out payment cycles and difficulty in collecting accounts receivable ;
clearing customs and experiencing shipping delays ; and
encountering political and economic imbalance .

Addressing these risks could require us to expend significant resources, and if we are unsuccessful at finding a solution, we could underperform on our international expansion efforts and our sales or profitableness may be harmed. additionally, our ability to grow sales of our Hair Removal Laser internationally may be limited in sealed countries, because the product is not effective on individuals with light, red or grey hair color and may cause price to individuals with dark peel tones. There is significant existing and potential future competition that could prevent us from increasing market penetration. We chiefly compete against three categories of companies : those that sell premium positioned cosmetic OTC skin care products, such as Murad ; those that provide capital equipment for office-based aesthetic procedures, such as Lumenis ; and those that provide at-home light-based skin care devices, such as HomeSkinovations. Competing with early companies could result in price-cutting, reduce profit margins and passing of market share, any of which would harm our commercial enterprise, fiscal circumstance and results of operations. extra competitors are besides likely to enter the market in the future. Our ability to compete efficaciously depends upon our success in distinguishing our company and our products from our competitors and their products, and includes such factors as :

product performance ;
brand reputation ;
product price ;
intellectual property protection ;
quality of customer support ;
success and time of new product development and introductions ;
development of successful distribution channels, both domestically and internationally ; and
potency of marketing efforts .

If our competitors ’ products are perceived to offer benefits that are equivalent to or better than the ones our products offer, demand for, and sales of, our products could be harmed. We expect that competitive pressures may, over time, consequence in price reductions and reduce margins for our products. conversely, if competitors ’ products or competitors ’ advertising render minus grace with consumers, that could besides negatively affect demand for, and sales of, our products. Although we believe our expertness in designing and marketing consumer-focused products, ampere well as our rigorous scientific access and focus on regulative approvals, differentiate us from many of our competitors, some of our competitors may have more established products and customer relationships ampere good as better 14 protected intellectual property rights than we have, which could inhibit our market penetration efforts. In addition, some of our current and electric potential competitors have significantly greater fiscal, inquiry and exploitation, fabricate and sales and market resources than we have. These competitors could utilize their greater fiscal resources to acquire or develop new technologies or products that could compete directly against our product lines. We can not guarantee that our competitors will not pursue this opportunity or that, if they try, they will not be successful. To compete effectively, we must continue to develop new products and improve our existing products. Our industry is subject to intense rival. product introductions and technical developments are expected to continue at a rapid pace. Our stream and future competitors will introduce new products or new formulations of existing products that will result in near-term and long-run increased contest. While we attempt to protect our products through patents and other intellectual property rights, there are few barriers of entry that would prevent new entrants or existing competitors from developing products that would compete directly with ours. We believe that our success partially depends upon our ability to develop and commercialize newly products that appeal to changing customer tastes and preferences. consequently, our clientele strategy is based, in depart, on our arithmetic mean that we will continue to make novel product introductions and improvements or acquire newly products that we can sell to modern and existing customers. If we are unable to innovate successfully, our products could become disused and our sales will decline as our customers purchase our competitors ’ products. We are involved in trade disputes with competitors, which are costly and could impact the marketing claims that we can make in the future. Our market includes competitors that, we believe, engage in unfair competition by, among other things, making false and misinform claims in advertising regarding their products. We have in the past taken, and may in the future take, action against competitors for such unfair contest. For exercise, we are presently engaged in litigation with Radiancy, in which we seek injunctive and monetary remedies for, among other things, Radiancy ’ s faithlessly and misinform advertise of its no ! no ! Hair and no ! no ! Skin products. radiance, in reaction, has asserted counterclaims against us, seeking injunctive relief and damages arising from our advertise of our Hair Removal Laser and Skin Perfecting Blue Light. See “ Business—Legal Proceedings. ” Our ability to make marketing claims for our products and our competitive placement could be weakened as a result of an adverse govern with regard to either our injunctive claims against Radiancy or Radiancy ’ s injunctive counterclaims against us, and if Radiancy were to prevail on its damages counterclaims, we would be required to pay money damages to Radiancy. Whether or not we are successful in this lawsuit, this litigation consumes substantial fiscal resources and diverts management ’ mho care away from occupation functions. We are currently dependent on a single contract manufacturer to produce our Hair Removal Laser, which exposes us to risks including disruption in our operations. We presently manufacture our Hair Removal Laser through one third-party manufacturer, Flextronics Sales and Marketing, or Flextronics. Our condense with Flextronics allows Flextronics to terminate the agreement and stop manufacture our Hair Removal Laser at any fourth dimension and for any reason upon 180 days ’ notice to us. furthermore, Flextronics manufactures our Hair Removal Laser at one location in southern China. China-based manufacture has been known to involve potential heightened gamble of misdemeanor of intellectual property rights and the resulting production of counterfeit products that are sold on the black market, undermining sales of legitimate products. additionally, if our provision of product from Flextronics were terminated or interrupted, or if Flextronics were ineffective to meet our delivery requirements ascribable to capacity limitations, manufacture errors, delays, adverse regulative actions, or other constraints, we could be unable to fulfill customer orders in a timely manner. additionally, identifying and qualifying alternative manufacturers could be an expensive and time-consuming process and may result in an addition in our monetary value of goods sold. Any new manufacturer may besides not perform to our expectations or produce quality products in a seasonably manner, which may result in damage to our post repute caused by bad components or delays in production and may besides result in increased cost of 15 our guarantee program on report of defects in products manufactured by such manufacturers. There can be no assurance that we will be able to identify and qualify acceptable option manufacturers on a timely basis. Our contract with Flextronics provides that Flextronics may reject any of our buy orders that would extend Flextronics ’ sulfur liability beyond our approve credit limit. Our credit specify with Flextronics may be adjusted higher or lower in Flextronics ’ s exclusive free will for any reason, including based on Flextronics ’ s views about the riskiness of extending credit to us based on our cash flows, assets or our ability to pay all invoices from Flextronics within 30 days as required by our narrow. If Flextronics chooses to lower our accredit limit, this would hamper our ability to fulfill customer orders. additionally, if customer need for our products increases and Flextronics does not raise our credit restrict, this could have an adverse effect on our ability to fulfill customer orders. Our manufacturing operations, and those of our contract manufacturer, are dependent upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations that could harm our business. Certain of the components used in our products are presently manufactured by a single supplier or circumscribed phone number of suppliers. In many of these cases, we and our manufacturers have not even qualified alternate suppliers and rely upon purchase orders preferably than long-run supply agreements. A supply break or an addition in demand beyond our current suppliers ’ capabilities could harm our and our manufacturer ’ s ability to manufacture our Hair Removal Laser and our Skin Perfecting Blue Light until new sources of supply are identified and qualified. Our reliance on these suppliers subjects us to a number of risks that could harm our business, including :

interruption of provide resulting from modifications to or discontinuance of a supplier ’ mho operations ;
delays in product shipments resulting from uncorrected defects, dependability issues, or a supplier ’ second magnetic declination in a part ;
price fluctuations due to a miss of long-run provision arrangements for key components with our suppliers, or other reasons ;
difficulty and price associated with situate and qualifying option suppliers for our components in a timely manner ;
production delays related to the evaluation and testing of products from alternate suppliers, and corresponding regulative qualifications ;
delay in delivery due to our suppliers prioritizing other customer orders over ours ;
price to our brand reputation caused by bad components produced by our suppliers ; and
increased cost of our guarantee program due to product compensate or substitute based upon defects in components produced by our suppliers .

The occurrence of any one or more of the foregoing could materially harm our business. We forecast sales to determine requirements for our products and components and materials used in our products and, if our forecasts are incorrect, we may experience either delays in shipments or increased inventory costs. We arrange for the manufacture of our products by third base parties on a purchase order basis. With respect to products produced immediately, we keep restrict materials and components on hand. To manage our manufacture operations and the manufacturing operations of our third-party manufacturer, we forecast merchandise orders and material requirements to predict our inventory needs up to twelve months in advance and enter into leverage 16 orders on the basis of these requirements. Our restrict diachronic have may not provide us with adequate data to accurately predict future demand. If our business expands, our demand for products and components and materials would increase and our manufacturers and suppliers may be ineffective to meet our demand. If we overestimate our product and component and fabric requirements, we will have excess armory, which would increase our expenses. If we underestimate our product and component and material requirements, we may have inadequate armory, which could interrupt, stay or prevent delivery of our products to our customers. Any of these occurrences would negatively affect our fiscal performance and the level of satisfaction our customers have with our business. We are dependent on third parties for the fulfillment of product orders, which exposes us to inventory and order processing risks. We depend on several third-party logistics providers, including RHIEM Services GmbH, Kintetsu World Express, Landmark Global and DisCopyLabs for fulfillment of customer orders. If any of these logistics providers were to terminate its relationship with us before we are able to arrange for a suitable surrogate, we might have to temporarily take over or suspend fulfillment duties and could experience delays in packing and shipping products to our customers, which could harm our clientele. additionally, a natural disaster or other catastrophic event at one of our fulfillment locations could cause interruptions or delays in our business and loss of inventory and could render us unable to accept or fulfill customer orders in a timely manner. Misuse of our products, failure to follow instructions for use of our products or product defects could harm the user, result in ineffective treatment, increase our warranty costs and subject us to product liability claims, which could harm our reputation and our business. Our Hair Removal Laser and Skin Perfecting Blue Light are medical devices designed for at-home habit by consumers. If consumers fail to understand or follow the instructions for habit, they could be unsatisfied with the effectiveness of our product or they could be injured. Injury could besides result if our products are defectively manufactured. Product indebtedness lawsuits can be expensive and prison term consuming. Any product liability claims brought against us, with or without deserve, could increase our product liability indemnity rates or prevent us from securing continuing coverage, harm our repute in the industry, cause regulative scrutiny and reduce intersection sales. We presently have product liability coverage in amounts that we believe are adequate but we may not have, or may not be able to obtain, policy in amounts or setting sufficient to provide us with adequate coverage against all potential liabilities. Product indebtedness judgments in overindulgence of our policy coverage would be paid out of cash reserves, harming our fiscal condition and reducing our manoeuver results. In addition, we provide a entire refilling guarantee that our products are free of defects and provide a wide refund as depart of our money-back guarantee plan. Product defects, consequently, could increase our guarantee costs and harm our business. The terms of our debt financing facility may restrict our ability to engage in certain transactions. In January 2012, we entered into a loanword and security agreement with MidCap Financial, or Midcap, Silicon Valley Bank and General Electric Capital. Pursuant to the terms of the loan and security agreement, discipline to certain exceptions, we can not engage in sealed transactions, unless sealed conditions are met or unless we receive the anterior approval of lenders holding more than 75 % of the aggregate principal of the loans, including the blessing of Midcap. such transactions include :

qualify of our business or certain assets ;
changing our business, management, ownership or business locations ;
incurring extra debt or liens or making payments on other debt ;
making certain investments and declaring dividends ;
acquiring or merging with another entity in surfeit of an permissible amount ;

17

engaging in transactions with affiliates ; or
encumbering intellectual property .

If the needed lenders do not consent to any of these actions that we desire to take, we could be prohibited from engaging in transactions that could be beneficial to our business and our stockholders unless we were to repay the loans, which may not be desirable or possible. Our loan and security agreement is secured by a pledge of well all of our assets except for intellectual property. If we were to default under our loanword and security agreement and were ineffective to obtain a release for such a default, Midcap would have a right to foreclose on these assets in ordering to satisfy our obligations under the loan and security agreement. In addition, Midcap would have the right to accelerate the debt and terminate all commitments under the loanword and security agreement. Any such action on the part of Midcap against us could have a materially adverse shock on our business, fiscal stipulate and results of operations. We may voluntarily repay all or any part of the term loans upon notice to each lender and requital of a prepayment fee. We face risks associated with currency exchange rate fluctuations, which could adversely affect our operating results. internationally, a share of our sales received and expenses paid are denominated in currencies other than the United States dollar, such as the japanese Yen, Korean Won, british egyptian pound sterling, canadian dollar and euro. As separate of our emergence scheme, we plan to expand our international operations. As a result, we may in the future be at an increased risk for substitution rate fluctuations between foreign currencies and the United States dollar, which could affect our results of operations. We attempt to limit our exposure by paying our manoeuver expenses incurred in extraneous jurisdictions with sales received in the applicable currentness, but if we do not have enough local currency to pay all our expenses in that currency, we are exposed to currency central pace risk with deference to those expenses. We are besides exposed to exchange rate risk with respect to our profits earned in extraneous currency. even if we were to implement hedging strategies to mitigate extraneous currentness risk, these strategies might not eliminate our exposure to extraneous exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time, external costs to implement the strategies and electric potential accounting implications. The loss of one or more of our key employees, or our failure to attract and retain other highly qualified personnel in the future, could harm our business. We depend on the continued overhaul and performance of our key employees, including Kevin J. Appelbaum, our president and headman executive officer. We maintain key man policy on Mr. Appelbaum, but not on any of our early officers or key employees. We besides do not have long-run use agreements with any of our officers or key employees. The loss of key members of our executive management team, ampere well as cosmopolitan managers of our foreign offices, could disrupt our operations and have an adverse effect on our ability to grow our clientele. In addition, to execute our growth design, we must attract and retain highly qualify personnel. contest for these employees is acute, and we may not be successful in attracting and retaining restricted personnel. Many of the companies with which we compete for feel personnel have greater resources than we have. If we fail to attract modern personnel, or fail to retain and motivate our stream personnel, our clientele and future increase prospects could be badly harmed. We may need to raise additional funds in the future, and such funds may not be available on a timely basis, on acceptable terms or at all. Until such fourth dimension, if ever, as we can obtain and maintain profitableness from sales of our products, we will be required to finance our operations with our cash resources. We may need to raise extra funds in the future to support our operations. We can not be certain that extra capital will be available as needed or on satisfactory terms. If we raise extra funds through the issue of equity or convertible securities, the share ownership of holders of our common standard could be importantly diluted and these newly issued securities may have rights, preferences, or privileges elder to those of holders of our common stock. If we obtain debt finance, a substantial 18 fortune of our function cash stream may be dedicated to the payment of principal and concern on such indebtedness, and the terms of the debt securities issued could impose meaning restrictions on our operations. We may be adversely affected by the current economic environment. Our operate on and fiscal performance may be adversely affected by a variety of factors that influence the cosmopolitan economy in the United States and worldwide. For exemplar, as observed during the recent economic crisis, consumer spend may deteriorate significantly if individual income levels or general consumer confidence decline, unemployment levels wax, interest rates fluctuate, there is doubt with deference to tax and banal market performance or there are far-flung concerns regarding political imbalance, recessionary periods or the potential for inflation. A descent in consumer spend could result in consumers electing to purchase lower-cost products in stead of purchasing our products or in deferring purchases of aesthetic and skin care products all in all. If any of these circumstances occur, the marketplace demand for our products and our business and results of operations could be materially and adversely affected. Our sales may be adversely affected if we are required to charge sales taxes in additional jurisdictions and/or other taxes for our products. We collect or have imposed upon us sales or early taxes related to the products we sell in certain states and other jurisdictions. extra states or one or more countries or other jurisdictions may seek to impose sales or other tax collection obligations, tariffs and duties in the future. A successful assertion by any state, state or other jurisdiction in which we do business that we should be collecting sales or early taxes on the sale of our products could, among other things, create significant administrative burdens for us, leave in substantial tax liabilities for past sales, discourage customers from purchasing from us or otherwise substantially harm our business and results of operations. furthermore, we are not presently charging sales tax in jurisdictions in which we do not have a legal nexus. With the increase in on-line sales of products throughout the world, there has been an feat to expand laws and regulations related to the imposition of sales tax on internet sales. The increase imposition of a tax on internet sales could discourage customers from purchasing our products and harm our business and results of operations. Our information technology infrastructure is vulnerable to damage and interruption, which could harm our business. Our ability to fulfill orders successfully is dependent on the effective and uninterrupted operation of our calculator and communications hardware and software systems, arsenic well as those of our provision chain partners. Our chief computer systems and operations, which are located at a co-location adeptness, and our corporate headquarters, both in Dublin, California, are vulnerable to damage or pause from power outages, computer and telecommunications failures, calculator viruses, security breaches, catastrophic events ( such as earthquakes ) and errors in use by our employees and customers. Systems integration issues are complex, time consume and expensive. We outsource the host of our websites. Any meaning interruption in the handiness or functionality of our web site or our sales processing, distribution or communications systems, for any reason, could badly harm our business, prospects, fiscal stipulate and results of operations. Any acquisitions that we make could disrupt our business and harm our financial condition. We expect to evaluate likely strategic acquisitions of complemental businesses, products or technologies from clock time to time. We may besides consider joint ventures and other collaborative projects. We may not be able to identify appropriate acquisition candidates or strategic partners, or successfully negociate, finance or integrate acquisitions of any businesses, products or technologies. furthermore, the consolidation of any acquisition and management of any collaborative project may divert management ’ sulfur meter and resources from our core business and disrupt our operations. If we decide to expand our merchandise offerings beyond our current products, we may 19 spend time and money on projects that do not increase our sales. Any cash skill we pursue would diminish the cash available to us for early uses, and any malcolm stock acquisition would dilute our stockholders ’ ownership. While we from time to clock evaluate potential collaborative projects and acquisitions of businesses, products and technologies, and anticipate continuing to make these evaluations, we have no give understandings, commitments or agreements with obedience to any future acquisitions or collaborative projects. Our ability to use our net operating loss carryforwards may be limited. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a pot undergoes an “ ownership change, ” the corporation ’ mho ability to use its pre-change net operating loss carryforwards to offset its post-change taxable income may be limited. In general, an “ ownership switch ” will occur if there is a accumulative change in our ownership by certain “ 5-percent shareholders ” that exceeds 50 share points over a roll three-year period. similar rules may apply under state of matter tax laws. We may have experienced an ownership change in the past and may experience ownership changes in the future as a result of this issue or future transactions in our broth, some of which may be outside our control. As a resultant role, if we earn net taxable income, our ability to use our pre-change net operate personnel casualty carryforwards to offset United States federal and state taxable income may be subject to limitations. Risks Related to Our Intellectual Property We are involved in costly and time-consuming intellectual property litigation with Palomar Medical Technologies relating to our leading Hair Removal Laser product. An outcome in this litigation could require us to pay royalties for a U.S. license, and a judgment could prevent us from selling our Hair Removal Laser product in the United States until the relevant patents expire in 2015. We are presently defending a patent violation lawsuit filed on June 24, 2009 by Palomar Medical Technologies, or Palomar, in the United States District Court for the District of Massachusetts. In the lawsuit, Palomar alleges that the manufacture, consequence, sale and use of our Hair Removal Laser infringes two United States patents that it licenses : U.S. Patent Nos. 5,735,844, entitled “ Hair Removal Using Optical Pulses, ” and 5,595,568, entitled “ Permanent Hair Removal Using Optical Pulses. ” Palomar seeks both monetary damages for our past sales of the Hair Removal Laser and injunctive respite to stop us from selling the Hair Removal Laser. fact discovery is basically completed and technical discovery is ongoing. As of the date of this prospectus, no test date has been set, though drumhead judgment brief is scheduled to be completed in December 2012. In our answers to Palomar ’ s lawsuit, we raised a number of defenses, including that Palomar ’ south patents are disable and unenforceable, and that the use, significance, manufacture and sale of the Hair Removal Laser does not infringe Palomar ’ second patents. While we are vigorously contesting Palomar ’ mho allegations, intellectual place litigation is building complex and outcomes can not reasonably be predicted, including not merely the likelihood of winning or lose, but besides the remedies that might ultimately be granted by a court. If we lose the litigation, we may be ordered to pay compensatory damages and enhanced damages of up to three times the sum of actual damages. Compensatory damages may be measured by Palomar ’ s lost profits and/or fair royalty payments for by and future U.S. sale and manufacture of the Hair Removal Laser through the termination of the relevant patents in 2015. furthermore, we could be enjoined from making, using, importing or selling our Hair Removal Laser in the United States through the passing of the patents in 2015. alternatively, if we and Palomar agree to settle this litigation, we may still have to pay significant damages and a royalty on future sales through the passing of the patents. An adverse result in this lawsuit could materially hurt our business, fiscal condition, results of operations and cash flows. This litigation has been and will continue to be expensive and protracted, and our intellectual property position may be weakened as a resultant role of an adverse rule. Whether or not we are successful in this dispute, this litigation consumes substantial amounts of our fiscal resources and diverts management ’ south attention away from our kernel business. For extra discussion, see “ Business—Legal Proceedings. ” 20 Because of our reliance on proprietary technology within our products, we are dependent on our ability to operate without infringing or misappropriating the property rights of others. There is a significant total of litigation over patent and other intellectual property rights in the aesculapian device diligence. While we attempt to ensure that our products do not infringe other parties ’ patents, patent applications and proprietary rights, our competitors may assert that our products or processes may infringe their patent or other intellectual property rights. Although we may seek to obtain a license or other agreement under a third gear party ’ s intellectual property rights to avoid or bring an end to certain claims or actions asserted against us, we may not be able to obtain such an agreement on reasonable terms or at all. If we are not successful in obtaining a license or redesigning our products when necessity, we may have to stop manufacture and selling our products and our product sales and profitableness could suffer as a resultant role. besides, with regard to our stream products or processes, we may be unwittingly infringing one or more third-party patents. As we expand into raw markets and as fresh competitors emerge, the possibility of a patent violation claim against us, in-licensing costs and research and development expense, may increase. We are aware of published U.S. patent applications that may issue into U.S. patents that might cover certain aspects of our current or future products. In summation, because patent applications frequently remain confidential for 18 months or more after file and can take many years to issue into patents, there may now or in the future be relevant pending patent applications of which we are unaware. If any of these applications issues as a apparent, its owner might initiate patent litigation against us or demand that we obtain a patent license that may significantly affect the profitableness or fiscal feasibility of any products covered by the license. Any patent litigation, careless of deserve, could be expensive and time consume and divert our management ’ south attention from our core business. Further, if we were to lose such litigation, a court could require us to pay hearty damages or royalties and prohibit us from using technologies essential to our current or future products. alternatively, a license to any such patent may not be available at all or may only be available on terms that would place significant constraints on our manufacture and sale of our products. In addition, design changes to our current or future products to avoid such license or litigation may add significant development and/or manufacture costs, frankincense affecting the profitableness or fiscal feasibility of such products. Intellectual property rights may not provide adequate protection for some or all of our products, which may permit third parties to compete against us. We rely and expect to continue to rely on patent, copyright, trade secret and hallmark laws, arsenic well as confidentiality agreements, to protect our engineering and products. As of March 31, 2012, in the United States we had six issued patents, 12 published patent applications and a number of unpublished patent applications ( including probationary patent applications ), and internationally we had five issued patents, 11 published patent applications and four unpublished apparent applications relating to our current products and products under exploitation. Some of the components of our products are not, and in the future may not, be protected by patents. additionally, our patent applications may not result in the issue of patents or, if issued, may not issue in a imprint that will be advantageous to us. any patents we obtain may be challenged, construed narrowly, invalidated or legally circumvented by third base parties. many of our trademarks contain words or terms having a common usage and, as a resultant role, may not be protectable under applicable law. Because of this concern, we have elected not to file applications with respect to certain of our trademarks, and some of our trademarks for which we have filed applications may not be protectable, which could restrict our ability to exclude our competitors from using these trademarks. The limits to our cerebral property protection expose us to a greater risk of direct competition. Competitors could purchase one of our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, design around our protected engineering, or develop their own competitive technologies that spill outside of our intellectual property rights. In summation, the laws of certain countries in which we develop, fabrication or sell our products may not protect our intellectual property to the same extent as the laws of the United States, and gaining protection for and enforcing our rights in these jurisdictions may be particularly unmanageable and expensive. Our Hair Removal Laser is manufactured by Flextronics in China. China- 21 based fabrication has been known to involve likely heightened gamble of violation of intellectual property rights and the resulting production of counterfeit products that are sold on the black market, undermining the sales of the legitimate merchandise. If our cerebral place is not adequately protected against competitors ’ products and methods, our competitive position could be adversely affect, as could our commercial enterprise. Nondisclosure and assignment agreements with employees and others may not adequately prevent disclosure of trade secrets, know-how and other proprietary information. A hearty helping of our technologies and cerebral property are protected by trade secret laws. We rely on a combination of apparent and other cerebral property laws and nondisclosure and appointment agreements with our employees, consultants and third base parties with whom we have relationships to protect and otherwise seek to control access to, and distribution of, our proprietary information. These measures may not be adequate to prevent disclosure of confidential data, third-party misdemeanor or embezzlement. The nondisclosure and assignment agreements may be breached, and we may not have adequate remedies for any transgress. We have limited master over the protection of trade secrets used by our third-party manufacturers and suppliers. We could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, others may independently discover our trade secrets and proprietorship information, and in such cases we could not assert any craft clandestine rights against such parties. Laws regarding trade unavowed rights in certain markets in which we operate may afford little or no protection to our deal secrets. Parties to our nondisclosure and assignment agreements may breach these agreements, and we may not have adequate remedies for any gap. besides, others may learn of our trade secrets through a diverseness of methods. failure to obtain or maintain deal secret protection could adversely affect our occupation, sales, reputation and competitive position. Risks Related to Regulation To introduce new products or to expand our U.S. marketing claims for current products, we may need to obtain additional FDA clearances or approvals, which may not be granted. Our products are by and large subject to 510 ( kilobyte ) headroom by the FDA anterior to their selling for commercial use in the United States. In the United States, each of our Hair Removal Laser and our Skin Perfecting Blue Light are indicated for over-the-counter use. Our Hair Removal Laser is indicated for adjunctive practice with shaving for haircloth removal sustained with periodic treatments and intended for permanent reduction in hair regrowth defined as a long-run, stable reduction in hair counts following a discussion regimen. Our Skin Perfecting Blue Light is broadly indicated to treat dermatologic conditions and specifically indicated to treat mild to moderate incendiary acne vulgaris. These clearances restrict our ability to commercialize or advertise the Hair Removal Laser and the Skin Perfecting Blue Light for early uses. If we want to expand our marketing claims with deference to our Hair Removal Laser or Skin Perfecting Blue Light or make any changes or modifications to these products that could significantly affect product condom or effectiveness, or would constitute a transfer in either product ’ sulfur intended consumption, we may be required to engage in extra clinical trials and submit a newly lotion for 510 ( k ) clearance or possibly a premarket approval application. These processes can be expensive, time consuming and uncertain. Although developing and promoting newfangled treatment indications and protocols for our Hair Removal Laser and Skin Perfecting Blue Light are elements of our growth scheme, we can not predict when or if we will receive the FDA clearances required to implement these elements. Delays in receipt of, or failure to obtain, FDA clearances or approvals for any product enhancements or raw products we develop would adversely affect our ability to introduce modern or enhanced products in a timely manner, limit our ability to promote our products in the United States and result in delayed, or no, realization of sales from such product enhancements or new products. In addition, FDA requirements to obtain extra clinical or non-clinical data in hold of such clearances or approvals could result in substantial extra costs that could decrease our profitableness. Because we anticipate that sales in the United States will continue to be a significant fortune of our business for the foreseeable future, ongoing restrictions on our ability to market the Hair Removal Laser , the Skin Perfecting Blue Light , and any new products we develop in the United States could harm our business and limit our sales growth. 22 We are besides required to continue to comply with applicable FDA and other regulative requirements once we have obtained market headroom for a intersection. There can be no assurance that we will successfully comply with such regulative requirements or that we will maintain the FDA commercialize clearances that we have received or may receive in the future. Our FDA clearances can be revoked if base hit or effectiveness problems develop. Any failure to maintain complaisance with FDA and early regulative requirements could result in public notice of disobedience, merchandise recalls, government-mandated manufacture or distribution shutdowns, fiscal penalties, condemnable prosecution, or other harm to our commercial enterprise, fiscal discipline and results of operations. We may not be able to obtain or maintain international regulatory qualifications or approvals for our current products and products under development, which would harm our geographic expansion efforts and future sales. Sales of our products outside the United States are subject to alien regulative requirements that vary widely from area to area, some of which we may not be fully mindful of or which may be subject to changes affecting our ability to sell our products in those jurisdictions. In addition, if we make any modifications to products already approved outside the United States that could significantly affect intersection base hit or potency, or would constitute a change in intended use, then we may be required to submit newfangled applications for foreign regulative approvals. Complying with international regulative requirements can be an expensive and time-consuming procedure, and approval is not certain. The foreign regulative blessing procedure may include all of the risks associated with obtaining FDA clearance or blessing, in addition to other risks. For exercise, the time required to obtain extraneous approvals may exceed the time required for FDA approval, and requirements for such approvals may differ importantly from FDA requirements. Foreign regulative authorities may not approve our merchandise for the lapp uses cleared or approved by the FDA. additionally, we may be ineffective to maintain existing foreign approvals or obtain such approvals as are required in geographies into which we intend to expand, which would harm our international growth strategy. We may be subject to significant liability if we promote our products for uses that have not been approved by the FDA or other applicable agencies. The FDA strictly regulates the promotional claims that may be made about FDA-cleared medical devices. In especial, a device may not be promoted for uses that are not cleared or approved by the FDA. If we are found to have inappropriately marketed our products for off-label uses, we may be subject to significant liability. The federal politics has levied large civil and criminal fines against companies for alleged promotion of uncleared or unapproved uses. The FDA has besides demanded that companies enter into consent decrees of permanent injunction under which specified promotional behavior is prohibited. State Attorneys General besides have investigated promotional practices of FDA-regulated products and entered into settlements of allegations that off-label promotional practices violated state consumer protection laws. similarly, extraneous regulative agencies could take action against us if we are found to have marketed our products for off-label uses. Regulatory agencies may fail to take action against competitors that illegally market products without obtaining required approvals or clearances. Achieving regulative approvals and clearances for medical devices is costly and delays the insertion of new or modified products into the marketplace. In addition, after regulative agencies approve or clear a checkup device for market, maintaining ongoing conformity with postmarket medical device regulations requires constant management attention and the devotion of significant operational resources. We believe that a number of companies are marketing medical devices that compete with one or more of our products without the needed regulative approvals or clearances. Although we can bring such matters to the care of regulative agencies, those agencies may not take natural process at all or legal action may be importantly delayed. regulative agencies ’ bankruptcy to act against competitors that illegally market their products could result in damage to our competitive position and could undermine consumer assurance in our diligence in general, affecting our reputation and ability to marketplace our products successfully. 23 Our failure, and the failure of our contract manufacturer and suppliers, to comply with regulations applicable to the production of medical devices, could harm our business. Our manufacture processes and facilities are required to comply with the FDA ’ s Quality System Regulation, or the QSR, which covers the procedures and documentation of the blueprint, testing, production, control, timbre assurance, tag, promotion, sterilization, repositing and ship of our devices, ampere well as alike foreign regulative requirements including ISO 13495 medical choice organization requirements in some cases. The FDA enforces the QSR, and foreign regulators enforce like requirements, through periodic announced or unannounced inspections of manufacture facilities. We are subject to such inspections, a well as to inspections by other federal and state regulative agencies. In addition, the contract manufacturer for our Hair Removal Laser, Flextronics, is required to comply with the QSR and similar foreign requirements, and is besides national to regulative inspections. We have limited ability to ensure that Flextronics is taking, or any other third-party manufacturers we may use in the future will take, the necessity steps to comply with applicable regulations, which could cause delays in the delivery of our products. We are besides subject to adverse event report regulations in the United States and overseas. For example, we are required to report to the FDA if our products may have caused or contributed to a death or good wound or malfunctioned in a way that would probably cause or contribute to a death or serious injury if the malfunction were to recur. We must report product corrections and removals to the FDA where the correction or removal was initiated to reduce a risk to health posed by the device or to remedy a trespass of the Federal Food, Drug, and Cosmetic Act, or FDCA, caused by the device that may present a gamble to health, and we must maintain records of other corrections or removals. failure to comply with applicable FDA or other regulative requirements, or by and by discovery of previously unknown problems with our products or manufacture processes, including our failure or the failure of Flextronics or third-party manufacturers we may utilize in the future to take satisfactory corrective action in answer to an adverse regulative inspection, can result in, among early things :

administrative or judicially-imposed sanctions ;
injunctions or the imposition of civil penalties ;
recall or seizure of our products ;
total or overtone suspension of product or distribution ;
regulative authorities ’ refusal to grant pending future marketing clearance or approvals for our products ;
withdrawal or pause of marketing clearances or approvals ;
clinical holds that suspend our ability to conduct clinical trials of our products ;
regulative admonition letters ;
refusal to permit the consequence or export of our products ; and
criminal pursuance of us or our employees .

Any of these actions, in combination or alone, could prevent us from marketing, distribute, or selling our products and would probable harm our business. A product defect or regulative misdemeanor could lead to a government-mandated or voluntary recall by us. regulative agencies in other countries have exchangeable authority to require the hark back of devices because of material deficiencies or defects in design or fabrication that could endanger health. Any recall would divert management attention and fiscal resources, could cause the monetary value of our shares of common breed to decline and may expose us to merchandise indebtedness or other claims, including contractual claims from parties to whom we sold products, and 24 harm our reputation with customers. A recall involving our Hair Removal Laser would be particularly harmful to our business and fiscal results and, even if we remedied a particular problem, could have a durable negative effect on our repute and demand for our products. Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of our products and to produce, market and distribute our products after clearance or approval is obtained. From time to fourth dimension, legislation is drafted and introduced in Congress or in foreign jurisdictions that could importantly change the statutory provisions governing the regulative clearance or approval, fabrication and market of regulated products. In addition, FDA regulations and guidance are much revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. For case, in the future, the FDA may require more burdensome premarket blessing of our products rather than the 510 ( k ) clearance process we have used to date and anticipate chiefly using in the future. Our Hair Removal Laser and Skin Perfecting Blue Light are besides subject to state and foreign laws and regulations which are, in many instances, in flux. Any new regulations or revisions or reinterpretations of existing regulations may impose extra costs or lengthen review times of our products, or otherwise restrict our ability to promote and sell our products. We can not determine what consequence changes in regulations, statutes, legal rendition or policies, when and if promulgated, enacted or adopted, may have on our business in the future. such changes could, among other things, command :

modern and more burdensome clinical trials or non-clinical examination for future products or product changes ;
postmarket trailing of device consumption by customers ;
changes in fabricate methods ;
recall, substitution, refund, repairs or discontinuance of certain products ; and
extra record keeping .

Each of these changes would likely entail significant clock and monetary value and could materially harm our fiscal results. In accession, delays in receipt of or failure to receive regulative clearances or approvals for our new products would harm our business, fiscal circumstance and results of operations. Federal and state governments in the United States are besides undertaking efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with aesculapian manage providers and third-party payors. In 2010, Congress enacted comprehensive examination healthcare reform legislation known as the Patient Protection and Affordable Care Act of 2010, as modified by the Health Care and Education Reconciliation Act of 2010, which we refer to as the Affordable Care Act, or ACA. The ACA imposes a 2.3 % excise tax on sales of aesculapian devices by manufacturers. taxable devices include any medical device defined in section 201 ( henry ) of the FDCA and intended for use by humans, with limited exemptions, including an exemption for devices that are determined to be of a type generally purchased by the public at retail for individual consumption. The Internal Revenue Service published a proposed rulemaking in February 2012 that would exempt devices that are regularly available for purchase and use by individual consumers who are not aesculapian professionals and whose design demonstrates that it is not chiefly intended for use in a aesculapian institution or office, or by aesculapian professionals. Because our products are sold over the counter directly to consumers, we believe that they would be exempt from the tax ; however, if this proposed exemption is deleted from the final rule, we could be required to pay the excise tax, which we would expect to begin paying in 2013. We expect that submission with the ACA may, if we are subject to the strike tax, impose a significant fiscal and administrative effect on us, which may harm our fiscal results. We are subject to various anti-bribery laws, and any violations by us of such laws could result in fines or other penalties. The U.S. Foreign Corrupt Practices Act and like cosmopolitan anti-bribery laws broadly prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the aim of obtaining or 25 retaining occupation. Some of our partners are located in parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, hard-and-fast submission with anti-bribery laws may conflict with local customs and practices. We can not assure you that our home control policies and procedures will protect us from foolhardy or negligent acts committed by our employees, partners or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or pursuance and have a negative shock on our business, results of operations and reputation. We are subject to numerous environmental, health and safety laws and regulations, and must maintain licenses or permits; noncompliance with these laws, regulations, licenses or permits may expose us to significant costs or liabilities. We are subject to numerous extraneous, federal, state and local anesthetic environmental, health and condom laws and regulations relating to, among early matters, safe working conditions and environmental auspices, including those governing the generation, storage, handling, practice, transportation and disposal of hazardous or potentially hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more rigorous over time. If we violate or fail to comply with these laws, regulations, licenses or permits, we could be fined or otherwise sanctioned by regulators. We can not predict the impingement on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any compulsory licenses or permits. Risks Related to this Offering and Our Common Stock An active, liquid and orderly trading market for our common stock may not develop, our share price may be volatile and you may be unable to sell your shares at or above the offering price. anterior to this extend, there has not been a public market for our common broth. We can not predict the extent to which a trading market will develop or how melted that market might become. The initial populace offer price for our shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trade market. The grocery store price of shares of our coarse stock could be submit to wide fluctuations in reply to many risk factors listed in this section and others beyond our control, including :

actual or anticipate fluctuations in our key operating metrics, fiscal stipulate and operate results ;
a greater than expected passing of existing customers ;
a negative switch in one or more of our key metrics ;
actual or anticipated changes in our growth rate ;
issue of new or update research or reports by securities analysts ;
our announcement of actual results for a fiscal period that are higher or lower than projected or expected results or our announcement of sales or earnings guidance that is higher or lower than expected ;
fluctuations in the valuation of companies perceived by investors to be comparable to us ;
plowshare price and book fluctuations attributable to discrepant deal book levels of our shares ;
sales or expected sales of extra common stock ;
announcements from, or operating results of, our competitors ; or
general economic and market conditions .

26 furthermore, the stock markets have experienced extreme point price and volume fluctuations that have affected and continue to affect the market prices of fairness securities of many companies. These fluctuations often have been unrelated or disproportionate to the operate on performance of those companies. These wide marketplace and diligence fluctuations, adenine well as cosmopolitan economic, political and market conditions such as recessions, concern rate changes or international currency fluctuations, may cause the market price of shares of our common sprout to decline. If the market price of shares of our common stock after this offer does not exceed the initial populace volunteer monetary value, you may not realize any retort on your investing in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the commercialize price of their stock have been subject to securities course military action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management ’ sulfur attention from other occupation concerns, which could seriously harm our business. If our future operating performance does not meet the expectations of investors or financial analysts, our stock price will likely decline. Our ability to sell our products successfully is subject to many uncertainties, as discussed in this prospectus. consequently, it is difficult to estimate our future results with accuracy. Expectations regarding these results will be subject to numerous risks and uncertainties that could make actual results differ materially from those anticipated. If our actual results do not meet the expectations of investors or third-party fiscal analysts, our stock price could decline significantly. If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline. The trade market for our common lineage will be influenced by the research and reports that industry or securities analysts publish about us or our occupation. We do not presently have any and may never obtain research coverage by diligence or fiscal analysts. flush if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our neckcloth price would probably decline. If one or more of these analysts cease coverage of our party or fail to regularly print reports on us, we could lose visibility in the fiscal markets, which in twist could cause our stock price or trade bulk to decline. We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors. We are an “ emerging growth company, ” as defined in the Jumpstart our Business Startups Act of 2012, or JOBS Act, and we intend to adopt sealed exemptions from versatile reporting requirements that are applicable to other public companies that are not “ emerging increase companies ” including, but not limited to, not being required to comply with the hearer attestation requirements of part 404 of the Sarbanes-Oxley Act, reduce disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on administrator compensation and stockholder approval of any golden chute payments not previously approved. We may remain as an “ emerging growth company ” for up to five years following our initial public extend. We can not predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock certificate less attractive as a resultant role, there may be a less active trade market for our park stock and our stock price may be more fickle. Our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price and quotation on The NASDAQ Global Market. As a public party, we will require greater fiscal, systems and accounting resources than we have had as a individual company. pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or section 404, we will be required to furnish a report by our management on the potency of our internal control over fiscal reporting beginning with our annual report for the fiscal year ending December 31, 2012. When we no longer 27 qualify as an “ emerging growth company ” under the JOBS Act, our mugwump registered public report firm will besides need to attest to the effectiveness of our home command over fiscal report. The controls and other procedures are designed to ensure that information required to be disclosed by us in the reports that we file with the Securities and Exchange Commission, or SEC, is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. We are in the early stages of implementing our internal control procedures to meet our populace caller obligations. even if we develop effective controls, these modern controls may become inadequate because of changes in conditions or the degree of submission with these policies or procedures may deteriorate. flush after we develop these new procedures, extra weaknesses in our home control over fiscal report may be discovered. The effectiveness of our controls and procedures may in the future be limited by a variety show of factors, including :

faulty human judgment and elementary errors, omissions or mistakes ;
deceitful action of an individual or collusion of two or more people ;
inappropriate management override of procedures ; and
the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate fiscal command .

If we fail to have effective controls and procedures for fiscal report in place, we could be ineffective to provide seasonably and accurate fiscal information and be topic to delisting from The NASDAQ Global Market, SEC probe and civil or criminal sanctions. Substantial future sales of our common stock or securities convertible or exchangeable for our common stock in the public market could cause our stock price to fall. extra sales of our common stock in the populace market after this volunteer, or the sensing that these sales could occur, could cause the marketplace price of our common stock to decline. Upon completion of this offer ( assuming no exercise of the underwriters ’ over-allotment choice ), we will have shares of coarse stock outstanding. The shares sold in this propose, a well as any shares disposed of upon drill of the underwriters ’ over-allotment choice, will be freely assignable without restriction or extra registration under the Securities Act of 1933, as amended, or the Securities Act. A significant dowry of the shares of our park standard great after this offer will continue to be restricted as a result of securities laws or lock-up agreements. The lock-up agreements restrict holders ’ ability to transfer their store for 180 days after the date of this course catalog, subject to extension in certain circumstances. Of the outstanding qualify shares, no shares will be available for sale in the public grocery store on the date of this offer, and an extra shares will be available for sale in the public market beginning 180 days after the go steady of this course catalog, subject to extension in sealed circumstances and to the requirements of Rule 144. In addition, the approximately shares underlying options that are either subjugate to the terms of our equity recompense plans or reserved for future issue under our fairness recompense plans as of the date of this prospectus will become eligible for sale in the populace grocery store to the extent permitted by the provisions of assorted choice agreements, the lock-up agreements and Rules 144 and 701 under the Securities Act. At any time, any or all of the shares subject to the lock-up may be released anterior to passing of the 180-day lock-up period ( subject to annex in certain circumstances ) at the free will of Morgan Stanley & Co. LLC and Piper Jaffray & Co. As resale restrictions end, the grocery store price of our park stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them. In accession, after this offer ( assuming no exercise of the underwriters ’ over-allotment choice ), the holders of approximately shares of common standard will be entitled to rights to cause us to register the sale of those shares under the Securities Act but can not exercise any such adjustment rights during the lock-up time period. registration of these shares under the 28 Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the potency of the registration. Our management will have broad discretion over the use of the proceeds from this offering and might not apply the proceeds of this offering in ways that increase the value of your investment. Our management will have broad delicacy to use the net proceeds from this offer. We expect to use the net proceeds from this extend for general bodied purposes, including working das kapital and the refund of indebtedness. We may besides use web proceeds for early purposes, including possible investments in, or acquisitions of, complementary color products or technologies, although we have no specific plans at this meter to do so. We may fail to use these funds effectively to yield a meaning return, or any reelect, on any investment of these net income proceeds. Our failure to apply these funds effectively could have a material adverse effect on our business and cause the price of our common stock to decline. The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members. As a populace company, we will be discipline to the coverage requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the list requirements of the securities exchange on which we will trade and other applicable federal and state securities rules and regulations. submission with these rules and regulations will increase our legal and fiscal conformity costs, make some activities more difficult, meter consuming or costly and increase necessitate on our clientele systems and resources, particularly after we are no longer an “ emerging growth company. ” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with deference to our commercial enterprise and function results. In addition, changing laws, regulations and standards relating to corporate administration and public disclosure are creating uncertainty for public companies, increasing legal and fiscal conformity costs and making some activities more time consuming. These laws, regulations and standards are capable to varying interpretations, in many cases due to their miss of specificity, and, as a result, their application in practice may evolve over time as fresh steering is provided by regulative and governing bodies. This could result in continuing uncertainty regarding complaisance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased cosmopolitan and administrative expenses and a diversion of management ’ south time and attention from sales-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulative or governing bodies due to ambiguities related to practice, regulative authorities may initiate legal proceedings against us and our commercial enterprise may be harmed. We besides expect that being a populace company and these new rules and regulations will make it more expensive for us to obtain director and officeholder liability indemnity, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could besides make it more unmanageable for us to attract and retain qualify administrator officers and members of our display panel of directors, peculiarly to serve on our audited account committee and recompense committee. New investors in our common stock will experience immediate and substantial dilution. The initial public offer price is expected to be well higher than the book value per parcel of our common stock. Investors purchasing common lineage in this offer will therefore receive immediate dilution of $ per parcel in net tangible reserve value per partake of common lineage, based on the wear initial offer price of $ per plowshare, the mid-point of the range on the blanket of this course catalog. Investors will incur extra dilution upon the exercise of outstanding stock options and warrants. See “ Dilution ” for extra information. 29 Our directors, executive officers and significant stockholders will continue to hold a substantial portion of our stock after this offering, which may lead to conflicts of interest with other stockholders over corporate transactions and other corporate matters. Following the completion of this offer, our directors, executive officers and beneficial holders of 10 % or more of our outstanding coarse stock will beneficially own approximately % of our outstanding coarse stock, including warrants and standard options exercisable within 60 days after March 31, 2012. This concentration of ownership may not be in the best interests of our early stockholders. We are not mindful of any stockholder or vote agreements or understandings between or among our directors, officers or holders of our great coarse livestock which will be in stead following our initial public offer. however, these stockholders, acting together, would be able to importantly influence all matters requiring stockholder blessing, including the election of directors and significant corporate transactions such as mergers or early business combinations. This control could delay, dissuade or prevent a one-third party from acquiring or merging with us, which could adversely affect the market price of our coarse stock. Anti-takeover provisions in our Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current directors and management team and limit the market price of our common stock. Our amended and restated certificate of internalization and amended and restated bylaws that will become effective anterior to completion of this offer check provisions that may delay or prevent a change of master, deter bids at a premium over the market price of our common livestock, and adversely affect the market price of our common stock and the vote and other rights of the holders of our common breed. These provisions include :

dividing our board into three classes, with each class serving a stagger three-year term ;
prohibiting our stockholders from calling a special touch of stockholders or acting by written accept ;
permitting our board to issue extra shares of our prefer stock, with such rights, preferences and privileges as they may designate, including the right to approve an skill or early changes in see ;
establishing an advance notice procedure for stockholder proposals to be brought before an annual meet, including proposed nominations of persons for election to our board of directors ;
providing that our directors may be removed only for lawsuit ;
providing that vacancies on our board of directors may be filled only by a majority of directors then in position, even though less than a quorum ; and
requiring the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital livestock to amend our bylaws and certain provisions of our security of incorporation .

Although we believe these provisions jointly provide for an opportunity to receive higher bids by requiring electric potential acquirers to negotiate with our board, they would apply even if the crack may be considered beneficial by some stockholders. In accession, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management team by making it more difficult for stockholders to replace members of our board, which is responsible for appointing the members of our management. furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in overindulgence of 15 % of our outstanding vote stock certificate from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in overindulgence of 15 % of our outstanding vote store, unless the fusion or combination is approved in a 30 prescribed manner. The restrictions contained in section 203 are not applicable to any of our existing stockholders that will own 15 % or more of our great vote stock upon the close of this volunteer. We have not paid dividends in the past and do not currently intend to pay dividends on our common stock in the future and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock. We have never declared or paid any cash dividends on our common broth and do not intend to do then for the foreseeable future. We presently intend to invest our future earnings, if any, to fund our growth. In addition, the provisions of our debt facility prohibit us from paying cash dividends. therefore, you are not likely to receive any dividends on your common broth for the foreseeable future and the success of an investment in shares of our common lineage will depend upon any future appreciation in their value. There is no guarantee that shares of our coarse broth will appreciate in value or even maintain the price at which our stockholders have purchased their shares. 31 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA This course catalog contains advanced statements, including statements regarding the progress and timing of clinical trials, the safety and effectiveness of our products, the goals of our development activities, estimates of the potential markets for our products, estimates of the capacitance of manufacture and other facilities to support our products, projected cash needs and our expect future revenues, operations and expenditures. The advanced statements are contained chiefly in the sections entitled “ Prospectus Summary, ” “ Risk Factors, ” “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” and “ Business. ” These statements relate to future events or our future fiscal operation and involve known and obscure risks, uncertainties and other factors that could cause our actual results, levels of natural process, performance or accomplishment to differ materially from those expressed or implied by these advanced statements. These risks and uncertainties include, among others :

the execution of our business mannequin and strategic plans for our commercial enterprise, and our current and future products ;
the consequence of our active litigation, including the intellectual property litigation with Palomar Medical Technologies regarding our lead product, the Hair Removal Laser ;
our ability to grow our business by successfully marketing our current products and expanding our sales to existing customers or introducing our products to new customers ;
our ability to successfully expand our business into new geographies ;
the timing or likelihood of regulative filings and approvals for extra indications of our current products and for future products ;
our ability to successfully introduce new products, including our Skin Rejuvenating Laser ;
competition, both direct and collateral, with presently available and future products, within the markets in which we compete ;
our use of proceeds from this offer ;
the oscilloscope of protection we are able to establish and maintain for cerebral property rights covering our current and future products ;
our ability to manage our growth and estimate and control our expenses, future gross and capital requirements and our needs for extra financing ; and
our fiscal performance .

advanced statements include all statements that are not historical facts. In some cases, you can identify advanced statements by terms such as “ may, ” “ will, ” “ should, ” “ could, ” “ would, ” “ expect, ” “ plan, ” “ anticipate, ” “ believe, ” “ appraisal, ” “ intend, ” “ chew over, ” “ seek, ” “ project, ” “ bode, ” “ likely, ” or the negative of those terms, and similar expressions and comparable terminology intended to identify advanced statements. These statements reflect our stream views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these advanced statements. These advanced statements represent our estimates and assumptions only as of the date of this course catalog and, except as required by law, we undertake no obligation to update or revise publicly any advanced statements, whether as a solution of newfangled information, future events or differently after the date of this course catalog. The advanced statements contained in this prospectus are excluded from the safe harbor protective covering provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act. 32 Unless differently indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, grocery store opportunity and commercialize size, is based on information from diverse sources, on assumptions that we have made that are based on those data and other similar sources and on our cognition of the markets for our products. These data involve a total of assumptions and limitations, and you are cautioned not to give excessive weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the diligence in which we operate is necessarily subjugate to a high academic degree of uncertainty and hazard due to a variety of factors, including those described in “ Risk Factors ” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the freelancer parties and by us. 33 USE OF PROCEEDS We estimate that the final proceeds from the sale of the shares of our coarse standard in this offer will be approximately $, or $ if the underwriters fully exercise their option to purchase extra shares, based upon an wear initial public offer price of $ per share, which represents the mid-point of the estimated price image set away on the cover page of this prospectus, and after deducting underwrite discounts and commissions and estimated offer expenses collectible by us. A $ 1.00 increase or decrease in the assume initial public propose monetary value of $ per share would increase or decrease the net proceeds to us from this offer by $, assuming that the number of shares offered by us, as set forth on the cover page of this course catalog, remains the lapp and after deducting the underwrite discounts and commissions and estimated offer expenses account payable by us. Of the net proceeds that we will receive from this offer, we expect to use approximately :

$ million for sales and marketing initiatives to support the ongoing commercialization of our products ;
$ million for inquiry and development activities, including support of product development, regulative and clinical analyze initiatives ; and
$ million for refund of the principal and interest outstanding, and a 3 % prepayment tip, under our loanword and security system agreement with three fiscal institutions, which bears interest at a rate of 9.36 % per annum and is ascribable in July 2015. This obligation has been used to date to repay, in broad, our anterior obligation incurred under the 2011 Facility ; see “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations—Loan Agreements. ”

We expect to use the remainder of the net proceeds for working capital and general corporate purposes. We may besides use a helping of the proceeds to expand our current business through acquisitions or investments in other strategic businesses, products or technologies. We have no commitments with respect to any future acquisitions at this time. We will have broad discretion in the way we use the net proceeds. We intend to invest the internet proceeds in short- and intermediate-term interest-bearing obligations, investment-grade instruments, certificates of down payment or undertake obligations of the United States government, pending their use as described above. The chief purposes of this put up are to raise extra capital, create a public market for our common stock, allow us easier and quicker access to the populace markets should we need more capital in the future, increase the profile and prestige of our company with existing and potential future customers, vendors and strategic partners, and make our stock more valuable and attractive to our employees and likely employees for compensation purposes. DIVIDEND POLICY We have never declared or paid any cash dividends on our capital sprout and our debt facility prohibits us from paying cash dividends. We presently expect to retain future earnings to finance the growth and exploitation of our business and do not anticipate paying any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on then-existing conditions. 34 CAPITALIZATION The comply postpone sets forth, our current fortune of long-run debt and capitalization at December 31, 2011 on :

an actual footing ;
a pro forma basis after giving effect to the conversion of all our outstanding shares of redeemable convertible preferable sprout into 91,602,072 shares of park stock prior to completion of this offering ; and
a pro forma, as adjusted footing after giving effect to the pro forma adjustments described above and the reception of the estimate net proceeds from the sale of shares of common stock offered by us at an assume initial public oblation price of $ per partake, the mid-point of the range on the front cover of this prospectus, after deducting cover discounts and commissions and estimated offer expenses account payable by us .

You should read this mesa in junction with the fiscal statements and notes to the consolidated fiscal statements included elsewhere in this prospectus and the information set forth under the captions “ Selected Consolidated Financial Data ” and “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. ”

As of December 31, 2011
Actual Pro Forma Pro Forma,
As  Adjusted
(unaudited)
(in thousands, except share data)
Notes account payable, including current dowry $ 7,213 $ 7,213
convertible prefer stock and common breed warrant liability 453 453
redeemable convertible favored stock, $ 0.001 par value ; 94,585,697 shares authorized, 91,602,072 shares issued and outstanding, actual, and no shares issued and outstanding, pro forma and pro forma as adjusted 109,540
Stockholders ’ equity ( deficit ) :
common neckcloth, $ 0.001 par prize ; 120,000,000 shares authorized, actual, professional forma and professional forma as adjusted, 5,360,299 shares issued and outstanding, actual, and 96,962,371 shares issued and outstanding, pro forma, and shares issued and outstanding, pro forma as adjusted 5 97
extra paid-in capital 2,907 112,355
Accumulated other comprehensive income 122 122
Accumulated deficit ( 101,768 ) ( 101,768 )
         
full stockholders ’ equity ( deficit ) ( 98,734 ) 10,806
         
total capitalization $ 18,472 $ 18,472
         

A $ 1.00 increase or decrease in the assume initial populace oblation price of $ per plowshare would increase or decrease each of pro forma, as adjusted, extra paid-in capital, total stockholders ’ equity ( deficit ) and total capitalization by approximately $ million, assuming the number of shares offered by us, as set forth on the brood page of this course catalog, remains the like and after deducting cover discounts and commissions and estimated propose expenses collectible by us. The above table excludes :

13,700,062 shares issuable upon the exercise of options outstanding as of December 31, 2011 under our 2004 plan at a weighted average use price of approximately $ 0.32 per contribution ; and
shares of coarse stock to be reserved for issue under our 2012 Plan, which amount includes those shares reserved but unissued under our 2004 plan at the completion of this offer .
the exercise of ( iodine ) warrants to purchase 201,429 shares of our common stock and ( two ) warrants to purchase 278,260 shares of our series CC choose stock .

35 DILUTION Our pro forma net real koran value as of March 31, 2012 was approximately $ million, or $ per contribution, based on 96,985,971 shares of coarse stock outstanding after giving effect to the conversion of all outstanding shares of redeemable convertible favored lineage into 91,602,072 shares of common store. Pro forma net income real book value per share represents our total real assets less our total liabilities, divided by the pro forma issue of shares of common stock outstanding earlier giving effect to this offer. After giving consequence to the issue and sale of shares of common stock in this extend at an initial populace offer price of $ per parcel, the mid-point of the range on the front cover of this prospectus, and after deducting cover discounts and commissions and estimated offer expenses collectible by us, our pro forma web real book value as of March 31, 2012 would have been $ million or $ per contribution. This represents an contiguous increase in pro forma web tangible bible value to existing stockholders of $ per contribution and an immediate dilution in pro forma net real book respect of $ per share to new investors purchasing our common stock in the offer at an initial populace offering price of $ per partake, the mid-point of the stove on the front cover of this prospectus. Dilution per contribution to new investors is determined by subtracting pro forma net tangible record value per share after this offer from the initial public offer price per share paid by a new investor. The following postpone illustrates the per partake dilution without giving effect to the over-allotment option granted to the underwriters :

Assumed initial populace offering monetary value per share $
Pro forma final palpable reserve respect per share as of March 31, 2012 $
Increase in net income palpable ledger value per partake attributable to new investors $
       
Pro forma net real book value per plowshare after this offer $
         
dilution of net income palpable record prize per plowshare to new investors $
       

Each $ 1.00 increase or decrease in the assume public propose price of $ per share, the mid-point of the monetary value range set forth on the embrace of this prospectus, would increase or decrease our professional forma net real book value by approximately $ million, or approximately $ per parcel, and the professional forma dilution per share to investors in this offering by approximately $ per plowshare, assuming that the number of shares offered by us, as set away on the cover page of this course catalog, remains the lapp and after deducting underwrite discounts and commissions collectible by us. We may besides increase or decrease the number of shares we are offering. The pro forma data discussed above is exemplifying only and will adjust based on the actual populace offer price, number of shares sold and early terms of this offer determined at price. The comply board sets forth, as of March 31, 2012, on the pro forma basis discussed above, the numeral of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid to us by existing stockholders and to be paid by raw investors purchasing shares of coarse banal in this offer. The postpone reflects an initial populace offer price of $ per share ( the mid-point of the range on the battlefront cover of this prospectus ) and before deducting cover discounts and commissions and estimated offer expenses collectible by us.

Shares Purchased Total Consideration Average Price per
   Share   
  Number Percent Amount Percent
Existing stockholders % $ % $
New investors
                  
total 100 % $ 100 %
                  

36 If the underwriters exercise their over-allotment option in full to purchase extra shares of coarse stock in this propose, the professional forma net real record value per parcel after the offering would be $ per share, the increase in pro forma internet tangible ledger value per share to existing stockholders would be $ per plowshare and the dilution to new investors purchasing shares in this offering would be $ per share. The above discussion and tables exclude :

13,508,669 shares issuable upon the exert of options great as of March 31, 2012 under our 2004 plan at a leaden average practice price of approximately $ 0.32 per plowshare ; and
shares of common breed to be reserved for issue under our 2012 Plan, which sum includes those shares reserved but unissued under our 2004 plan at the completion of this offer .
the exercise of ( one ) warrants to purchase 201,429 shares of our common malcolm stock and ( two ) warrants to purchase 884,541 shares of our series CC favored store .

To the extent any of the predate options are exercised, there will be far dilution to investors participating in this offering. In addition, we may choose to raise extra das kapital due to commercialize conditions or strategic considerations. To the extent that we raise extra capital through the sale of equity or convertible debt securities, the issue of these securities could result in far dilution to our stockholders. 37 SELECTED CONSOLIDATED FINANCIAL DATA You should read the following selected fiscal data in concurrence with our consolidate fiscal statements, the notes to the consolidate fiscal statements and “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations ” included elsewhere in this course catalog. The selected fiscal data included in this department are not intended to replace the consolidate fiscal statements and the associate notes included elsewhere in this prospectus. We derived the selected statements of operations data for the years ended December 31, 2009, 2010 and 2011 and the balance sheet data as of December 31, 2010 and 2011 from our audited consolidate fiscal statements appearing elsewhere in this prospectus. The choose statements of operations data for the class ended December 31, 2008 and the poise tabloid data as of December 31, 2008 and 2009 are derived from our audited fiscal statements not included in this course catalog. Our historical results are not necessarily indicative mood of the results that may be expected in the future.

Year Ended December 31,
     2008           2009           2010           2011     
(in thousands, except per share data)
Consolidated Statements of Operations Data:
net sales $ 9,805 $ 19,417 $ 27,140 $ 45,049
price of goods sold 6,477 9,621 14,109 22,533
               
Gross profit 3,328 9,796 13,031 22,516
function expenses :
Sales and marketing 6,373 9,005 19,863 32,256
research and exploitation 5,767 8,253 9,381 9,341
General and administrative 3,870 5,583 9,792 14,867
               
total operate expenses 16,010 22,841 39,036 56,464
               
loss from operations ( 12,682 ) ( 13,045 ) ( 26,005 ) ( 33,948 )
other income ( expense ) :
Interest income 515 386 50 46
interest expense ( 1 ) ( 1 ) ( 7 ) ( 601 )
change in fair prize of warrant liability ( 252 )
Foreign exchange profit ( personnel casualty ) 1,081 372 366 ( 38 )
               
Loss before profit ( provision ) for income taxes ( 11,087 ) ( 12,288 ) ( 25,596 ) ( 34,793 )
Benefit ( planning ) for income taxes 77 ( 91 ) ( 23 ) ( 44 )
               
net loss ( 11,010 ) ( 12,379 ) ( 25,619 ) ( 34,837 )
alteration to net loss resulting from preferred malcolm stock modification and extinguishment 982
               
net loss attributable to common stockholders $ ( 11,010 ) $ ( 12,379 ) $ ( 24,637 ) $ ( 34,837 )
               
net loss per share attributable to common stockholders – basic and diluted $ ( 3.46 ) $ ( 3.70 ) $ ( 6.26 ) $ ( 6.52 )
               
Weighted-average shares of common stock used in computing net passing per parcel attributable to common stockholders – basic and diluted ( 1 ) 3,183 3,345 3,933 5,342
               
Pro forma net income loss per share attributable to common stockholders – basic and diluted ( unaudited ) ( 1 ) $ ( 0.43 )
         
burden average shares of common stock used in computing pro forma web loss per plowshare attributable to common stockholders – basic and diluted ( unaudited ) ( 1 ) 81,042
         
( 1 ) See Notes 2 and 15 to our audited consolidate fiscal statements for an explanation of the calculations of our basic and dilute net passing per partake of common lineage attributable to common stockholders and pro forma net loss per plowshare of coarse stock attributable to common stockholders .

38

As of December 31,
     2008           2009           2010          2011     
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents $ 7,816 $ 5,590 $ 5,809 $ 14,972
short-run investments 25,785 13,876 10,713
Working capital 35,531 22,232 17,384 13,520
Assets 38,616 29,684 27,977 31,470
Notes collectible, including stream assign 7,213
redeemable convertible favored stock 64,542 64,542 83,878 109,540
Stockholders ’ fairness ( deficit ) $ ( 28,453 ) $ ( 40,641 ) $ ( 64,423 ) $ ( 98,734 )

39 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Risk Factors.” Overview Tria Beauty brings clinically-proven light-based aesthetic medical technologies out of the doctor ’ randomness position and into the home. We sell easy-to-use, FDA-cleared aesculapian devices to consumers that deliver results comparable to professional aesthetic treatments at a fraction of the monetary value. Our internet sales have grown from $ 9.8 million in 2008 to $ 45.0 million in 2011. We were in the first place incorporated in California in January 2003 under the name SpectraGenics, Inc. We changed our name to Tria Beauty, Inc. in July 2008 and reincorporated in Delaware in August 2010. We have developed and market rechargeable consumer hand-held devices that are safe and effective, so far simple to use. Our two current devices on the market are the Hair Removal Laser and Skin Perfecting Blue Light. The Hair Removal Laser, our precede product, is a diode laser device that provides permanent reduction in hair regrowth comparable to devices used in a doctor ’ s office. It was cleared by the FDA in 2005 as a prescription device. In 2008, we obtained FDA clearance to market the device over the counter for home manipulation. Our Skin Perfecting Blue Light delivers high-intensity aristocratic ignite that inhibits acne-causing bacteria to treat meek to moderate acne comparable to phototherapy performed in a doctor ’ mho agency. In January 2010, we obtained headroom to commercialize the device over the counter for home manipulation. Our most advance product under development is our Skin Rejuvenating Laser, a fractional non-ablative laser device designed to enable our entrance into the anti-aging market. We expect to begin selling this device outside the United States in the second one-half of 2012. We believe that our pivotal clinical studies will support a 2012 FDA application for over-the-counter, or OTC, discussion of periorbital wrinkles ( crow ’ mho feet ), perioral wrinkles ( wrinkles around the mouth ), dyschromia ( uneven pigmentation ) and textural irregularities like tactile choppiness, for which fractional non-ablative technology has become an accept treatment standard. We besides believe that these clinical studies will demonstrate that our device has base hit and potency results comparable to those obtained by fractional non-ablative laser treatments in a doctor ’ randomness office. We sell our products outside of the United States in Japan, South Korea, Canada, the United Kingdom, Germany and Spain. We intend to grow our business further in these geographies by amply deploying our multi-channel distribution model, which consists of both direct and indirect sales channels. additionally, we intend to selectively expand our international presence into newly geographies that offer the likely for significant demand for our products. We initially began selling our Hair Removal Laser in Japan, which accounted for the huge majority of our gross until our U.S. OTC launch in 2008. Since then, the United States and Japan have been our two largest markets, with sales in the United States generally accounting for an increasing percentage of our net sales over time. Sales in North America, primarily from the United States, comprised 45 % of our net sales for the year ended December 31, 2010, and 65 % of our net sales for the year ended December 31, 2011. We have systematically grown our sales. Our sales have increased from $ 9.8 million in 2008 to $ 45.0 million in 2011, representing a compound annual growth rate of 66 % and over 90 % annual average whole growth rate. During this like time frame, our net losses have increased from $ 11.0 million to $ 34.8 million, a 47 % compound annual increase. Throughout this timeframe, we have strategically sought to reach a broader group of consumers by pricing our products at more attractive retail monetary value points. As a leave, we have introduced new versions of our Hair Removal Laser at lower average costs to manufacture, allowing us to reduce our average selling prices while adding features that we believe make the product increasingly attractive to consumers. Following FDA headroom in 2008, we commercially launched our Hair Removal Laser in the United States at a monetary value of $ 995. Our future generation model, introduced in the United States in 2009, sold for $ 595 and increased 40 the energy rescue from one to three settings. Our most recent model, introduced in 2011, retails in the United States for $ 395 and includes an increase discussion descry size and five adjustable department of energy rescue settings. We have achieved year-over-year quarterly sales growth for the past 12 consecutive quarters. Since our origin, we have incurred losses and negative cash stream from our operations. Our net income losses were $ 12.4 million, $ 25.6 million and $ 34.8 million in the years ended December 31, 2009, 2010 and 2011, respectively. For the class ended December 31, 2011, we used $ 32.4 million of cash from our operate activities. At December 31, 2011, we had accumulated deficits of $ 101.8 million. We expect to continue to incur losses as we invest in building the commercialize for at-home light-based skin care devices through our sales and marketing activities, expanding our development of new products and expanding our external sales geographically. historically, we have funded our operations primarily from proceeds from issuances of common stock and redeemable convertible prefer breed and borrowings under our debt facilities. As of December 31, 2011, we had $ 7.2 million great under a savings bank term lend that was in full drawn down and we had $ 2.0 million that was undrawn and available under our existing revolving credit line of credit. In January 2012, we entered into a lend and security agreement with three fiscal institutions that provides a $ 27.0 million debt facility to be used for general corporate purposes. See “ —Loan Agreements. ” Basis of Presentation Sales We presently generate substantially all of our sales from our Hair Removal Laser. We sell our products directly to individual consumers through our e-commerce web site at www.triabeauty.com, e-commerce affiliates, such as www.amazon.com and our infomercials. The significant majority of purchases made through these channels of distribution are paid for by credit card. We besides sell our products wholesale through a count of collateral sales channels, including on television through QVC, and at physical locations and websites of blue-ribbon high-end retailers and doctor offices. Our mix of sales between target and wholesale was approximately 86 % and 14 %, respectively, for the class ended December 31, 2011. We believe that the long-run lookout for our sales will continue to benefit from several factors. First, we are in the early stages of penetrating our prey markets. While we have grown our net sales at a compound annual growth rate of 66 % from 2008 to 2011 and have increased our unit of measurement sales from approximately 16,000 in 2008 to over 116,000 in 2011, our sales represent only a small percentage of the electric potential markets we target. We intend to continue implementing our multi-channel sales and marketing strategy, which is in diverse stages of deployment in existing geographies. We besides intend to continue to expand into newfangled international geographies by leveraging our experience and existing infrastructure. We further intend to continue to create raw products and improve existing ones by leveraging our testify engineering platforms and product design capability. We anticipate introducing our Skin Rejuvenating Laser outside of the United States in the second gear half of 2012, and expect to continue to develop other light-based skin care products to provide consumers with a comprehensive examination and complemental portfolio of skin care solutions. Sales by Geography We generate sales in North America, Asia Pacific, or APAC, and in the lie of the earth. In North America, most of our sales are generated in the United States, which represents our largest single market, with the balance generated in Canada. In APAC, our sales are primarily generated in Japan, our moment largest marketplace, and a smaller measure is generated in South Korea. In the rest of the worldly concern, the majority of our sales are generated in Spain and in the United Kingdom. Sales are attributed to a detail region based on the placement to which we ship our customers ’ products. Our north american commercialize broadly involves lower margins ( and lower average selling prices ) than international markets. The share of our total sales generated in North America has increased from 24 % in 2008 to 65 % in 2011, chiefly as a consequence of significant sales increase in the U.S. commercialize. We anticipate that our sales in North America 41 will continue to grow, but through our efforts to expand into raw international geographies and to grow existing international geographies, APAC and the rest of the worldly concern will grow faster than North America and make up a larger share of our net income sales. The keep up presents our internet sales shipped to customers in each geographic area, as a share of full net sales :

Year Ended December 31,
2008 2009 2010 2011
North America 24 % 45 % 45 % 65 %
APAC 58 38 51 34
Rest of World 18 17 4 1
                
net sales 100 % 100 % 100 % 100 %
                

Cost of Goods Sold cost of goods sold consists of costs of finish products purchased from our third-party manufacturer, labor movement, material and viewgraph involved in our inner manufacture processes, shipping costs, guarantee estimates, warehouse personnel costs and warehouse storage costs. We outsource the forum of our Hair Removal Laser to Flextronics, a third-party shrink manufacturer who sources the natural materials, parts, components, subassemblies and packaging products from our list of modify suppliers. Using a third-party manufacturer allows us to fulfill requirement without corresponding capital expenditures or procurement and repositing of raw materials, and allows us to maintain a limited inventory. Because our current production volume of our Skin Perfecting Blue Light is not large enough to warrant a third-party contract manufacturer, we manufacture that intersection in-house at our headquarters in California. We anticipate transitioning the manufacture of our Skin Perfecting Blue Light to a third-party narrow manufacturer once product sales warrant such a transition. We anticipate that our price of goods sold will increase in absolute dollars as we grow our sales. We besides believe that price of goods sold as a percentage of net sales will decrease as we continue to reduce the fabricate costs of our Hair Removal Laser and Skin Perfecting Blue Light. We anticipate accomplishing this by reducing the costs of our components and implementing lower cost designs, by reducing our promotion and freight expenses, and by outsourcing the manufacture of our Skin Perfecting Blue Light, angstrom good as by introducing our Skin Rejuvenating Laser, which we believe will be produced with lower costs in relative to sales. Operating Expenses Sales and Marketing Our sales and market expenses include costs that are of a fixed nature that do not vary significantly with sales volumes, a well as variable costs that can be more quickly adjusted in conjunction with fluctuations in sales. Fixed sales and marketing expenses primarily consist of labor-related costs, including salaries, benefits, stock-based compensation, consulting and professional fees. Fixed costs besides include the costs of developing advertisements used internationally and the product of television infomercials. variable star sales and market expenses primarily include the costs of placement of television infomercials, on-line search and advertise fees, payments to affiliates on sales made through their websites, credit menu serve fees, public relations, marketing agency fees and other promotional expenses. We expect to continue to invest in sales and selling activities to grow sales, increase brand awareness and educate consumers about light-based skin care devices. We expect that as our brand grows in realization, and as situate costs are leveraged over a larger sales base, sales and market expenses will continue to increase in absolute dollars but decrease as a share of sales. 42 Research and Development research and exploitation expenses chiefly consist of personnel-related salaries, benefits, stock-based compensation, consulting and professional fees, materials and supplies, disparagement and facilities and associate costs involved in research and development. Research and development includes intersection development costs for modern or better devices, a well as regulative and clinical trial expenditures for new or extended claims and clearances. We expense all research and growth costs in the periods in which they are incurred. We intend to continue to invest in bringing light-based technologies into the base by designing and developing new products, including the Skin Rejuvenating Laser, and investing in clinical studies to prove the products ’ guard and potency. accordingly, we expect our research and exploitation expense to increase in absolute dollars but to decrease as a share of sales. General and Administrative General and administrative expense primarily consists of personnel-related salaries, benefits and stock-based compensation for administrative, human resources, information technology support, finance and account. This category besides includes legal expenses, professional fees, indemnity, depreciation, technology related costs, facilities and related costs. We anticipate we will incur increased personnel expenses, professional service fees, including legal and audited account, investor relations, price of conformity with securities laws and regulations, and higher director and officer insurance costs as a leave of becoming a populace company. In accession, we expect our general and administrative expenses to increase in absolute dollars as we continue to add personnel to support the growth of our business internationally but to decrease as a percentage of sales. Other Income (Expense) Interest Income Interest income includes interest earned on cash and cash equivalents and short-run investments. Interest Expense pastime expense includes the interest expense associated with our long-run debt and amortization of postpone finance costs. Our pastime expense varies based on the level of debt outstanding. Foreign Exchange Gain (Loss) The functional currency for most of our alien operations is the relevant local currency. We have translated the fiscal statements of our foreign subsidiaries into U.S. dollars using the change rate in effect at the libra sheet date for our asset and liability accounts and using the average exchange rate for the period for our gross, price and expense accounts. We record gains and losses resulting from translating the fiscal statements in the accrued early comprehensive loss score in stockholders ’ fairness ( deficit ). We criminal record transaction gains or losses in web personnel casualty in the period in which they occur. Results of Operations The pursue tables set forth, for the periods presented, our amalgamate statements of operations. In the tables below and throughout this “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations, ” consolidated statements of operations data for the years ended December 31, 2009, 2010 and 2011 have been derived from our audited consolidate fiscal statements which are included elsewhere in this course catalog. The information contained in the tables below should be read in junction with our consolidate fiscal statements and the related notes appearing elsewhere in this prospectus. 43 Comparison of the Years Ended December 31, 2009, 2010 and 2011 The following table shows the amounts of the listed items from our statements of operations for the periods presented, showing period-over-period changes.

  Year Ended December 31,      2009 vs. 2010   
    2009         2010         2011     2010 vs. 2011
(dollars in thousands)
web sales $ 19,417 $ 27,140 $ 45,049 $ 7,723 40 % $ 17,909 66 %
cost of goods sold 9,621 14,109 22,533 4,488 47 8,424 60
                       
Gross net income 9,796 13,031 22,516 3,235 33 9,485 73
operate expenses :
Sales and marketing 9,005 19,863 32,256 10,858 121 12,393 62
inquiry and development 8,253 9,381 9,341 1,128 14 ( 40 )
General and administrative 5,583 9,792 14,867 4,210 75 5,075 52
                       
full manoeuver expenses 22,841 39,036 56,464 16,196 71 17,428 45
                       
loss from operations ( 13,045 ) ( 26,005 ) ( 33,948 ) ( 12,961 ) 99 ( 7,943 ) 31
other income ( expense ) :
Interest income 386 50 46 ( 336 ) ( 87 ) ( 4 ) ( 8 )
interest expense ( 1 ) ( 7 ) ( 601 ) ( 6 ) 600 ( 594 ) ( 849 ) %
transfer in fairly value of warrant liability ( 252 ) ( 252 )
Foreign commute advance ( personnel casualty ) 372 366 ( 38 ) ( 6 ) ( 2 ) ( 404 ) ( 110 )
                       
Loss before provision for income taxes ( 12,288 ) ( 25,596 ) ( 34,793 ) ( 13,309 ) 108 ( 9,197 ) ( 36 )
provision for income taxes ( 91 ) ( 23 ) ( 44 ) 68 ( 75 ) ( 21 ) ( 91 )
                       
net passing $ ( 12,379 ) $ ( 25,619 ) $ ( 34,837 ) $ ( 13,241 ) 107 % $ ( 9,218 ) ( 36 ) %
                       

Net Sales 2010 compared to 2011. Sales increased by $ 17.9 million, or 66 %, to $ 45.0 million for the year ended December 31, 2011 as compared to $ 27.1 million for the class ended December 31, 2010. The growth in sales was chiefly due to a cheeseparing double over of the phone number of units of our Hair Removal Laser that we sold global, from approximately 59,000 units in 2010 to 116,000 units in 2011. This addition resulted from several factors, including a significant addition in outgo on our direct answer television spots, respective digital selling programs and a reduction in the price of our Hair Removal Laser from $ 595 to our target retail monetary value in the United States of $ 395, made potential by the introduction of our lower-cost third base genesis Hair Removal Laser. Although APAC grew in sales for the class, the rate of emergence declined ascribable to the market for home-use hair removal devices becoming more competitive. In response, in former 2011, we made changes to our market approach to implement assorted e-commerce and other strategies similar to those that had been implemented in North America, including the plunge of calculate reaction television in an effort to stimulate sales. Sales in the respite of the populace were impacted by our decisiveness to exit certain markets that had been historically served by distributors in formulation for our entry on a direct footing. 2009 compared to 2010. Sales increased by $ 7.7 million, or 40 %, to $ 27.1 million for the year ended December 31, 2010, compared to $ 19.4 million for the year ended December 31, 2009. The increase was primarily due to an increase in unit volume from approximately 38,000 units in 2009 to 59,000 units in 2010 due to growing requirement for our Hair Removal Laser through direct to consumer e-commerce channels, driven by increase market spend and a sales price reduction, partially offset by a decline in the rest of the populace due to lower distributor sales in Europe as we exited certain markets that had been historically served by distributors in preparation for our entry on a direct basis. Cost of Goods Sold 2010 compared to 2011. Costs of goods sold increased by $ 8.4 million, or 60 %, to $ 22.5 million for the year ended December 31, 2011, up from $ 14.1 million for the year ended December 31, 2010. The increase in our cost 44 of goods sold was chiefly driven by higher sales bulk of our Hair Removal Laser in 2011 as compared to 2010. As a percentage of sales, cost of goods sold decreased to 50 % for the year ended December 31, 2011, compared to 52 % of sales for the year ended December 31, 2010. The decrease in monetary value of goods sold as a percentage of sales for the period was chiefly due to a benefit of two percentage to crying margins related to an increase in the amount of refurbish inventory that was sold for the period resulting in a profit, and one percentage related to a reimbursement from a customer holding consigned goods a helping of which had been physically lost. These improvements were partially offset by the affect of our geographic mix of sales that included a larger percentage of lower margin north american sales, stock write-downs of $ 1.2 million and introductory pricing for our Skin Perfecting Blue Ligh t. 2009 compared to 2010. Cost of goods sold increased by $ 4.5 million, or 47 %, to $ 14.1 million for the year ended December 31, 2010, compared to $ 9.6 million for the year ended December 31, 2009. The increase was chiefly due to an increase in the volume of our Hair Removal Laser sold during 2010, partially offset by lower unit costs due to a redesign of the merchandise. cost of goods sold as a percentage of sales increased from 50 % for the class ended December 31, 2009 to 52 % for the year ended December 31, 2010, chiefly due to higher guarantee costs related to a bad battery. Gross Profit 2010 compared to 2011. Gross profits increased by $ 9.5 million, or 73 %, to $ 22.5 million for the year ended December 31, 2011, up from $ 13.0 million for the year ended December 31, 2010. As a share of sales, our crude profit was 50 % for the year ended December 31, 2011, compared to 48 % of sales for the class ended December 31, 2010. The increase in the crude net income margin for the menstruation was chiefly due to a benefit of two percentage to arrant margins related to an increase in the amount of refurbish stock that was sold for the period resulting in a gain, and one percentage related to a reimbursement from a customer holding consigned goods a share of which had been physically lost. These improvements were partially offset by the affect of our geographic mix of sales that included a larger percentage of lower gross profit union american sales, inventory write-off ’ mho of $ 1.2 million and basic price for our Skin Perfecting Blue Ligh t. 2009 compared to 2010. Gross profit increased by $ 3.2 million, or 33 %, to $ 13.0 million for the year ended December 31, 2010, up from $ 9.8 million for the year ended December 31, 2009. The addition in our gross profit was due to higher sales bulk of our Hair Removal Laser in 2010 as compared to 2009. As a percentage of sales, gross profit decreased to 48 % for the year ended December 31, 2010 from 50 % for the year ended December 31, 2009, primarily due to higher guarantee costs related to a bad battery. Operating Expenses Sales and Marketing 2010 compared to 2011. Sales and marketing costs increased by $ 12.4 million, or 62 %, to $ 32.3 million in the year ended December 31, 2011 as compared to $ 19.9 million in the year ended December 31, 2010. This increase was primarily attributable to ad expenses incurred through versatile digital market, traditional print advertising, promotional campaigns, the development of modern television infomercial programs in North America and Asia, and increased head count in support of the growth in our market activities. 2009 compared to 2010. Sales and market expenses increased by $ 10.9 million, or 121 %, to $ 19.9 million for the year ended December 31, 2010, as compared to $ 9.0 million for the class ended December 31, 2009. The increase was primarily due to higher outgo in support of customer learning through our direct-to-consumer channel, establish costs associated with our Skin Perfecting Blue Light, expenses incurred in the entry into the south korean and canadian markets and an increase in head count to support the growth in market activities. 45 Research and Development 2010 compared to 2011. Research and development costs decreased by $ 0.1 million to $ 9.3 million in the year ended December 31, 2011 as compared to $ 9.4 million in the year ended December 31, 2010. The decrease in our research and development expenses was chiefly due to the completion of the growth of our third base generation Hair Removal Laser, which was partially offset by initial spend on the development of our Skin Rejuvenating Laser. As a percentage of sales, research and exploitation costs were 20.7 % in 2011 as compared to 34.6 % in 2010. 2009 compared to 2010. Research and exploitation expenses increased by $ 1.1 million, or 14 %, to $ 9.4 million for the class ended December 31, 2010, as compared to $ 8.3 million for the year ended December 31, 2009. The increase was primarily due to an increase in head count and professional services associated with the development of our third generation Hair Removal Laser. As a share of sales, research and development costs were 35 % in 2010 as compared to 43 % in 2009. General and Administrative 2010 compared to 2011. General and administrative costs increased by $ 5.1 million, or 52 %, to $ 14.9 million in the year ended December 31, 2011 as compared to $ 9.8 million in the year ended December 31, 2010. The increase in our general and administrative expenses was primarily due to higher legal fees, related to ongoing litigation described elsewhere in this course catalog, and an increase in head count to support our emergence. 2009 compared to 2010. General and administrative expenses increased by $ 4.2 million, or 75 %, to $ 9.8 million for the year ended December 31, 2010, as compared to $ 5.6 million for the year ended December 31, 2009. The increase in our general and administrative expenses was primarily due to higher legal fees related to ongoing litigation as described elsewhere in this course catalog, a well as increased head count to support our increase. Other Income (Expense) 2010 compared to 2011. other income ( expense ) decreased from income of $ 0.4 million to expense of $ 0.8 million, a $ 1.2 million decrease in the year ended December 31, 2011 as compared to the year ended December 31, 2010. This decline was chiefly due to higher pastime expense of $ 0.6 million related to the 2011 term loan with Silicon Valley Bank. In addition, the foreign currency gain of $ 0.4 million in 2010 turned to a little loss in 2011, chiefly due to unfavorable changes in currency exchange rates related to account payable amounts denominated in U.S. dollars compared to our subsidiaries ’ functional currencies. 2009 compared to 2010. other income ( expense ) was $ 0.3 million lower for the year ended December 31, 2010 as compared to December 31, 2009, chiefly due to a decrease in matter to income as we had less cash to invest throughout the class. Unaudited Quarterly Results of Operations The follow tables deliver our unaudited quarterly consolidated results of operations for the eight quarters ended December 31, 2011, american samoa well as the percentage that each credit line item represented of internet sales. This unaudited quarterly consolidated information has been prepared on the lapp basis as our audited consolidate fiscal statements and, in the opinion of management, the statements of operations data includes all adjustments, consisting of normal recurring adjustments, necessary for the fairly presentation of the results of operations for these periods. You should read this board in conjunction with our fiscal statements and the refer notes located elsewhere in this course catalog. The results of operations for any draw are not necessarily indicative of the results of operations for any future periods. 46

Three Months Ended
March 31,
2010
June 30,
2010
September 30,
2010
December 31,
2010
March 31,
2011
June 30,
2011
September 30,
2011
December 31,
2011
(in thousands, unaudited)
net sales $ 5,754 $ 5,314 $ 7,400 $ 8,672 $ 9,058 $ 11,949 $ 11,473 $ 12,569
cost of goods sold 2,802 2,515 3,762 5,030 4,895 5,287 6,360 5,991
                               
Gross profit 2,952 2,799 3,638 3,642 4,163 6,662 5,113 6,578
operate expenses :
Sales and market 4,241 4,564 4,962 6,096 5,952 7,788 8,873 9,643
research and development 2,128 2,520 2,562 2,171 1,941 2,004 2,501 2,895
General and administrative 2,211 2,999 2,254 2,328 3,101 3,800 3,642 4,324
                               
total operating expenses 8,580 10,083 9,778 10,595 10,994 13,592 15,016 16,862
                               
loss from operations ( 5,628 ) ( 7,284 ) ( 6,140 ) ( 6,953 ) ( 6,831 ) ( 6,930 ) ( 9,903 ) ( 10,284 )
other income ( expense ) :
Interest income 22 6 13 9 13 10 10 13
interest expense ( 2 ) ( 5 ) ( 101 ) ( 207 ) ( 293 )
change in fairly value of warrant liability ( 252 )
Foreign exchange profit ( loss ) ( 61 ) 49 296 82 ( 42 ) 62 ( 29 ) ( 29 )
                               
Loss before planning for income taxes ( 5,667 ) ( 7,229 ) ( 5,833 ) ( 6,867 ) ( 6,860 ) ( 6,959 ) ( 10,129 ) ( 10,845 )
provision for income taxes ( 11 ) ( 12 ) ( 11 ) ( 3 ) ( 7 ) ( 23 )
                               
net loss $ ( 5,678 ) $ ( 7,229 ) $ ( 5,833 ) $ ( 6,879 ) $ ( 6,871 ) $ ( 6,962 ) $ ( 10,136 ) $ ( 10,868 )
                               
Three Months Ended
March 31,
2010
June 30,
2010
September 30,
2010
December 31,
2010
March 31,
2011
June 30,
2011
September 30,
2011
December 31,
2011
final sales 100 % 100 % 100 % 100 % 100 % 100 % 100 % 100 %
cost of goods sold 49 47 51 58 54 44 55 48
                               
Gross profit 51 53 49 42 46 56 45 52
operate expenses :
Sales and selling 74 86 67 70 66 65 77 77
research and development 37 47 35 25 21 17 22 23
General and administrative 38 56 30 27 34 32 32 34
                               
total operate on expenses 149 189 132 122 121 114 131 134
                               
loss from operations ( 98 ) ( 136 ) ( 83 ) ( 80 ) ( 75 ) ( 58 ) ( 86 ) ( 82 )
other income ( expense ) :
Interest income
interest expense ( 1 ) ( 2 ) ( 2 )
change in average value of sanction indebtedness ( 2 )
Foreign exchange gain ( loss ) ( 1 ) 1 4 1 1
                               
Loss before provision for income taxes ( 99 ) ( 135 ) ( 79 ) ( 79 ) ( 75 ) ( 58 ) ( 88 ) ( 86 )
provision for income taxes
                               
net personnel casualty ( 99 ) % ( 135 ) % ( 79 ) % ( 79 ) % ( 75 ) % ( 58 ) % ( 88 ) % ( 86 ) %
                               

47 We believe our business is affected by seasonal trends, but the full impact of these trends is difficult to measure due to the develop nature of our markets, our relatively inadequate operating history and our sales growth. In the four quarters ended June 30, 2011, our sales for each of those quarters grew consecutive chiefly as a consequence of increasing credence of our Hair Removal Laser in the North America and APAC regions, increased spend on send response television receiver spots and in diverse digital market efforts and because of the introduction in March 2011 of the third generation of our Hair Removal Laser at more attractive retail price points. Sales in the three months ended September 30, 2011 were down slenderly compared with the former quarter chiefly because the emergence in the north american market was offset by a slow-down in APAC as marketing strategies were restructured to deal with a more competitive home-use haircloth removal device commercialize. Sales in the three months ended December 31, 2011 increased because of higher north american sales. Factors affecting crude profit as a share of sales during the periods listed by and large included a decrease in fabrication costs, lowered prices at retail, promotionally priced sales programs and a change in the geographic shuffle of sales to include a greater numeral of lower margin north american sales. Gross net income as a share of sales declined in the three months ended September 30, 2010 to 49 % as compared with the previous quarter because we reduced prices anterior to realizing the price reductions from outsourcing the fabrication of our Hair Removal Laser. Gross profit further declined to 42 % in the three months ended December 31, 2010 due to a shift in geographic tax income desegregate resulting from significant emergence in North America. Due to our price strategy in the japanese market, gross profit as a percentage of sales in Japan is normally higher than in the union american market. Gross profit as a percentage of sales increased in the one-fourth ended March 31, 2011 due to a reduction in the price of the third base generation Hair Removal Laser. The gross net income share again improved in the quarter ended June 30, 2011 reflecting extra benefits from the price reduction mentioned above and from seasonal worker growth in APAC sales for the draw. The crude profit share declined in the quarter ended September 30, 2011 due to an unfavorable mix of sales from the lower gross profit North America region and from inventory reserves that were established for overindulgence Skin Perfecting Blue Light armory. In the quarter ended December 31, 2011, crying profit as a share of sales benefited from the sale of refurbish inventory previously written off. The increases in sales and commercialize expenses as a share of sales are generally due to higher spend in lead answer television spots and in assorted digital market efforts, the plunge of new products, geographies and channels of distribution and a larger share of sales in North America as compared to APAC and the rest of the world. In the quarter ended June 30, 2010, sales and marketing expenses as a share of sales increased to 86 % due to the cost of a celebrity promotional broadcast that occurred during the draw. The increase in the quarters ended September 30, 2011 and December 31, 2011 were due to higher spend on lineal answer television receiver. On an absolute dollars basis, our research and development expenses remain relatively ceaseless, with fluctuations due to periodic spend on growth projects or in clinical studies. On a share footing, our research and development expenses have declined as sales have increased. General and administrative expenses generally fluctuate on an absolute dollars basis based on periodic spending on legal fees related to ongoing litigation as described elsewhere in this course catalog and have remained relatively ceaseless as a share of sales. Liquidity and Capital Resources Since our origin, we have incurred losses and veto cash flow from our operations. For the year ended December 31, 2011, we incurred net losses of $ 34.8 million and we used $ 32.4 million of cash flows from our manoeuver activities. At December 31, 2011, we had an accumulated deficit of $ 101.8 million. As of December 31, 2011, we had working capital of $ 13.5 million. Historically, we have funded our operations primarily from proceeds from issuances of redeemable convertible prefer stock and borrowings under our debt facilities. As of December 31, 2011, we had $ 7.2 million outstanding under a deposit condition loan that was amply drawn down and we had $ 2.0 million that was undrawn and available under our existing revolving line of citation. In January 2012, we entered into a fresh loanword and security agreement with three fiscal institutions to 48 be used for cosmopolitan bodied purposes. We immediately drew down $ 20.0 million and repaid in entire the $ 7.2 million outstanding under the anterior bank condition loan. We have an extra $ 7.0 million available to us if we meet certain milestones. See “ —Loan Agreements. ” Our primary uses of cash include expenditures made in order to develop our sales channels ( both domestically and internationally ) and for our increase general and administrative needs for working capital to support our sales growth a well as for research and development activities for new and better products. We believe that our existing cash, cash equivalents and short-run investments ( anterior to the proceeds from this offer ) together with our fresh debt facility will be sufficient to fund our operations for at least the following 12 months. however, there can be no assurance that we will be able to meet our operational plan and adequately fund our operations or ultimately achieve profitableness. If we can not meet our objectives, we may need to curtail plan activities to reduce costs, and doing so will likely have an unfavorable consequence on our ability to execute on our intend clientele objectives. Our ability to continue to meet our obligations and to achieve our business objectives is dependent chiefly upon our ability to execute on our business plan, including generating sufficient revenues and cash flows from operate activities. If we are unable to execute on our occupation plan and adequately fund our operations, we may need to seek extra financing and/or reduce our investment in growing our business. Summary Statement of Cash Flows summary cash flow information for the years ended December 31, 2009, 2010 and 2011 is set forth below.

Year Ended December 31,
2009 2010 2011
(in thousands)
net income cash and cash equivalents ( used in ) provided by :
operating activities $ ( 13,174 ) $ ( 22,731 ) $ ( 32,395 )
Investing activities 11,046 1,952 8,757
finance activities 8 20,807 32,734
Effect of rally rate changes on cash and cash equivalents ( 106 ) 191 67
            
( Decrease ) increase in cash and cash equivalents $ ( 2,226 ) $ 219 $ 9,163
            

Cash Flows for the Years Ended December 31, 2009, 2010 and 2011 Operating activities For the year ended December 31, 2011, final cash used in operate activities was $ 32.4 million and consisted primarily of a final loss of $ 34.8 million, partially offset by $ 1.7 million in non-cash items and a final cash increase due to changes in our operational assets and liabilities of $ 0.7 million. For the class ended December 31, 2010, net cash used in operate activities was $ 22.7 million and consisted primarily of a net loss of $ 25.6 million, offset by $ 0.9 million in non-cash items and a net decrease to our operating assets and liabilities of $ 1.9 million. For the year ended December 31, 2009, net cash used in operating activities was $ 13.2 million and consisted primarily of a net loss of $ 12.4 million, offset by $ 0.5 million in non-cash items and a internet increase to our operating assets and liabilities of $ 1.3 million. Net cash (used in) provided by investing activities For the year ended December 31, 2011, net income cash provided by investing activities was $ 8.8 million. This consisted primarily of the leverage, sale and maturities of short-run investments. The amounts related to 49 investments in capital expenditures, including tooling for the industry of our Hair Removal Laser and Skin Perfecting Blue Light, were $ 1.9 million. For the year ended December 31, 2010, net cash provided by investing activities totaled $ 2.0 million and consisted primarily of the net purchase, sale and maturities of short-run investments, less $ 1.0 million used for capital expenditures. For the year ended December 31, 2009, final cash provided by investing activities totaled $ 11.0 million and consisted primarily of the net purchase, sale and maturities of short-run investments, less $ 0.9 million used for das kapital expenditures. Net cash provided by financing activities For the class ended December 31, 2011, net cash provided by finance activities totaled $ 32.7 million and consisted primarily of web proceeds from the issue of preferable lineage and from the proceeds of a term loan. For the class ended December 31, 2010, net cash proceeds from finance activities totaled $ 20.8 million and consisted chiefly of net income proceeds from the issue of prefer stock. For the year ended December 31, 2009, net cash proceeds from finance activities were minimal and were the solution of employees exercising options. Contractual Obligations and Commitments The succeed is a drumhead of our contractual obligations as of December 31, 2011 :

Payments Due by Period
Less than
1 Year
1 to 3 Years 3 to 5 Years More than
5  Years
Total
(in thousands)
operate on leases ( 1 ) $ 1,581 $ 2,640 $ 407 $ $ 4,628
purchase commitments 4,781 4,781
2011 facility 2,413 4,800 7,213
                        
sum $ 8,775 $ 7,440 $ 407 $ $ 16,622
                        
( 1 ) Represent our obligations to make payments under our non-cancelable lease agreements for our facilities in California, Japan and Korea .

Loan Agreements In May 2011, we entered into a lend and security agreement with Silicon Valley Bank, or SVB ( the “ 2011 Facility ” ). The lend agreement provided for a condition lend of up to $ 8.0 million available in two separate tranches. The lend and security agreement was amended and restated in August 2011 to provide for our ability to borrow up to $ 2.0 million on a revolve footing. additionally, we issued a sanction to SVB in May 2011 to purchase 278,260 shares of series CC preferred breed at $ 1.15 per share and a sanction to purchase 125,000 shares of common stock at $ 0.20 per parcel. In September 2011, we issued a warrant to SVB to purchase 71,429 shares of coarse stock at $ 0.21 per share. The average measure of these warrants resulted in a debt discount that is being amortized to interest expense over the term of the notes. The loan and credit facility was fully paid off with proceeds from our January 2012 loanword and security agreement described below, but the warrants described above stay outstanding. In January 2012, we entered into a loan and security agreement ( the “ 2012 Facility ” ) with three fiscal institutions that provides up to $ 27.0 million to be used for cosmopolitan bodied purposes. When we entered into the 2012 Facility, we repaid in entire the principal, plus accrued interest and the final payment tip due under the 2011 Facility. Borrowings under the 2012 Facility are collateralized by all of our assets, except intellectual property. 50 coincident with the close of the 2012 Facility, we borrowed $ 20.0 million of which $ 7.2 million was used to pay off the 2011 Facility, resulting in net income proceeds of $ 12.4 million after expenses. Payments are due as follows : sake merely for the first gear football team months, followed by 30 equal monthly amounts for principal and interest. Interest on the unpaid principal counterweight is 9.36 % per annum. In junction with entering into the 2012 Facility, we issued warrants to purchase 606,281 shares of series CC preferred stock certificate at $ 1.15 per share. We intend to use a helping of the web proceeds received by us from this offer to repay, in entire, this indebtedness. The remaining $ 7.0 million available under the 2012 Facility will be available to us if we launch our Skin Rejuvenating Laser before December 31, 2012 either in the United States or in both Canada and Europe, when our ability to borrow the $ 7.0 million expires. Payments on the $ 7.0 million, if borrowed, will be due as follows : pastime only through December 31, 2012 ( commencing once the borrow has been made ), followed by 30 equal monthly amounts for principal and sake. Interest on the unpaid star balance is fixed at fund as the greater of 9.36 % and the kernel of the then current U.S. Treasury note render to maturity plus 8.95 % per annum. The loan and security agreement contains certain affirmative and negative covenants and certain fiscal covenants, including restrictions with obedience to payment of cash dividends, payment on any subordinate debt, fusion or consolidation, changes in the nature of our clientele, disposal of assets, obtaining extra loans, maintenance of collateral accounts and transactions with affiliates. The loanword and security agreement besides contains sealed cross-default provisions. As of the date of this file, we were in complaisance with our debt covenants in all material respects. In the event we fail to comply with the covenants in the loanword and security agreement, the amounts outstanding thereunder would become due and account payable absent a release by the needed lenders, which could materially and adversely affect our liquid. Purchase Commitments We have certain purchase commitments related to a third-party condense manufacturer, Flextronics Sales and Marketing, Ltd. The sum noncancelable sum of such leverage commitments as of December 31, 2011 was $ 4.8 million, which we expect to fund through existing sources of available funds. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements and we do not have any relationships with unconsolidated entities or fiscal partnerships, such as entities frequently referred to as structured finance or special function entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow-minded or restrict purposes. Quantitative and Qualitative Disclosures about Market Risk We have operations both within the United States and internationally, and we are exposed to grocery store risks in the ordinary naturally of our business. These risks include primarily sake rate risk, extraneous exchange risks and ostentation. Interest Rate Risk We are exposed to pastime pace hazard that relates chiefly to our investment portfolio, which is affected by changes in the general level of the interest rates in the United States. We had cash and cash equivalents and short-run investments as hardening forth in the table below :

Year Ended December 31,
2009 2010 2011
           
(in thousands)
Cash and cash equivalents $ 5,590 $ 5,809 $ 14,972
short-run investments 13,876 10,713
           
total cash and investments $ 19,466 $ 16,522 $ 14,972
           

51 The cash, cash equivalents and short-run investments were held chiefly for working capital purposes in cash deposits, money marketplace funds, U.S. Treasury and agency debt securities and commercial wallpaper with a maturity of 90 days or less. Due to the short-run nature of these instruments, a sudden change in market interest rates would not be expected to have a fabric impingement on our fiscal condition or our results of operations. We had debt of $ 7.2 million ( $ 2.4 million short-run and $ 4.8 million long-run ) as of December 31, 2011, consisting of our outstanding obligations under the 2011 Facility. We have not drawn on the revolve line of credit that has a variable star interest rate ( prime pace published in the Money Rates section of the Wall Street Journal plus 2.5 % per annum ). In January 2012, we repaid in full the principal, plus accrue interest and final examination payment ascribable under the 2011 Facility. An increase or decrease in the prime rate by one share point would not have had a material impact on our concern expense. Foreign Currency Risk The functional currencies of our operations in the United States, Japan, Korea and the UK are the U.S. Dollar, japanese Yen, Korean Won and the british Pound respectively. Assets and liabilities recorded in extraneous currencies are translated at the exchange rate on the balance sheet date, and costs and expenses are translated at the median rates of substitute in effect during the year. The effects of foreign currentness translation adjustments are recorded as function of a classify component of stockholders ’ fairness ( deficit ). Foreign currency transaction gains and losses are included in the net passing for the period. Our foreign currency exchange gains and losses have been generated primarily from intercompany receivables and payables. In the future, we may continue to experience extraneous currency change gains and losses on our accounts receivable and intercompany receivables and payables that are denominated chiefly in U.S. dollars. We recognized a alien currency profit of $ 0.4 million in both 2009 and 2010 and a $ 38,000 loss in 2011. At this time, we do not enter into derivatives or other fiscal instruments to attempt to hedge our alien currency exchange risk. In the future, alien currency exchange losses could have a material adverse effect on our clientele, operating results and fiscal condition. Inflation Risk To date, we do not believe ostentation has had a substantial effect on our business, fiscal condition or results of operations. however, if our costs were to become discipline to significant inflationary pressures in the future, we may not be able to in full offset such higher costs through price increases. Our inability or failure to do therefore could harm our clientele, fiscal condition and results of operations. Critical Accounting Policies and Use of Estimates We prepare our consolidate fiscal statements in ossification with account principles generally accepted in the United States, or GAAP. The preparation of these consolidate fiscal statements and relate disclosures requires us to make estimates, assumptions and judgments that affect the report amounts of assets, liabilities, sales, costs and expenses and refer disclosures. These estimates and assumptions are frequently based on judgments that we believe to be fair under the circumstances at the time made, but all such estimates and assumptions are inherently uncertain and unpredictable. actual results may differ from those estimates and assumptions, and it is possible that other professionals, applying their own judgment to the same facts and circumstances, could develop and support option estimates and assumptions that would result in material changes to our operate results and fiscal condition. We evaluate our estimates and assumptions on an ongoing footing. Our estimates are based on historic experience and versatile other assumptions that we believe to be fair under the circumstances. We consider the assumptions and estimates associated with tax income recognition, sales returns and allowances, bad debt reserves, guarantee reserves, stock-based compensation, inventory reserves and income taxes to be our critical account policies where we apply judgments and estimates in the training of our fiscal statements. For far information on our significant accountancy policies, see Note 2 of the accompanying notes 52 to our consolidate fiscal statements. There have been no changes to our significant account policies since December 31, 2011, except as discussed in “ —Recent Accounting Pronouncements. ” Revenue recognition.   We recognize sales when the following four tax income recognition criteria are met : persuasive attest of an agreement exists, delivery has occurred, the sell price is fixed or determinable and collectability is sanely assured. We consider that products are delivered when manner of speaking terms are met and title and risk of loss have been transferred. For sales from our web site, and for sales to our retail customers and the autonomous distributor, this occurs at the fourth dimension of cargo. We recognize tax income as the net total we estimate to be received after deducting calculate amounts for product returns, discounts and allowances. We estimate future product returns, discounts and allowances based upon historic experience and changes in current sales vogue. Sales returns and allowances.   When we sell our products we reduce the amount of gross recognized from such sales by an appraisal of future product returns and other sales allowances. Sales allowances include rebates and sales incentives relating to products sold in the stream period. Factors that we consider in our estimates of sales returns include the historical rate of returns as a share of net intersection sales, gross of returns and allowances and transport and cover gross, and the stream grocery store conditions american samoa well as quality of the merchandise and recent promotional natural process. We maintain a tax return policy that allows our customers to return products, broadly within 60 to 90 days after cargo, but with no rights of return to distributors. Bad debt reserve.   We offer our direct customers the option to purchase certain products on a payment plan. The requital plan requires a gloomy payment plus four to five equal monthly payments secured by a credit calling card. At the time of sale we reserve an estimate bad debt valuation reserve for these transactions and for sales to retail customers and to physicians. We consider the follow factors when calculating the bad debt reserve : historical passing rate and current trends. Warranty reserve.   We provide a full replacement guarantee for our Hair Removal Laser and our Skin Perfecting Blue Light that these products are free from defects. Warranty periods range from 12 to 24 months for the products depending on the geographic area in which the product is sold. We accrue for electric potential guarantee claims by estimating our unit failure rates and multiplying this total by our estimate fulfillment costs of replacing the units. We estimate our failure rates by reviewing our recent failure rate history by product and region of the world and adjusting for any know specific issues. We estimate our fulfillment costs based on the monetary value to replace the products, including the fabricate and delivery price. Our cost assumptions have generally declined with the decline in the cost of the products and our bankruptcy rates generally increase when introducing a modern generation intersection or when a specific manufacture issue occurs. Excluding the impact of these discrete events, our actual results have been well consistent with our estimates and we do not anticipate that our calculate failure rates will change substantially in the foreseeable future. Stock-based compensation.   We have a stock-based recompense design that allows us to grant either stock options or stock purchase rights, representing the properly to purchase shares of our common breed, to employees, directors and consultants. Accounting steering requires employee stock-based payments to be accounted for under the fair value method. Under this method acting, we are required to record recompense price based on the honest value estimated for stock-based awards granted over the necessity service periods for the individual awards, which by and large equal the invest periods. We use the straight-line amortization method acting for recognizing stock-based compensation expense. For account purposes, the fair value of each livestock choice grant was estimated on the date of grant using the Black-Scholes-Merton option pricing model, which requires the function of highly subjective estimates and assumptions to determine the fair value of share-based awards, including the expect term of the concede, the expected volatility, the risk-free interest rate and the expect dividends. The Black-Scholes-Merton choice price model besides requires that we estimate the fair value of the underlie ordinary shares. These 53 inputs are immanent and by and large require significant judgment. We used the come assumptions for stock-based awards granted in the years ended December 31, 2009, 2010, and 2011 :

Year Ended December 31,
2009 2010 2011
Expected term 6.1 years 5.9 years 6.0 years
Expected excitability 65 % 60 % 60 %
risk-free interest rate 2.5 % 2.0 % 2.0 %
Expected dividend rate 0.0 % 0.0 % 0.0 %

Expected term. The expect term represents the period that our stock-based awards are expected to be great and is determined using the simplified method acting for estimating expected term for awards in accordance with the guidance provided by the SEC. The simplified method acting calculates the expect term as the average of the time-to-vesting and the contractual life of the awards. We will continue to utilize the simplified method for all “ plain vanilla ” awards until we have established a reasonable period of spokesperson trade history as a public company, at which meter we will determine the expect terminus based on the diachronic option use demeanor of our employees, expectations about future choice exercise behavior and post-vesting cancellations. Expected volatility. As a individual company, we have lacked company-specific historical and entail volatility information. consequently, we estimate our expected excitability based on the historical volatility of our publicly-traded peer companies and expect to continue to do therefore until such time as we have adequate historical data regarding the volatility of our trade sprout price. We consider companies as peers based on a number of factors including, but not limited to, similarity to us with obedience to diligence, business model, phase of growth, fiscal gamble or other factors, along with considering the future plans of our company. The peer companies used in determining our expected volatility were, at the time of excitability decision, broadly larger and operationally further develop than we are. however, the operational and fiscal growth and development of the peer companies during the period in which historic volatility were considered were determined to be sufficiently alike to our expectations for future growth to provide a reasonable basis on which to establish our expected volatility. Risk-free interest rate. The risk-free interest pace is the give presently available on U.S. Treasury zero-coupon issues with a remaining term approximating the have a bun in the oven term of the choice. Expected dividend rate. We assumed the expected dividend to be zero since we have never paid dividends and have no current plans to do therefore. We recognize compensation expense for only the assign of options that are expected to vest. accordingly, we have estimated expected forfeitures of neckcloth options based on our diachronic forfeit rate and used these rates in developing a future forfeit pace. If our actual forfeit rate varies from our historical rates and estimates, extra adjustments to compensation expense may be required in future periods. We will continue to use judgment in evaluating the ask term, expected volatility and forfeit rates related to our stock-based compensation on a prospective basis. As we continue to accumulate extra data related to our coarse lineage, we may make refinements to the estimates of our expected volatility, expected terms and forfeit rates, all of which could materially impact our future stock-based compensation expense. 54 The following table sets forth our total stock-based compensation expense for awards granted in the years ended December 31, 2009, 2010, and 2011 :

Year Ended December 31,
2009 2010 2011
(in thousands)
monetary value of goods sold $ 6 $ 6 $ 3
Sales and marketing 52 30 41
research and development 68 74 103
General and administrative 188 193 321
              
full stock-based compensation expense $ 314 $ 303 $ 468
              

As of December 31, 2011, we had $ 3,363,000 of unrecognized stock-based recompense expense, final of estimated forfeitures, that is expected to be recognized over a weighted-average time period of 2.6 years. In future periods, we expect our stock-based recompense expense to increase as a resultant role of our existing unrecognized stock-based recompense which will be recognized as these awards singlet and as we issue extra stock-based awards to attract and retain our employees. Common stock valuations. We are required to estimate the average value of the common banal underlying our stock options when performing the fair respect calculations of our great neckcloth options using the Black-Scholes-Merton option-pricing model. The fair value of our common stock was determined on a periodic basis by our recompense committee of our board of directors, taking into report our most recent valuation analysis among early factors. The assumptions underlying these valuations represent management ’ mho best estimates, which involve built-in uncertainties and the application of management judgment. As a leave, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different. In determining the bazaar value of our common livestock, our compensation committee considered evaluation methods intended to comply with Section 409A of the Code that creates a given that the resulting valuation is reasonable. In addition, these common lineage valuations were performed in accord with Financial Accounting Standards Board, or FASB, Accounting Standards Codification 718, Stock Compensation, or ASC 718. Our compensation committee and management intended all options granted to be exercisable at a price per share not less than the fair respect per parcel of our common stock on the date of grant based on the facts and context known on the date of award. For all granted stock options, our compensation committee determined the fair rate of our common stock on each grant date with reference to the factors listed below :

prices for our convertible favored stock sold to external investors in weapon ’ s-length transactions ;
our capital structure, including the rights, preferences and privileges of our prefer stock proportional to those of our common stock ;
our operational and fiscal performance ;
business conditions and projections ;
our likelihood of achieving a fluidity event, such as an initial public offer or a fusion or acquisition of our company given prevailing market conditions and the nature and history of our business ;
grocery store value of comparable public companies ;
illiquidity of stock-based awards involving securities in a secret ship’s company ; and
U.S. and global das kapital market conditions .

55 To assist our compensation committee, our management provided our compensation committee with an calculate of the fair rate of our common standard on each grant date. To determine the fair measure of our park neckcloth, we beginning analyzed the equity value of the company using a leaden combination of two methodologies, the dismiss cash flow method acting and the guideline public companies method. The dismiss cash stream method estimates the rate of the company based on our expected future cash flows discounted to present rate at a rate of render commensurate with the risks associated with the cash flows. Management determined a fiscal prognosis for each valuation date to be used in the calculation of the equity prize under the income approach path. These fiscal forecasts took into account our past feel and future expectations. The discount rate is related by and large to market-required rates of tax return observed in the speculation capital diligence equally well as the specific perceived risks of achieving the calculate fiscal performance. The guidepost public companies method by and large estimates the equity value of a party by applying grocery store multiples of comparable companies that are publicly traded. We selected comparable companies on the basis of functional and economic similarity to our occupation at the clock of the evaluation. We then calculated a multiple of key metrics implied by the enterprise values of these comparable companies. Based on our historical and expect performance as compared to the comparable companies, we selected allow multiples and applied them to our metrics to derive an indication of equity value. specifically, we considered respective factors affecting our equity value, including : Common stock pricing indications implied from our most recent sales of preferred securities. We used arm ’ s-length individual transactions involving our convertible prefer stock, including the closings of the sale of our serial CC rounds of convertible preferable stock at a leverage monetary value of $ 1.15 per contribution in August 2010, October 2010, February 2011 and December 2011, adjusted to reflect our capitalization structure, the prevailing risk-free interest rates as of the dates of the sales, estimates of expected equity excitability and the expected meter to liquidity. Market pricing information from companies that we considered to be comparable or that we believed would be priced in a similar fashion. The companies selected had significant operations in the checkup technologies or aesthetics industry. We analyzed market equity values from these selected companies and apply allow multiples to our projected fiscal metrics to determine the future equity measure or future common stock value. These values were then discounted to the evaluation date at a risk adjusted rate of return to determine a current common stock value. Discounted cash flow models. Discounted cash flow models were based on our then existing fiscal projections. These cash flows were discounted to the salute to determine a present coarse malcolm stock rate indication, using a risk-adjusted equity rate. During the menstruation November 17, 2010 through December 24, 2011, the equity rates of return used in our assumptions have fluctuated from a abject of 15 % to a high of 35 %. Market volatility. We factored prevailing market conditions into our analysis when deriving the equity value indications. More specifically, we evaluated the volatility of companies we consider to be comparable to determine the equity value. Liquidity considerations. We considered the liquid of our securities in determining our fairness value and common livestock measure. Because our stockholders have not had access to an organized exchange on which to trade their securities, the appropriate adaptation to the respect to account for this lack of liquidity was assessed. During the period November 17, 2010 through December 24, 2011, the adjustments for illiquidity of our coarse stock have fluctuated from a moo of 12 % to a high of 31 %. once we determined an equity value, we utilized the choice price method acting, or OPM, to allocate the fairness value to each of our classes of stock. The OPM values each fairness class by creating a series of call options on our fairness respect, with exercise prices based on the elimination preferences, engagement rights and strike prices of derivatives. This method acting is by and large preferred when future outcomes are unmanageable to predict and dissolving or 56 liquidation is not at hand. Prior to starting our preparation for this offer, we utilized the OPM because we could not reasonably estimate the class and time of electric potential liquid events. The Probability Weighted Expected Return Method, or PWERM, involves a advanced analysis of the potential future outcomes of the caller. This method is particularly useful when discrete future outcomes can be predicted at a high gear assurance level with a probability distribution. Discrete future result considered under the PWERM included outcomes based on a public offer of our common stock vitamin a well as other scenarios. In the early scenarios, a bombastic helping of the equity value is allocated to the choose stock certificate to incorporate higher aggregate liquidation preferences. In the public offer scenario the equity value is allocated pro rata among the shares of common breed and each series of favored standard, which causes the common banal to have a higher relative value per plowshare than under the early scenarios. Determining the bonny rate of the enterprise using the PWERM requires us to estimate the probability of both types of scenarios and if different estimates are used, the fair prize of the company could be importantly different. The following table summarizes the fair value of the park stock underlying our sprout options granted between November 17, 2010 and December 24, 2011 :

Grant Date Number of
Options Granted
Per Share Exercise Price of Options Fair Value Per
Share of
Common Stock
Updated Fair Value
Per Share of
Common Stock
November 17, 2010 2,127,827 $ 0.20 $ 0.20 $ 0.20
January 25, 2011 770,105 0.20 0.20 0.20
February 8, 2011 647,500 0.20 0.20 0.20
February 16, 2011 367,600 0.20 0.20 0.20
May 9, 2011 552,000 0.20 0.20 0.20
July 20, 2011 367,500 0.21 0.21 0.21
October 4, 2011 955,000 0.21 0.21 1.01
December 24, 2011 3,140,000 $ 0.43 $ 0.43 $ 1.11

No one event caused the valuation of our common stock to increase or decrease through December 24, 2011. alternatively, a combination of the factors described below in each menstruation led to the changes in the bazaar measure of our common stock. The changes in fair prize of our ordinary shares at the go steady of each grant are as follows : November 17, 2010 Grants. In November 2010, the compensation committee of our board of directors performed a valuation of our coarse sprout intended to comply with section 409A of the Code. This valuation included reference to a contemporaneously obtained valuation report prepared by a valuation confer firm dated as of October 2010. The report employed multiple valuation approaches including the market and income approach in determining our fairness value as recommended by the American Institute of Certified Public Accountants exercise guide on valuing individual companies. The reputation applied a 15 % non-marketability rebate in the calculation of final carnival value per plowshare and besides considered the impact of the series CC shares of favored sprout we issued during this time. accordingly, the common livestock value was determined to be $ 0.20 per share as of November 2010. January 25, February 8, February 16 and May 9, 2011 Grants.   Our compensation committee issued grants at $ 0.20 per plowshare, which reflected their determination of the bonny measure, based in part on the most recently available third-party valuation report and the decision that there were no events that occurred in the intervening period which would impact the average value of the common stock on the go steady of accord nor were there any significant changes in our business or forecasts since November 17, 2010 to warrant a higher valuation. July 20, 2011 Grants. Our compensation committee performed a valuation of our park stock in July 2011. This valuation included reference to a contemporaneously obtained evaluation report prepared by a valuation confer firm dated as of June 2011, establishing our fair market measure at $ 0.21 per share. The overall market conditions remained relatively stable from the previous evaluation, but the evaluation of our common stock was affected by reasonably higher valuation multiples affecting comparable companies. consequently, the fair market value of our common stock was determined to be $ 0.21 per share in June 2011. 57 October 4, 2011 Grants. For the stock option grants in October 2011, our compensation committee determined the fairly market rate to be $ 0.21 per parcel. This fair prize was based on a number of factors, including considering those included in the most holocene available evaluation and considering that no events had occurred during the intervene period from the go steady of the last valuation report that would have increased the value of the stock. subsequently, in preparing for this propose, we reviewed our October 4, 2011 option grants entirely for the purpose of calculating the fair value of our neckcloth options. During this review, we considered several extra factors : the effects of altering our allotment method from an choice based method acting to a PWERM method acting ; the effects of updating the initial public offer ( IPO ) scenario calculation to reflect the evaluation multiples of a list of comparable populace companies used in a display from an investment bank to our board of directors on July 26, 2011 ; and the effects of updating the probability slant of an IPO to 50 % to reflect the board discussion held at the July 26, 2011 board meet regarding a possible initial public offer. Offsetting these factors, we took into retainer weaker than expected function results, specially internationally ; the need to importantly strengthen our finance officiate, including by hiring a headman fiscal officer ; our contiguous want to raise significant extra fund through a combination of equity and debt finance ; and, the stay volatility of the capital markets and the lack of late examples of comparable companies with successful initial public offerings. These factors led us to an updated fair value of common malcolm stock of $ 1.01 per share for the options granted on October 4, 2011 entirely for purposes of calculating the average rate of our outstanding broth options. December 24, 2011 Grants. Our recompense committee performed a evaluation of our common stock in December 2011. This valuation included citation to a contemporaneously obtained valuation report prepared by a evaluation confer firm dated as of November 2011, establishing our fair marketplace value at $ 0.43 per share. The increase in our coarse stock certificate fair grocery store value was chiefly attributable to the committee ’ s determination that potential for an initial public extend had increased. We subsequently obtained a revise evaluation report using the PWERM methodology for the December 2011 grants that validated our $ 0.43 valuation. In preparing for this offer, we reviewed our December 24, 2011 choice grants entirely for the purpose of calculating the fair prize of our neckcloth options. During this review we noted that the board of directors selected underwriters for a electric potential IPO on November 1, 2011, and that we held an organizational meet to formally begin the process for this offer on November 8, 2011 and had commenced the registration statement drafting march in training for filing. As a result, in addition to increasing the valuation multiples in the IPO scenario to reflect the valuation multiples of a number of comparable public companies used in a presentation from an investment trust to the board of directors on July 26, 2011, we besides increased the probability burden of a potential IPO to 70 % to reflect the potential for an initial populace offer had increased, while recognizing the volatility of the capital markets continued to create uncertainty as to our ability to complete this offer. We besides took into consideration the November and December 2011 subsequent closings of our Series CC choose malcolm stock financing at $ 1.15 per parcel in which respective big existing investors declined to participate. These factors led us to an updated fair respect of common livestock of $ 1.11 per share for the options granted on December 24, 2011 entirely for purposes of calculating the fair measure of our outstanding stock options. Convertible preferred stock warrants. We account for warrants to purchase shares of our convertible favored stock as liabilities at fair value because these warrants may obligate us to transfer assets to the holders at a future date under certain circumstances, such as a change of dominance. We re-measure these warrants to current fair prize at each balance sheet date, and any change in fair value is recognized as a part of interest income and concern ( expense ) in our statements of operations. We estimated the clean value of these warrants at the respective balance wheel sheet dates using an enterprise respect option-pricing model. We use a number of assumptions to estimate the clean value including the remaining expect life of the guarantee, risk-free interest rates, expected dividend give, and expected excitability of the price of the underlying stock. These assumptions are immanent and the fair value of these warrants may have differed significantly had we used different assumptions. We will continue to adjust the convertible preferable stock guarantee liability for changes in bazaar measure until the earlier of the exercise or termination of the convertible prefer stock warrants or until holders of our outstanding prefer lineage can no long trigger a deem extermination event. 58 Inventory reserves.   We record write-downs to inventory for potentially excess, disused or slow-moving goods in order to department of state inventory at its net realizable measure. We regularly review inventory for overindulgence and disused products and components, taking into account product life cycle and growth plans, product termination and quality issues, historical have and our current armory levels. If actual marketplace conditions are less favorable than anticipated, extra stock adjustments could be required. Income taxes.   We account for income taxes under the liability method acting in accord with ASC 740-10, Income Taxes, or ASC 740. Under this method, submit tax assets and liabilities are determined based on the differences between the fiscal report and tax bases of assets and liabilities and are measured using the ordain tax rates that will be in effect when the differences are expected to be recovered or settled. A valuation valuation reserve is recorded against submit tax assets if it is more likely than not that all or a part of the submit tax assets will not be realized. We recognize liabilities for unsealed tax positions based upon a two-step process. To the extent a tax place does not meet a more-likely-than-not degree of certainty, no benefit is recognized in the fiscal statements. If a side meets the more-likely-than-not level of certainty, it is recognized in the fiscal statements at the largest sum that has a greater than 50 % likelihood of being realized upon ultimate settlement. As depart of our execution for the fiscal class beginning January 1, 2009, we analyzed our tax positions taken with regard to all applicable income tax issues for all open tax years ( in each respective legal power ), and concluded that no changeable tax positions were required to be recognized in our fiscal statements. In accord with ASC 740, our accounting policy is that interest and penalties recognized are classified as part of our income taxes. Since we have not recorded any reserves related to unrecognized tax benefits, we have not recorded any sake or penalties in our provision for income taxes. The actual liability for unfulfilled tax benefits in any such eventuality may be materially unlike from our estimates, which could result in the motivation to record extra liabilities for unrecognized tax benefits or potentially adjust previously-recorded liabilities for unfulfilled tax benefits and materially affect our results of operations. As of December 31, 2011, we had federal and state of matter net operating loss carryforwards of $ 95.1 million and $ 69.1 million, respectively. The federal net operating loss carryforwards will begin to expire in 2023, and the state web operating loss carryforwards will begin to expire in 2013. We are subjugate to income taxes in the U.S. federal jurisdiction and assorted state and local jurisdictions. Our tax years from origin through 2011 are national to examination by the U.S. and state tax authorities due to the carryforward of unutilized net operational losses and research and development credits. We are not presently under examination in any tax jurisdictions. Under federal and like state tax statutes, substantial changes in our ownership, including ownership changes resulting from the offer contemplated by this prospectus, may limit our ability to use our available net operate passing and tax credit carryforwards. The annual limitation, as a result of a transfer of operate, may result in the termination of net function losses and credits before utilization. Recent Accounting Pronouncements We are an “ emerging growth company ” and have not elected to take advantage of the extend transition period provided under the Jumpstart our Business Startups Act of 2012 for complying with new or revised report standards. In May 2011, the FASB issued newfangled steering for fairly value measurements to provide a coherent definition of average value and ensure that the fair measure measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The guidance changes certain carnival value measurement principles and enhances the disclosure requirements, particularly for level three fair measure measurements. The guidance is effective for us prospectively beginning in the beginning quarter of fiscal 2012. We are presently evaluating the impact this guidance may have on our fiscal position, results of operations and cash flows. 59 In June 2011, the FASB issued Accounting Standards Update, or ASU, No. 2011-05, Presentation of Comprehensive Income, or ASU 2011-05. ASU 2011-05 requires entities to report components of comprehensive income in either a continuous statement of comprehensive examination income or two divide but back-to-back statements. Under the continuous statement border on, the statement would include the components and entire of web income, the components and total of early comprehensive examination income and the total of comprehensive examination income. Under the two instruction approach, the first gear statement would include the components and total of net income and the second instruction would include the components and sum of other comprehensive examination income and the sum of comprehensive income. comprehensive income may nobelium long be presented only within the consolidate instruction of stockholders ’ equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income. ASU 2011-05 is effective retrospectively for interim and annual periods beginning after December 15, 2011, with early adoption permitted. We are presently evaluating the affect this guidance may have on our presentation of our fiscal placement, results of operations and cash flows. 60 BUSINESS Overview Tria Beauty brings clinically-proven light-based aesthetic medical technologies out of the doctor ’ randomness office and into the home plate. We sell easy-to-use, FDA-cleared medical devices to consumers that deliver results comparable to professional aesthetic treatments at a divide of the cost. As a solution, we believe we are expanding the market for aesthetic light-based treatments. Our late customer review suggests that approximately three quarters of our customers have never tried professional in-office laser treatments before purchasing our products. We have successfully combined our technical light-based expertness with extensive consumer marketing experience to produce and sell hand-held consumer skin care devices that are safe and effective, so far dim-witted to use. Our two stream merchandise lines and our most progress product under development are : Hair Removal Laser, our head product, is a diode laser device that provides permanent decrease in hair regrowth comparable to devices used in a doctor ’ s office. It was cleared by the FDA in 2005 as a prescription device and in 2008 as an over-the-counter device. Skin Perfecting Blue Light uses high-intensity blue light that inhibits acne-causing bacteria with anti-acne effectiveness comparable to light-based acne treatments performed in a doctor ’ second office. It was cleared by the FDA in 2006 as a prescription device and it was cleared as an nonprescription device for the treatment of balmy to moderate incendiary acne in 2010. Skin Rejuvenating Laser, a product in deep stage development, is a fractional non-ablative laser device designed to enable our entrance into the anti-aging skin care market. We expect to begin selling this device outside of the United States in the moment half of 2012. We believe, based on technical similarities to predicate, animal histology and pilot program clinical studies, that our pivotal clinical studies will support a 2012 FDA lotion for OTC treatment of periorbital wrinkles ( crow ’ randomness feet ), perioral wrinkles ( wrinkles around the mouth ), dyschromia ( uneven pigmentation ) and textural irregularities like haptic crudeness, for which fractional non-ablative engineering has become an accept treatment standard in professionals ’ offices. We besides believe that these clinical studies will demonstrate that the device has condom and potency comparable to fractional non-ablative laser treatments in a doctor ’ south office. We have historically derived substantially all of our sales from our Hair Removal Laser. Our Skin Perfecting Blue Light, which we launched in 2010, remains in the early stages of commercialization and we expect that the Hair Removal Laser will be our primary source of sales and increase for the foreseeable future. We are involved in intellectual property litigation with Palomar Medical Technologies regarding engineering incorporated into our Hair Removal Laser. There has been no trial date set, though summary opinion brief is scheduled to be completed in December 2012. If we do not ultimately prevail in this litigation, we could be required to pay damages for past sales of the Hair Removal Laser and could be required to pay royalties for, or be enjoined from, future U.S. sales of the Hair Removal Laser through the exhalation of the relevant patents in 2015. Our focus on invention has enabled us to quickly develop new products, arsenic good as introduce new generations of existing ones with better performance characteristics and reduce fabrication costs ; our median manufacture costs for our Hair Removal Laser have decreased 47 % since 2008. Our devices are developed by engineers with decades of blend experience designing light-based aesthetic medical technologies for the professional setting. We have successfully applied our expertness to develop custom-designed components with proprietary safety systems, such as the Hair Removal Laser ’ s built-in skin detector, that permit effective, high-octane discussion while protecting the drug user ’ s eyes and bark. condom and effective consumer devices confront engineer and manufacture challenges absent in large aesthetic capital equipment designed for doctor function. As a result, we believe our expertness in designing products specifically for the consumer differentiates us from competitors who remain focus chiefly on producing capital equipment for practice by physicians. A core chemical element of our occupation is our distinctive selling scheme and multi-channel distribution model. We believe high-engagement media such as our websites, infomercials and home shopping television are particularly 61 effective at informing consumers about our advanced products, the compelling skin care benefits they produce and the room in which they are used and incorporated into a personal skin care regimen. We have built our brand by educating consumers about the particular benefits of light-based skin care and our products and developing mastermind relationships with those consumers. Our physical presence at premium retailers such as Bloomingdale ’ randomness, american samoa well as in doctor offices, helps to further strengthen our trade name image, validate our technology and provide extra points of contact to educate consumers about our products. Our net losses were $ 25.6 million and $ 34.8 million in the years ended December 31, 2010 and 2011, respectively. As of December 31, 2011, we had an accumulated deficit of $ 101.8 million. We expect to continue to incur losses as we invest in building the market for light-based skin care devices through our sales and market activities, expand our commercialization of new products and expand into new external geographies. Competitive Strengths We believe there is significant unmet demand in the skin care market for home-use medical devices that deliver results comparable to in-office professional aesthetic treatments. We believe that we are well positioned to pursue the market for home-use checkup devices because addressing this market is the focus of our business. We have developed our research and development and marketing competencies specifically to pursue this opportunity. We believe that a significant investment in, for case, retail cosmetic skin care products, or capital equipment for use in physicians ’ offices, would represent a significant departure from and conflict with, our primary business model and expertness. We attribute our historic success and future increase prospects to the follow : Effectiveness Comparable to Professional Treatments with In-Home Convenience at Affordable Prices : We grocery store to consumers who seek an effective alternative to traditional lotion and skim at-home skin care regimens that does not involve the inconvenience or expense of in-office professional treatments. Consumer-Focused Sales and Marketing Approach : We have established a multi-channel consumer-focused marketing approach with an emphasis on our directly sales distribution channel. This allows us to acquire and retain customers by :

maintaining premium brand positioning with scalable investments in direct marketing while avoiding addiction on third-party retailers ;
developing directly customer relationships that provide us with opportunities to continue to communicate with our customers through e-mail and social media in an attempt to improve their treatment complaisance and satisfaction ; and
encouraging the purchase of modern product offerings, including new devices, topical skin care products and early consumables .

Innovative, Proprietary Technology : Our expertness in incorporating light-based energy into safe, consumer-friendly home-use devices has allowed us to internally develop and launch two product lines, with a third expected to follow in 2012. Our prove ability to move products from concept to commercialization has allowed us to launch three versions of our Hair Removal Laser in the United States in the last three years, with substantial improvements to enhance the user experience and reductions in unit price with each new initiation. Clinical Data and Scientific Publications : Our rigorous scientific approach, clinical trials and focus on regulative approvals and submission set us aside from many of our competitors who can not legitimately make like base hit and effectiveness claims. The FDA and other regulative clearances and approvals that we have received both domestically and internationally attest to our commitment to regulative conformity and distinguish us from competitors that have not obtained legally necessitate commercialize approvals. We have conducted clinical studies with 62 key opinion leading physicians that have been published in peer-reviewed scientific journals, including the Journal of Drugs in Dermatology and Lasers in Surgery and Medicine. Demonstrated International Penetration : Our test steer sales scheme built on a scalable e-commerce platform has permitted us to enter new external markets with limited investment. approximately 35 % of our final sales were derived from outside of North America in 2011, chiefly from Japan and South Korea. We have besides leveraged our have to quickly expand into Canada and several countries in Europe. We believe that we have developed effective procedures that will facilitate our expansion into extra countries with demographics that offer the electric potential for significant demand for our products. A Loyal Customer Base : We have doubled the size of our customer free-base every year since 2008. Our late customer research suggests we attract the majority of our customers from the OTC consumer skin care products commercialize for hair’s-breadth removal and acne as, we believe, those customers trade up to more effective, longer-lasting skin care solutions. approximately 80 % of the approximately 1,300 individuals who responded to our late customer survey indicated that they would both recommend our products to others and consider bribe from us in the future. Almost half of the respondents who indicated that they would consider buying from us in the future responded that they would be concern in Tria products that address aging skin. As a consequence, we believe we are well positioned to enter the anti-aging class with our Skin Rejuvenating Laser. Our clinically-demonstrated potency is based upon data from clinical studies that are discussed in detail in “ —Technology and Clinical Results. ” even where such studies demonstrate statistically significant results, many of these studies have relatively little sample sizes, which may be viewed as inherently less predictive of individual results than larger studies. additionally, our clinical studies involve the consumption of our products under coach supervision and pursuant to our specifications, which may lead to better results than autonomous use by consumers. Our Markets We operate at the concourse of the markets for professional aesthetic skin care treatments and OTC cosmetic skin care products. According to Medical Insight, the professional aesthetic skin care market represented an estimate $ 15.0 billion of global sales for 2011, which included $ 2.4 billion related to haircloth removal, $ 0.4 billion related to anti-acne treatments and $ 4.0 billion related to anti-aging treatments. Based on data from Euromonitor, the OTC cosmetic skin care products markets for hair removal, anti-acne treatments and anti-aging treatments and nourishers represented an estimate $ 4.5 billion, $ 3.2 billion and $ 22.2 billion in 2011 global sales, respectively. Kline & Company reports that a combination of factors, including heightened awareness and technical advances, is driving the at-home skin care device market, which grew an estimate 48 % and achieved estimated sales of approximately $ 532 million for 2011, of which an estimated $ 163 million was attributable to light-based devices, which grew at an estimate rate of 50 %. The $ 15.0 billion global professional aesthetic skin care marketplace includes non-surgical aesthetic procedures delivered either in the doctor ’ second position or in the professional health spa fix. According to Medical Insight, professional light-based aesthetic treatments for hair removal, acne decrease and hide rejuvenation generated operation fees estimated at $ 6.8 billion globally in 2011. We believe consumers demonstrate senior high school levels of awareness and broadly accept the potency of light-based skin care treatments. For example, the american Society of Plastic Surgeons reports that, in terms of absolute number of procedures performed, laser hair removal is the number one aesthetic procedure for women between the ages of 20 and 29 and the issue two routine behind Botox for women between the ages of 30 and 39. Despite this broad credence, sales for light-based professional treatments remain moo compared to sales for OTC products that generally offer relatively little long-run profit for consumers. The $ 28.9 billion ball-shaped OTC cosmetic skin care products market is composed of three product categories—depilatories, acne treatments and nourishers/anti-agers—which were identified, studied and estimated by Euromonitor in late 2010. The majority of these products are sold at low prices through mass trade retail outlets. While a majority of these products are sold at abject prices through mass merchandise retail outlets, prestige skin care products are sold chiefly through luxury outlets such as department stores and 63 broadly command higher prices. These prestige skin care products are marketed to our aim customer and, according to the NPD group, U.S. sales of the class grew by 8 % to $ 2.7 billion from 2009 to 2010. Key Trends The Boston Consulting Group estimates that the number of middle-income and affluent consumers in developing countries, defined as those with annual disposable incomes of more than $ 15,000, will reach 2.7 billion by 2020. Emerging economies are providing the platform for an increasing number of consumers to entree prestige beauty and personal care products. As these consumers accumulate disposable income, we believe they tend to purchase products that improve physical appearance. We believe this consumer behavior is universal and will be embraced by the emerging economies that contain growing middle classes. increasingly, consumer products are being sold through e-commerce and infomercials, where companies have the ability to provide detail product information, share across-the-board testimonials and demonstrate the merchandise ’ south functionality and benefits. such send sell to consumers has emerged as a powerful sales channel for companies because it enables high-quality engagement with target consumers. We believe the distribution of prestige beauty products through the send sales distribution channel is resonating with a broader potential market than ever before, particularly for products that provide solutions that may be newfangled to the target consumer. The at-home light-based skin care device industry is emerging and quickly growing. This industry includes sonic-, light-, heat-, microcurrent- and microdermabrasion-based devices, and it addresses areas of skin care such as laser hair removal, anti-aging, acne and acne rosacea. At-home skin care devices typically cost less than, and offer greater appliance and privacy than, their office-based analogues, and these advantages have caused the industry to grow quickly in late years. In accession to FDA-cleared medical devices, of which there are few, there are a multitude of devices available that are marketed without FDA headroom or approval, on the aim basis that they are cosmetic products and not medical devices. Some of these devices are marketed as having medical device characteristics, in rape of FDA and Federal Trade Commission regulations, and lack clinically demonstrated base hit and effectiveness. Current Treatment Alternatives and their Limitations Treatment alternatives for hair removal, acne and skin rejuvenation have historically been hindered by meaning consumer trade-offs. Consumers who choose professional office-based aesthetic treatments commit to a relatively expensive and time-consuming process, while those who choose OTC skin care products sacrifice effectiveness for public toilet and short-run affordability. many stream treatment alternatives suffer from one or more of the pursuit limitations :

price : While professional office-based aesthetic treatments can be effective, they can cost several thousand dollars to effectively treat a single area of the body. OTC skin care products can be low cost on a per use basis, but the monetary value over years of habit of OTC skin care products can far exceed the monetary value of professional office-based alternatives .
effectiveness : OTC skin care products are typically used casual for an indefinite period of time to maintain their coveted effects because they only deliver short-run results. OTC skin care products broadly lack the proved effectiveness of professional office-based aesthetic treatments .
convenience : professional office-based aesthetic procedures take several minutes to several hours per seance. For optimum results, multiple sessions have to be scheduled over many months, which may create significant dislocation to work or personal life. Time spend scheduling appointments, traveling to and from sessions and sitting in the waiting room further add to the overall inconvenience of these procedures. OTC skin care products are generally commodious, involving easy home-use treatment .

Hair Removal Alternatives : permanent hair removal can be accomplished through a laser or early light-based routine or through electrolysis, which involves the application of electric stream one follicle at a time. Laser hair removal procedures are typically performed by or under the supervision of a doctor using das kapital equipment, while electrolysis treatments are typically performed by a skilled licensed or certify electrologist. 64 few patients achieve desired results after a individual seance because it is believed that hair in the active growth phase is more susceptible to discussion than hair’s-breadth in the abeyant phase. Hair enters that growth phase at different times, then multiple sessions are required to best address the hair follicles in a particular treatment area. To achieve coveted results, most patients require three to six laser hair removal sessions scheduled approximately three to six weeks apart. Electrolysis, which is performed one hair at a time, can take fifteen or more treatment sessions to treat a comparable sphere of the body to that treated in three to six laser hair removal sessions. The total cost of either method acting can vary widely, chiefly depending on the size of the area being treated. typically, each laser hair removal session costs respective hundred dollars and, to achieve desire results, patients must commit to respective sessions that can cost thousands of dollars in the aggregate. Electrolysis treatment can range from respective hundred dollars for a small area to respective thousand dollars for larger areas. Shaving and waxing products, american samoa well as depilatory creams, are the most common OTC skin care products purchased for temp removal of unwanted haircloth. These treatment alternatives share the advantage of being able to be performed in the privacy and appliance of one ’ sulfur dwelling. however, they do not provide permanent results and must be repeated frequently for an indefinite period of time. These OTC skin care products frequently cost several hundred dollars per year. Acne Treatment Alternatives : Acne is a multi-factorial peel disease caused in share by P. acnes bacteria, which occurs normally in post-pubescent skin. Under the right field conditions, the bacteria become trapped within the skin and acne blemishes occur in the shape of inflammation, blackheads and whiteheads. For adult women, acne is sometimes besides associated with the hormonal changes related to menstruation, pregnancy or menopause, ampere well as with the function of constitution and masking creams, which can remove the skin ’ s protective coating of helpful bacteria or cause excessively a lot sobriety. Acne treatments are available in many unlike forms, including OTC creams and lotions, prescription medications and in-office procedures performed by professionals. OTC creams and lotions are the most coarse treatment option because they are commodious and can be self-administered in the privacy of one ’ south home. however, these creams and lotions have significant drawbacks when measuring effectiveness. Common acne creams and lotions use chemicals such as benzoyl hydrogen peroxide, which is found in, for exemplar, Proactiv Solution, or salicylic acid, which is found in, for case, Neutrogena acne wash. These chemicals can cause irritating slope effects, including dryness or inflammation, which may result in result of treatment. additionally, the cost of these treatment regimes can vary wide, from less than a hundred dollars per year to upwards of a thousand dollars per year, based on customer needs and preferences, and are frequently used for many years. Professional acne treatments, such as LED blue unaccented therapy or laser therapy, have emerged as alternatives to prescription medications, such as topical creams and antibiotics. Unlike professional hair-removal treatment, professional acne discussion does not generally produce permanent results. professional light-based therapies are primarily based on the anti-bacterial and anti-inflammatory properties of specific wavelengths of light that inhibit the acne-causing bacteria without harming the skin ’ s coat. however, P. acnes bacteria can quickly re-establish, so ongoing in-office treatments are necessary for best results. consequently, these master treatments, while effective, are temp, dearly-won and inconvenient. Anti-aging Treatment Alternatives : Anti-aging treatment represents a broad class of aesthetic products and procedures designed to target unwelcome skin changes that occur naturally through the aging process or from environmental factors such as sun exposure and include fine lines, wrinkles, old age spots, spotty skin note, poor people texture and sagging bark. facial lotions claiming anti-aging properties can range in price from under $ 10 to $ 150 or more. Anti-aging cosmetics are not subject to FDA headroom and much lack credible clinical data demonstrating effectiveness. treatment with FDA-cleared anti-aging products, as with hair removal and acne, typically involves the expense and trouble of recur professional in-office procedures, whether treatment is with laser or early light-based procedures, toxins like Botox or cutaneous fillers. Of the available anti-aging treatment alternatives, many doctors believe that fractional non-ablative laser skin rejuvenation represents a breakthrough solution. similar to more traditional light-based peel rejuvenation procedures, fractional 65 non-ablative laser skin rejuvenation entirely treats a fraction of the bark by restricting the laser air to fine “ spot sizes ” surrounded by untreated tissue, producing faster recovery times and fewer adverse side effects than non-fractional therapy while even delivering results. A professional in-office light-based fractional non-ablative treatment regimen requires approximately three to five sessions spaced about two to four weeks apart to achieve desired results. The cost ranges from $ 750 to $ 1,000 per session, or between $ 3,000 and $ 6,000 for a full treatment regimen. The results can final for up to six months or more before another treatment regimen is required. Our Solution Our products and our products in development provide light-based solutions for haircloth removal, acne treatment and clamber rejuvenation without many of the compromises implicit in in professional office-based aesthetic procedures and OTC skin care products. They are designed to deliver results comparable to professional aesthetic treatments at a divide of the cost in the convenience and privacy of the home plate. Our consumer-focused products address the cost and convenience limitations facing services sold through the professional in-office set up, angstrom well as the potency limitations facing OTC skin care alternatives.

cost : Over the path of a treatment regimen, our products are typically significantly less expensive than professional in-office treatment alternatives. We believe that our products are low-cost not only to the affluent consumers of master treatments, but besides to consumers who otherwise sacrifice effectiveness for the short-run affordability of less expensive OTC treatments. Our products are more expensive than many competitive OTC cosmetic products .
effectiveness : Our products deliver comparable results to professional treatments, providing the consumer an alternative to often ineffective OTC products. Each of our FDA-cleared hand-held devices is supported by multiple clinical studies demonstrating guard and effectiveness. Our laser hair’s-breadth removal product permanently reduces the regrowth of undesirable hair and can reduce or eliminate the need for ongoing shave, waxing or resort hotel treatments. Our acne amobarbital sodium light up device emits the venereal disease of a professional in-office device, inhibiting acne-causing bacteria within the peel and providing healthier looking, clearer peel and improved complexion .
convenience : Each of our light-based hair removal, acne and peel rejuvenation products is designed with our customers ’ needs for public toilet and ease of consumption in heed, a characteristic shared by many OTC products. Our rechargeable products are engineered to be simple, lightweight and ergonomic and use proprietorship laser and high-octane LED systems. This allows our customers to use our products in the privacy of their homes as part of their existing personal skin care and smasher regimens .

Hair Removal Solution : Our Hair Removal Laser operates at a lower utmost energy concentration than distinctive professional devices and without skin cool, while still delivering a wavelength of approximately 800 nanometers with an energy pulse of up to 22 joules per square centimeter, which provides sufficient energy to effect permanent hair reduction for bespeak users. This enables cost-efficient self-treatment on parts of the body below the neck for individuals with light-to-medium skin color and brown or black hair color. To deliver these energy levels within a consumer product at an low-cost price, our device operates at a lower coverage rate than typical master devices. While reduced coverage rate increases the time required to treat a particular sphere, it does not impact condom or effectiveness. Because our intersection enables discussion at home as part of the customer ’ s existing skin care regimen, we believe our products offer significantly more convenience and privacy than professional treatment alternatives. Acne Solution : The current professional blue-light acne discussion regimen broadly involves one to two treatments per workweek for four to eight weeks. This treatment delivers an accumulate dose of approximately 400 joules per square centimeter to treat the underlie P. acnes bacteria and reduce the total of acne lesions. however, the bacteria will re-establish after treatments cease and the acne will return without even re-treatment, which makes professional treatment particularly expensive, inconvenient and impractical. We have designed our Skin Perfecting Blue Light device to provide the lapp effective, accumulated acid of 400 joules per squarely centimeter found in the professional set but in brief casual treatments, rather than treatments administered once or doubly a week in a doctor ’ s office. 66 Anti-Aging Solution : Our Skin Rejuvenating Laser, which is presently under development, incorporates fractional laser engineering. exchangeable to our presently marketed products, we are designing our Skin Rejuvenating Laser to change the stream discussion paradigm by integrating our device into the consumer ’ s casual skin care regimen in a manner that is commodious and minimally invasive. The current professional fractional anti-aging treatment regimen generally involves a series of three to six once-per-month sessions. At each session, the bark is treated with thousands of laser pulses that each process only a microscopic area but in sum add up to treat approximately 30-60 % of the bark. Because such a large percentage of skin receives laser pulses at each seance, there can be significant inflammation, swelling and discomfort. We have designed our dwelling fractional device to deliver a sufficient number of laser pulses to treat 1-2 % of the skin each day, thereby providing 30-60 % coverage each month, which is equivalent to the professional dose, but, we believe, with fewer side effects and in a low-cost, hand-held device. Customer atonement with aesthetic products and procedures is inherently immanent. additionally, unlike office-based procedures, home-use products require the exploiter to comply with commend treatment instructions for optimum potency. Our Hair Removal Laser is entirely intended for treatment on parts of the body below the neck by people with light-to-medium skin tones and brown or blacken hair discolor, since laser hair removal is not effective on individuals with easy, crimson or grey hair’s-breadth color and may cause damage to individuals with dark skin tones. Growth Strategy Our goal is to be a run developer and seller of premium at-home, light-based skin care products by continuing to pursue the pursue strategies : Grow Our Brand : We are growing what we believe to be an emerging category of at-home light-based skin care devices, and establishing our brand as a leader within it. Our multi-channel distribution model allows us to reach our customers directly to communicate the specific benefits of light-based skin care devices for home practice. Over clock time, we believe that consumers will increasingly recognize and trust in our stigmatize ’ s coherent ability to create high-quality, clinically-validated and FDA-cleared aesthetic medical devices and complemental topical products for home practice. Penetrate Our Existing Channels and Markets : We are in the early stages of penetrating our existing markets. While we have grown our sales at an annual rate of 66 % over the by three calendar years, our sales represent a little share of the multi-billion dollar markets we target. We intend to continue implementing our multi-channel sales and marketing strategy, which is in diverse stages of deployment in existing geographies. Expand into New Geographies : Our consumer-focused sales and selling model, anchored by our direct groove, has allowed us to quickly expand into raw geographies, as evidenced by our chase record of successfully launching our products outside the United States. We intend to grow our international bearing by leveraging our experience to expand into newfangled geographies with demographics that offer the potential for meaning demand for our products. Drive Product Innovation : We will continue to create new products and improve existing ones by leveraging our prove technology platforms. We anticipate introducing our Skin Rejuvenating Laser outside of the United States in 2012, and will continue to develop other light-based skin care products to provide consumers with a comprehensive and complementary portfolio of topical skin care solutions. Our Customers Our customer base consists of consumers from both the OTC cosmetic skin care market and the professional aesthetics market. According to our holocene consumer sizing surveys, we draw the huge majority of our customers from the OTC consumer skin care products grocery store for hair removal and acne as, we believe, they trade up to more effective, longer-lasting skin care solutions. Our typical U.S. customer is a charwoman between the ages of 25 67 and 55 with an average family income greater than $ 50,000. According to 2010 U.S. Census Bureau data, there are an estimate 33 million women in the United States who fall into this class. We believe this customer demographic contains highly friendly attributes, particularly with obedience to willingness to pay and capacity to spend on premium beauty products. In December 2011, we conducted a general population survey in an effort to determine an calculate size of our target U.S. population for hair removal, anti-acne and anti-aging. The survey gathered responses from over 1,600 men and women. The results showed that 42 % of respondents not lone fell within our typical age and income class, but besides had naturally lighter brown to black hair and bazaar to light up brown skin, shaved greater than three times per workweek or waxed greater than four times per year and indicated an sake in undergoing professional laser hair removal if the costs were lower. We extrapolated this 42 % subpopulation to the 33 million U.S. women from the census data to conclude that the aim U.S. population for our hair’s-breadth removal product consists of approximately 14 million women. We performed similar analyses for anti-acne and anti–aging to conclude that the size of those target U.S. populations are approximately 5 million men and women for anti-acne and 18 million women for anti-aging. In the capitulation of 2011, we conducted an extra on-line survey of existing customers who purchased either or both of our Hair Removal Laser and Skin Perfecting Blue Light within the last year. Of the customers to whom we sent this survey, we received approximately 1,300 sum responses. approximately 75 % of our customers indicated that they had never tried professional in-office laser treatments before purchasing our products. roughly 80 % of the survey respondents indicated that they would both recommend our products to others and consider buy from us in the future. Almost half of the respondents who indicated that they would consider buying from us in the future responded that they would be concerned in Tria products that address aging bark. As a result, we believe we are well positioned to enter the anti-aging class with our Skin Rejuvenating Laser. Distribution Channels We believe that a core component of our business is our classifiable multi-channel distribution model, which differs significantly from traditional skin care distribution, because our products are not sold primarily through retail stores, which would require us to act as a jobber, nor are they sold to physicians as capital equipment, which would require us to employ a bombastic sales power. We chiefly sell our products to consumers through a direct sales channel scheme anchored by our e-commerce web site at www.triabeauty.com and infomercials. secondarily, we sell our products wholesale through a numeral of indirect sales channels, including on television receiver through QVC, and at physical locations and websites of choose high-end retailers and doctor offices. Our domestic distribution model focuses on the steer transmit, which is the primary coil driver of our domestic sales and growth. Our indirect distribution channel strategy is designed to complement and reinforce our target channel. We believe that this distribution model enables us to effectively and efficiently :

drive sword awareness across channels ;
quantify and optimize the price of acquiring and educating customers ;
sell extra products to existing customers ;
develop and align strategies to improve sales efficiency ;
build up agio sword positioning while efficaciously maximizing the tax return on ad and market investments ; and
provide a convenient means for consumers to purchase our products .

68 The aspects and benefits of both our primary coil directly distribution transmit and our indirect distribution channel are summarized by the follow table.

Channel Marketing Benefits
  Direct
  Corporate e-commerce sites www.triabeauty.com www.trytrialaser.com e-commerce affiliates • cost-efficient consumer learning • Consumer education • Cross market of products • Direct and repeated contact with customers
  Infomercials Long-form Short-form • Consumer department of education • Brand awareness • Message operate • Wide audience
  Indirect
  Premium Wholesale Bloomingdale ’ randomness stores and web site Bergdorf Goodman web site • Brand prestige • Personal interaction • Wide hearing
  Physician-Dispensed • Professional endorsement • Product credibility • Consumer education
  Television Shopping QVC www.qvc.com • Consumer education • Brand awareness • Targeted demographic • Wide consultation

Direct Channel. Our steer sales distribution groove includes numerous digital and direct market efforts that drive traffic to our main web site, www.triabeauty.com, and e-commerce affiliates, such as www.amazon.com. Our leading direct traffic sources dwell of paid and unpaid search referrals, affiliate sites and on-line and traditional public relations. This channel is the stress of our sales and marketing scheme because it drives potent margins and enables us to scale internationally, while maintaining operate over our market messages and costs. Through the use of the internet, we are able to efficiently acquire our target customers. Once we acquire a customer through a direct sales duct, we have a significant opportunity to continue to communicate with them through e-mail and social media to cross-sell extra products, introduce new products and provide reminders when it is clock to reorder consumable aspects of our products. This interaction besides allows us to encourage customer complaisance, which is a identify driver of improved outcomes and satisfaction. Our lineal reply television efforts include infomercials broadcast in 29-minute “ long-form ” programs and one- and two-minute “ short-form ” programs. In addition to driving immediate response to sites and call centers resulting in address sales, our target response television spots enable us to increase trade name awareness, communicate the specific properties of the Hair Removal Laser and Skin Perfecting Blue Light and educate the consumer regarding proper function of our products. We work with an independent media agency to develop a media scheme and acquire coveted fourth dimension slots. Indirect Channel. Since February 2009, we have marketed and sold our products on-air at QVC and through QVC ’ s web site at www.qvc.com. According to QVC, they reach approximately 85 million american english homes and more than 190,000 customers shop with QVC every sidereal day. We believe that QVC is a solid consumer acquisition channel and we use home television receiver shopping to develop brand awareness and train consumers on product differentiation, proper habit and resulting benefits. 69 We besides grocery store and sell our products through high-end retailers. Our retail impart enables us to provide extra points of contact to drive customer awareness with limited capital investment, educate consumers about our products and further strengthen our brand image. We believe that our physical presence at high-end retailers, such as Bloomingdale ’ mho, reinforces our image as a quality brand, allows us to target a consumer who may be less inclined to shop on-line and provides an inviting venue to experience our products personally and discuss product features with experience sales personnel. Our Skin Perfecting Blue Light is besides sold through our doctor distribute course of study, whereby dermatologists and other physicians can sell the intersection to patients suffering from meek to moderate inflammatory acne. We believe that selling the Skin Perfecting Blue Light to patients represents an attractive alternate for physicians unwilling or ineffective to make an investment in professional blue light capital equipment, american samoa good as those physicians who recognize the benefits of home discussion over in-office treatment. In summation, our blue light therapy can be an attractive adjunct to other treatments that the doctor might dispense or prescribe. International. In our more ripe international markets, we typically employ a similar distribution strategy to the United States, utilizing both direct and indirect channels, as is the encase in Japan. In our new geographies, including Korea, the United Kingdom and Canada, we start with the direct distribution channel, which provides the most effective and cost-efficient means to test market receptiveness and borrowing before investing in the indirect channel. Branding, Product Design and Packaging We are growing what we believe to be an emerging class of skin care, home-use light-based skin care devices, and establishing our brand as a leader within it. Over clock, we believe consumers will recognize and trust in our trade name ’ s coherent ability to create high-quality, clinically-validated and FDA-cleared aesthetic medical devices and complemental topical products for at-home manipulation, increasing consumer awareness and expectations for what is possible. Our commercialize strategy reflects the watch priorities :

inaugurate and acquiring raw consumers to our trade name ;
trade products according to channel demographics ;
encouraging the purchase of extra product offerings ;
generating and renewing agitation among our consumers ; and
reinforcing our brand .

We believe that for a skin care merchandise to succeed in the family place setting, it must besides create a enjoyable experience for the user. As a consequence, we complement our scientific capabilities with marketing expertness to develop products that appeal to the consumer. We compete on the footing of product performance, brand recognition, value and other core benefits to consumers. We work with leading global agencies to develop a holistic, best-in-class market and product feel, across all consumer partake points. We recognize that advertise, forwarding, selling and box have a meaning impact on consumer buy decisions. consequently, our products are childlike and easy to use and we believe that our box is elegant. We partner with strategic consultants and invest in developing cryptic consumer insights, significantly influencing product design and selling communications. Our products, brand and price structure are consistent and widely recognizable through all distribution channels, including directly to consumer, retail and physician-dispensed. We provide a full substitution guarantee that our Hair Removal Laser and Skin Perfecting Blue Light are loose of defects. Warranty periods range from 12 to 24 months from the date of buy, depending on the geographic placement and year purchased. If customers are not satisfied with our products, we besides provide a full refund as part of our money-back guarantee program. For purchases made after March 30, 2011, customers have 90 days to return our Hair Removal Laser and 60 days to return our Skin Perfecting Blue Light and other acne 70 products and kits for a full refund. Purchases made anterior to March 30, 2011 are submit to our previous 30-day money-back guarantee program. We besides allow our customers to purchase certain products in installments. For exemplar, we offer our direct customers a payment plan consisting of a down payment plus four to five equal monthly payments secured by a credit tease. Technology and Clinical Results Our products incorporate proprietorship technology developed by skilled scientists and tested in clinical studies for guard and potency using the same methodologies established by professional aesthetic checkup equipment used in the doctor ’ south office. Our products are comparable to devices used in a doctor ’ south office in terms of technological similarities, clinical results and, for our commercially-available products, regulative clearances of solid equivalence. Hair Removal Laser. Our Hair Removal Laser is a hand-held, cordless, rechargeable diode laser designed with features for easy operation by the consumer, including :

lightweight, ergonomic design ;
skin detector to ensure that the user falls within the mean skin tone range of light-to-medium skin tones ( because our Hair Removal Laser is merely intended for people with light-to-medium skin tones and may cause injury to those with black skin tones ) ;
automatic pulsate upon touch with the skin ;
five adjustable comfort settings to control the amount of energy emitted during treatment ; and
easy-to-use graphic drug user interface with universal symbols for battery charge, hotness sic and hide detector indicator .

The basal components of our Hair Removal Laser include a solid-state light engine, ocular diffuser and optical manner of speaking mechanism, ocular skin detector, along with a lithium battery and master electronics. The Hair Removal Laser delivers beams of infrared sparkle at a wavelength of approximately 800 nanometers with an department of energy pulsation of up to 22 joules per square centimeter. This energy degree is generally less than the maximum energy levels of master devices but within the scope of settable energy levels for those devices and distillery capable of inducing permanent wave hair reduction when used as lead. This energy can be absorbed by melanin, disabling the hair follicles without harming the surrounding hide by thermally injuring the bow cells responsible for the hair growth cycle, a process known as selective photothermolysis. A typical discussion can take from 10 to 40 minutes depending on the size and discipline of the area being treated. Because hair’s-breadth cycles through active and dormant phases, and laser hair removal is believed to be most effective in the active phase, customers are instructed to continue treatments doubly a month for the first three months and then once a month for five extra months to achieve best results. The core technology of our Hair Removal Laser has been examined in several studies, including a clinical analyze designed to simulate consumer home habit. The study involved the discussion of 77 “ appropriate ” users and 44 “ inappropriate ” users. The study was designed to test both the safety and effectiveness of the device in appropriate users and good the safety of the device in inappropriate users. allow users were defined as individuals with naturally sparkle brown to total darkness hair and fairly to light brown skin ( Fitzpatrick Skin Types I-IV ), while inappropriate users were defined as individuals not meeting one or both of those criteria. The device may be ineffective on users with relatively clean colored haircloth because lighter color hair may not contain enough pigment to absorb a sufficient come of light. The device may be harmful for users with relatively dark skin because higher levels of melanin in such clamber may result in besides much light being absorbed by the skin. allow users self-administered three treatments over six weeks ( less than one-third of the treatments that we presently recommend for consumption of our Hair Removal Laser ), while inappropriate users were given a individual pulse at the device ’ south highest department of energy set. The results of this clinical study were published by Ronald G. 71 Wheeland, M.D., FACP, the principal investigator and a leading laser dermatologist, in the July 2007 issue of Lasers in Surgery and Medicine and formed the footing of our 2008 FDA clearance. The results of the clinical analyze demonstrated :

short-term benefits for appropriate users of 61 %, 70 % and 60 % haircloth count reduction at three weeks after the first treatment, three weeks after the second treatment and four weeks after the third base and last treatment, respectively, which was the footing for our FDA indication for “ adjunctive use with shaving for hair’s-breadth removal sustained with periodic treatments ” ; and
long-term benefits for appropriate users of 41 %, 31 % and 33 % hair consider decrease at 6, 9 and 12 months after the last discussion, respectively, which was the basis for our extend FDA indication in 2009 for “ permanent wave decrease in hair’s-breadth regrowth defined as a long-run, stable decrease in hair’s-breadth counts following a treatment government. ”

In questionnaires, one year after the appropriate users ’ last treatment, relative to their pre-treatment hair’s-breadth, 71 % of appropriate users reported fine haircloth, 44 % reported lighter hair and 64 % found their haircloth to be less obtrusive. The merely side consequence observed immediately after treatment or by an research worker for allow users was ephemeral erythema ( inflammation ) with an incidence rate of 33 %. The erythema was judged as minimal or mince and resolved spontaneously, frequently in less than 30 minutes while the subject was still in the clinic. Burning and blistering was observed with the discussion of inappropriate users having naturally dark brown to bootleg skin ( Fitzpatrick Skin Types V or VI ). In another clinical cogitation ( pending submission to a peer-reviewed diary ), base hit and effectiveness of eight treatments ( a more distinctive number of treatments for laser haircloth removal than the three-treatment protocol used in our pre-clearance trial ) was measured in a baseline and shaving controlled study with 12-month follow up. here, 21 bespeak subjects ( naturally brown or black hair, Fitzpatrick Skin Type I-IV ) were enrolled with eight discontinuing at some point in the long ( 20 calendar month ) study, which provided a sufficient sample distribution size for statistical significance. Subjects were given monthly staff-administered treatments at 7, 12 and 20 J/cm 2 corresponding to low, medium and senior high school settings of the device, respectively. An adjacent area was left untreated but shaved at the like intervals as the cover sites to provide the shave manipulate. During the treatment period, the hair decrease on the active sites generally increased with each treatment to a mean reduction of 23 %, 32 % and 50 % at one calendar month after the stopping point discussion at first gear, medium and high, respectively. During the follow-up period, the corresponding hair count reduction remained relatively stable with a mean reduction of 31 %, 36 % and 52 % at 12 months after the last treatment at first gear, medium and high, respectively. In acute contrast, the shaving control site was broadly stable over the report duration and showed a slight increase in hair’s-breadth counts of 23 % and 13 %, compared to baseline at one and 12 months after the last treatment, respectively. After normalizing to control, the beggarly hair consider reductions for the treatment sites were 47 %, 55 % and 73 % at one month after the final treatment and 44 %, 49 % and 65 % at 12 months after the concluding treatment, for gloomy, medium and high settings, respectively. These reductions were all statistically meaning ( phosphorus < 0.05 ) using standard statistical assessments. These clinical results are comparable to results reported for professional laser and light-based hair removal when used on indicate users and according to the device ’ second instructions for use. Skin Perfecting Blue Light. Our Skin Perfecting Blue Light is a hand-held, cordless, rechargeable device that uses high-intensity bluing light to inhibit acne-causing bacteria within the skin. The Skin Perfecting Blue Light has a power density of 400 milliwatts per square centimeter and an output wavelength of 415 nanometers. We have designed our Skin Perfecting Blue Light device to provide the same effective, accumulated dose of 400 joules per squarely centimeter found in the professional setting but in brief day by day treatments, rather than treatments administered once or twice a week in a doctor ’ s position. The treatment is designed to effect photochemical end of the P. acnes bacteria, whereby blue light is absorbed by porphyrin, producing reactive oxygen that targets the bacteria. The Skin Perfecting Blue Light allows our customers to clear breakouts gently while improving their skin complexion, tone and texture. The Skin Perfecting Blue Light features inviting packaging, a lightweight, ergonomic design and an easy-to-use graphic user interface with universal symbols for battery charge, length of 72 the current treatment session and the remaining time on the treatment cartridge. The device has no on/off button ; alternatively, it mechanically turns on and off as it is placed on the bark or taken away. The device uses our proprietary solid-state light engine and a replaceable code treatment cartridge that permits the device to be used for 300 minutes of treatment time ( 60 days of distinctive habit ). Consumers can purchase extra 300-minute treatment cartridges for the device. Our Skin Perfecting Blue Light besides incorporates ocular soft engineering for eye safety and ocular uniformity, customs adaptive capacitive detector and lithium battery technology. The safety and potency of our Skin Perfecting Blue Light core engineering has been studied in a total of clinical trials, including a pivotal clinical learn which formed the basis of our 2010 FDA clearance. That single-center, placebo-controlled learn was conducted by Zoe Draelos, M.D. and measured safety and effectiveness of treating balmy to moderate acne in 39 subjects. Subjects were treated in a split-face fashion in which one side of the face was randomly assigned to receive treatment with the blue easy and the other side of the face receiving no discussion as a restraint. Subjects were treated five days a week at the sketch site for two weeks. A five-minute treatment with blue light discussion was applied to a 3x3cm area of the grimace having mild to moderate acne. In accession, individual or groups of lesions within this area were treated for an extra 30 seconds. elementary efficacy ( a statistically significant improvement in the research worker ’ s overall assessment of acne on the tempered side of the confront versus the non-treated side ) was achieved with a statistically significant ( p=0.002 ) drop in acne badness at the end of two weeks of treatment. Acne wound counts on the treated and untreated sides of the boldness were performed. At the end of two weeks there was an approximately 70 % decrease in baseline papule counts on the tempered side, versus an approximately 25 % decrease on the untreated side. treatment with the Skin Perfecting Blue Light was well tolerated ; no adverse events were reported during the analyze. Results from this study supported the FDA clearance of the Skin Perfecting Blue Light for the treatment of meek to moderate incendiary acne. Skin Perfecting Blue Light was conducted by Ronald G. Wheeland, M.D., FACP, and Andrea Koreck, M.D., Ph.D. In this study, the safety and effectiveness of a high and low dose treatment regimen for treating mild to moderate acne was evaluated in 31 subjects. Subjects treated with the blue light by using a “paint the face” motion twice daily for eight weeks. The high dose treatment was achieved by painting a 3x5cm area of the face for three minutes, representing a dose that may occur during treatment of a localized breakout, and the low dose treatment was achieved by treating the remainder of the face for three minutes, representing a full face treatment. Subjects were also instructed to spot-treat breakout areas during the first two weeks of treatment. Inflammatory lesion counts were performed by the investigator at baseline and at weeks one, two, three, four, six and eight weeks. Treatment with the Skin Perfecting Blue Light resulted in statistically significant (p £0.01) percentage reductions from baseline in inflammatory lesion count as early as week one in the high dose treatment area and in week three in the low dose treatment area. The median reductions in inflammatory lesion count at weeks one, four and eight were 29%, 43% and 60%, respectively, in the high dose area, and 23%, 33% and 46%, respectively, in the low dose treatment area. Subject-reported satisfaction was excellent, including the fact that 100% of subjects reported improvement in the frequency and severity of their flares at week eight compared with baseline. The Skin Perfecting Blue Light was well tolerated; three adverse events reported as probably related to treatment were minimal transient skin dryness in two subjects and minimal transient hyperpigmentation in one subject. This study was postered at the 2011 Maui Derm and Dermatology World Congress conferences and has been accepted for publication by the Journal of Clinical and Aesthetic Dermatology. subsequently, a single-center, open-label study of ourwas conducted by Ronald G. Wheeland, M.D., FACP, and Andrea Koreck, M.D., Ph.D. In this study, the safety and potency of a senior high school and low acid discussion regimen for treating balmy to moderate acne was evaluated in 31 subjects. Subjects treated with the blue light by using a “ key the confront ” apparent motion twice daily for eight weeks. The high dose treatment was achieved by painting a 3x5cm area of the face for three minutes, representing a dose that may occur during discussion of a localized break, and the low drug discussion was achieved by treating the remainder of the face for three minutes, representing a full moon side treatment. Subjects were besides instructed to spot-treat break areas during the first base two weeks of treatment. inflammatory lesion counts were performed by the investigator at baseline and at weeks one, two, three, four, six and eight weeks. discussion with theresulted in statistically significant ( p0.01 ) share reductions from baseline in incendiary wound count angstrom early as week one in the high venereal disease treatment sphere and in week three in the low dose treatment area. The medial reductions in incendiary wound count at weeks one, four and eight were 29 %, 43 % and 60 %, respectively, in the high acid area, and 23 %, 33 % and 46 %, respectively, in the low dose discussion area. Subject-reported satisfaction was excellent, including the fact that 100 % of subjects reported improvement in the frequency and austereness of their flares at week eight compared with baseline. Thewas well tolerated ; three adverse events reported as probably related to treatment were minimal transient hide dispassion in two subjects and minimal transeunt hyperpigmentation in one subject. This discipline was postered at the 2011andconferences and has been accepted for publication by the A follow-on, two-center, open-label sketch of our Skin Perfecting Blue Light used in conjunction with our Skin Perfecting Foam Cleanser and Skin Perfecting Serum was conducted by Ronald G. Wheeland, M.D., FACP and Sunil Dhawan, M.D. here, the guard and potency of the blue light device for treating mild to moderate acne was evaluated in 28 subjects when used in conjunction with our pre-treatment cleansing agent and post-treatment serum. Subjects washed their faces in the morning and flush with the cleansing agent prior to treating with the blue unaccented and applied the serum after treating in the even. Subjects treated with the blue idle by using a “ paint the face ” movement doubly casual for eight weeks in high and low doses, identical to the device-only study described above. treatment was associated with significant reductions from baseline in acne lesions—from week one ahead for inflammatory lesions ( p < 0.01 ) and from week two or four forth for non-inflammatory lesion counts ( phosphorus < 0.05 ). 73 The median reduction in incendiary lesion count at weeks one, four and eight, respectively, was 25 %, 71 % and 80 % in the high dose treatment area and 33 %, 33 % and 67 % in the depleted venereal disease treatment area. With see to the non-inflammatory wound count, the median decrease at weeks one, four and eight, respectively, was 25 %, 25 % and 53 % for the high gear dose and 0 %, 40 % and 33 % for the first gear drug. These data show that incendiary wound counts can be improved by about 25 % by using our topicals compared to alone using our Skin Perfecting Blue Light. The Skin Perfecting Blue Light System was well tolerated ; 11 adverse events involving transient dispassion and erythema were reported for the topicals, and eight adverse events involving transient skin sobriety and hyper pigmentation were reported for the Skin Perfecting Blue Light. One subject dropped from the discipline due to a facial rash attributed to the serum. This report was postered at the 2011 Maui Derm and Dermatology World Congress conferences and was published in the Journal of Drugs and Dermatology in June 2011. An extra study was conducted to evaluate the tolerability of the Skin Perfecting Blue Light on asian clamber. This single-center, open-label sketch was conducted by Sunil Dhawan M.D. and Andrea Koreck, M.D., Ph.D. In this tolerability study, asian subjects with or without acne were eligible for registration. Of the 31 subjects enrolled, 13 had mild to moderate acne and 18 did not have acne. Subjects were instructed to “ paint their face ” with the amobarbital sodium light for 90 seconds, twice daily for eight weeks. At workweek four, an improvement from baseline in skin inflammation and evenness of skin tone was reported in 91 % of the acne group and 82 % of the non-acne group. similarly, at workweek four, an improvement from baseline in the smoothness of the skin was reported in 91 % of the acne group and 94 % of the non-acne group. At week four, 91 % and 100 % of the acne group and non-acne group, respectively, expressed agreement that “ The device was ennoble but effective. ” Weekly evaluations of tolerability by the investigator showed a transient one-point worsen from service line in erythema for one subject, sobriety for three subjects and peeling in four subjects ascribable, we believe, to the alcohol and sulfur-based cleansing agent used day by day prior to treatment. No hyperpigmentation was reported. The Skin Perfecting Blue Light was consequently judged well tolerated in asian skin, in both acne and non-acne skin. In addition, a majority of subjects reported a reduction in the inflammation of their bark and an improvement of evenness in skin spirit after treatment with the device. This sketch was postered at the 2011 Maui Derm and Dermatology World Congress conferences. Advanced Skincare. Our Skin Perfecting Blue Light is complemented by respective associated replenishable products, which the customer can reorder as needed or automatically at predetermined intervals, including :

Skin Perfecting Foam Cleanser : rinses away makeup and sunscreen, unclog pores and removes dead skin cells and vegetable oil .
Clarifying Body Wash : gently exfoliates the hide and unclog pores while helping to smooth all right lines and wrinkles and improve skin tone and texture .
Skin Perfecting Serum : calm air inflammations and soothes skin to help smooth fine lines and wrinkles and improve peel tone and texture .
Oil-Free Sunblock : helps defend against sun damage .

Skin Rejuvenating Laser. Our Skin Rejuvenating Laser is a product presently in development and designed to utilize fractional non-ablative technology to reduce wrinkles, eliminate age spots and dyschromia caused by overindulgence pigmentation and improve the texture of the hide. Through this summons, known as photothermolysis, laser light is absorbed by water, creating microscopic thermal zones to stimulate collagen and reduce pigment. The elementary components of the Skin Rejuvenating Laser include a proprietary solid-state light locomotive, proprietorship ocular scanner and liaison and position sensors and a lithium barrage and control condition electronics. The Skin Rejuvenating Lase gas constant is expected to deliver light at a wavelength of approximately 1,410 nanometers in microscopic beams ( about 250 microns in diameter ) that are distributed across the treat area. These microbeams generate microscopic thermal zones, or column of coagulate tissue in the epidermis and dermis with an intact stratum stratum corneum, that heal cursorily from untreated adjacent tissue. In the healing process, collagen is stimulated and excess pigmentation is ejected, leading to a reduction in wrinkles, reduction in overindulgence pigmentation and a smoothen of the skin. approximately one to two percentage of the skin is treated in a full confront 74 daily regimen such that 30-60 % of the clamber will be treated over the naturally of a calendar month, which equals a typical monthly treatment at a professional clinic. This device is expected to allow our customers to obtain similar anti-aging benefits with day by day at-home treatments to those that could be obtained with office-based engineering. We expect that customers would treat their fully confront for approximately three to five minutes per day for best results. We expect, based on dosing parameters exchangeable to predicates including the PaloVia by Palomar and the ReAura by Philips, histology and pilot burner clinical work, that our U.S. pivotal study will measure potency end points consistent with previous studies conducted with professional aesthetic treatments. We expect that study to involve approximately 90 subjects, to begin in mid-2012 and to be completed within six months thereafter. A histological study has been performed with a prototype of the Skin Rejuvenating Laser on an animal exemplar ( hairless wop pigs ) to observe mend and the extent and depth of microthermal zones, or MTZs. At all energies studied ( approximately 6, 8 and 13 mJ/MTZ ), the pulses produced MTZs that were distinctive and coherent with commercially-available predicate devices. immediately after treatment, the MTZs were typically less than 500 microns deep and less than 200 microns across-the-board. No tissue ablation was observed. Slight cutaneous and cuticular junction de-lamination occurred immediately post-treatment as is distinctive and which fully resolved by five days after treatment. Complete cuticular heal occurred and restructure of goodly dermis was discernible by day five. Normal dermal collagen surrogate was observed by day 15. The prototypes demonstrated the desire tissue response and an excellent base hit profile that supports its function in human clinical trials. The studies were performed under GLP controls. A pilot program, safety and efficacy survey of a prototype of the Skin Rejuvenating Laser has been completed and preliminary results are available. This single-center, randomized, open-label cogitation was conducted under an investigational device exemption by Brian Biesman, M.D. at the Nashville Centre for Laser and Facial Surgery, Nashville, Tennessee. Safety and efficacy of two proprietorship regimens for treating periorbital wrinkles, perioral wrinkles, dyschromia ( uneven pigmentation ), diffuse red and textural irregularities ( like tactile harshness ) was evaluated in 22 subjects. Subjects were treated in a split face fashion, in which each side of the font was randomly assigned to be treated with one of the venereal disease regimens, five days a workweek for six weeks at the study center. Subjects were followed for 12 weeks after the concluding treatment. primary efficacy was established at four weeks post-treatment for all indications, except textural irregularities, in which chief efficacy was established at two weeks post-treatment. efficacy in the treatment of periorbital and perioral wrinkles was based on the research worker ’ s scores of blinded photograph ( baseline versus four weeks post-treatment ) using the nine-point Fitzpatrick Wrinkle Assessment Scale. efficacy in the treatment of dyschromia and permeate inflammation was evaluated in the lapp manner using a 9-point Dyschromia and Diffuse Redness Assessment Scale. The preliminary results of the investigator ’ s photographic assessments four weeks post-treatment are as follows for subjects in the abject acid group : for periorbital wrinkles, 36 % of subjects had at least a one-point improvement ; for perioral wrinkles, 36 % of subjects had at least a one-point improvement ; for dyschromia, 55 % of subjects had at least a one-point improvement ; and for diffuse red, 45 % of subjects had at least a one-point improvement. efficacy in the treatment of textural irregularities was based on the investigator ’ south scores of a live tactile harshness judgment using the 9-point Tactile Roughness Scale. For textural irregularities, all subjects had at least a one-point improvement two weeks post-treatment. All treatment regimens were demonstrated to be safe and well tolerated. No unexpected or serious adverse events were reported. The most common, have a bun in the oven adverse events reported were skin burn sensation, stinging, erythema, skin sensitivity, sobriety, hyperpigmentation, swelling and acne flares. A huge majority of these side effects were balmy and transient, resolving within hours to a few days following treatment. Two subjects had mild erythema that lasted more than a few days post-treatment ; it lasted for six days in one subjugate and 13 days in the other. One subject had bark sensitivity on sunday exposure that lasted for 25 days, two subjects had balmy dryness throughout treatment and two subjects had an acne flare that lasted more than a few days ; it lasted for eight days in one national and 12 days in the other. none of the report slope effects required treatment or caused an interruption in discussion with the device. Results from the Skin Rejuvenating Laser pilot study suggest the safety and efficacy of the device in treating facial wrinkles, clamber discoloration and skin crudeness is comparable to professional fraction non-ablative laser treatments performed in doctor offices. 75 Product Development One of our main goals as an organization is to innovate quickly to stay ahead of our contest. To that goal, we devise a product concept, complicate and validate that vision, develop engineering, optimize our clinical outcomes, create a product and then deliver our products both in the United States and internationally into our customers ’ hands. Because we seek to innovate quickly and render our own products disused, we focus a significant share of our product development efforts on creating new products and improving existing products, based on our own initiation or based on feedback and suggestions from physicians and from our consumers. For case, our rapid tempo of initiation has led to significant reductions in the manufacture cost and hence betray price of our Hair Removal Laser, a well as improvements in device function. Since introducing our first generation Hair Removal Laser in 2008, we have reduced the betray monetary value to the consumer from $ 995 to $ 395 and we have increased product operation by reducing treatment times and lengthening battery life, while reducing manufacturing monetary value and maintaining or increasing arrant margins. As of March 31, 2012, our research and growth staff consisted of 10 employees dedicated to all major engineering disciplines, upstream development, product development and sustaining engineering. To assist our research and development staff, we besides employ a clinical/regulatory team of six people to implement clinical trials to study the condom and effectiveness of our products, handle submissions for merchandise clearances and ensure quality complaisance. Our product exploitation activities occur at our California headquarter. Competition The markets in which we compete are subject to quickly changing diligence trends partially stemming from class expansion into at-home devices. In summation, consumer preferences continually evolve as educated beauty consumers become mindful of fresh skin care treatments and brands and search to find better results than they receive from their current routines. To compete successfully, we must be able to, among other things :

demonstrate the professional-level effectiveness of the products being offered ;
build trade name credibility and differentiation, as reflected by product benefits, cross-channel sales and selling strategy and customer reviews and testimonials ;
quickly innovate with new and improved products ;
communicate base hit for at-home use through published clinical studies, third-party certifications or other means ;
price products competitively and provide a compelling rate proposition ;
improve the consumer experience through multi-channel sales touch points ;
provide an categorization and continuity of merchandise survival ;
faithfully carry through and deliver orders ; and
invest necessity resources to brand and customer support post-purchase .

We chiefly compete against three categories of companies : those that sell agio positioned cosmetic OTC skin care products, such as Murad ; those that provide das kapital equipment for office-based aesthetic procedures, such as Lumenis ; and those that provide at-home skin care devices, such as HomeSkinovations. We believe that our combination of boost light-based science and demonstrated ability to marketplace directly to consumers provides us with a discrete competitive advantage over all three types of competitors. Our proximity to the customer through our direct distribution channel provides us with an effective and effective direction to inform, educate and present our products for sale in the proper idle and affords us the opportunity to gather crucial customer 76 feedback and tailor our products to the demand needs of our customers. The combination of a multi-channel distribution model and core competencies in consumer product plan, direct market expertness and proprietorship aesculapian engineering know-how is not normally found in either traditional medical engineering companies or in beauty products companies. We believe expertness in such divers capabilities is difficult to achieve. We besides believe there exists a disincentive for any company that has historically focused on either selling aesthetic capital equipment to medical professionals or leveraging wide retail distribution of OTC skin care products to devote substantial resources to competing directly against us, because to do so would undermine their congress of racial equality product offerings and capabilities. however, there are many companies presently focusing on selling aesthetic capital equipment to checkup professionals or focusing on wide-eyed retail distribution of OTC skin care products that have technical capabilities and fiscal resources that may be greater than ours. The technical foul capabilities and fiscal resources of these companies could enable them to compete effectively with our products, even though we may have stream advantages. The third category of competitors includes those within the emerging and quickly growing diligence of at-home skin care devices. This industry includes sonic-, light-, heat-, microcurrent- and microdermabrasion-based devices and it addresses skin care applications including cleanse, laser hair removal, anti-aging, acne and acne rosacea. We compete immediately against companies in this class that betray products that provide hair’s-breadth and acne solutions. Once we begin to market our Skin Rejuvenating Laser, we will compete directly against the anti-aging products in this class. Our primary coil direct competitors, based upon market plowshare, that sell at-home skin care devices include, for hair, Home Skinovations and Radiancy, and for acne, Pharos Life, Phototherapeautics, Radiancy and Zeno. In anti-aging, our current primary competitors include Home Skinovations, Pacific Bioscience Laboratories, Palomar Medical Technologies, and Philips. We are presently engaged in a false advertising lawsuit against Radiancy, and a patent violation lawsuit against Palomar. See “ —Legal Proceedings. ” Because at-home skin care devices typically cost less and offer greater convenience and privacy than their office-based analogues, these advantages have caused the industry to grow quickly in late years. however, few devices in this category are FDA-cleared checkup devices, and many devices lack clinically-demonstrated safety and potency. Because our Hair Removal Laser and Skin Perfecting Blue Light are cleared by the FDA and exhibit clinically-demonstrated base hit and effectiveness, we believe we have a competitive advantage over the other companies within this class. however, given our relatively early stage of commercialization and our express marketplace penetration, we can not predict whether we will be able to compete successfully in the future. Manufacturing Hair Removal Laser We outsource the manufacture of our Hair Removal Laser. Using third-party manufacturers allows us to maintain fixed unit costs without incurring significant capital expenditures. We presently use one third-party compress manufacturer, Flextronics, to manufacture our Hair Removal Laser at its adeptness in southern China. Flextronics sources the natural materials, parts, components, subassemblies and box products from our approve vendors list that are then used by Flextronics to manufacture, assemble and test our Hair Removal Laser. We believe Flextronics ’ sulfur manufacture processes are in submission with all apposite U.S. and external quality and base hit requirements and industry standards. Our condense with Flextronics does not have minimum buy requirements. quite, we have some degree of flexibility to adjust the delivery quantities of finish up products, equally well as delivery schedules, to match our changing requirements. Each month, we provide Flextronics with a rolling 12-month order calculate. The order for the foremost 90 days of each calculate constitutes a dressing leverage regulate. however, we may increase the size of the decree by up to 50 % or change pitch schedules upon 30 days ’ prior notice. The forecasts we use are based on historical trends, stream utilization patterns and sales forecasts of future demand. precede times for the components used in the products may vary significantly depending on the specific component, size of the decree, specific third-party supplier requirements and current market necessitate for the components and subassemblies. additionally, we besides make binding leverage commitments to certain suppliers of components and subassemblies either immediately or indirectly through Flextronics. Flextronics may only purchase materials from suppliers who are 77 approved by us and have been added to our approve seller list. In entire, we utilize approximately 50 unlike suppliers. Most of our third-party suppliers have no contractual obligations to supply us or Flextronics, and we and Flextronics are not contractually obligated to purchase from such third-party suppliers. Some components come from single suppliers, but in most cases alternate suppliers have been identified and qualified or, we believe, can be readily identified and qualified without meaning disruption to our business. Our agreement with Flextronics continues indefinitely but can be terminated by either party for appliance upon 180 days ’ written notice to the other party, or oklahoman, if there is an uncured material transgress of shrink. Flextronics is under no contractual non-compete and can, and does, fabrication products for competitors and potential competitors. We may use extra contract manufacturers and source new suppliers in the future to reduce fabrication costs, increase tractability and diversification and minimize risks to our company as a leave of potential provide or fabricate interruptions that could cause delays in product fabrication. besides, we per annum identify and audit our critical suppliers to, among other things, ensure their fiscal stability. One key retainer for a multiple manufacture and sourcing strategy is to reduce risk to our fabricate operations and leverage optimum pricing structures for cost-efficient product of our Hair Removal Laser. We selectively purchase critical and long lead time items to reduce the hazard of supply interruptions and intend to continue this practice. Skin Perfecting Blue Light We presently manufacture our Skin Perfecting Blue Light at our California headquarter. We do this because our stream book of production is not big enough to warrant utilization of a third-party contract manufacturer, though we anticipate transitioning the manufacture of our Skin Perfecting Blue Light to a third-party narrow manufacturer when product sales warrant such a transition. To manufacture our Skin Perfecting Blue Light, we purchase components and subassemblies from a restrict number of suppliers. We have flexibility with our suppliers to adjust the number of components and subassemblies equally well as the manner of speaking schedules. The forecasts we use are based on historic demands and sales forecasts of future demand. lead times for components and subassemblies used in the finished products may vary significantly depending on the specific component, size of the orderliness, fourth dimension required to fabricate and test the components or subassemblies, specific supplier requirements and current commercialize demand for the components and subassemblies. As with our other products, we are required to manufacture our Skin Perfecting Blue Light in complaisance with the FDA ’ s Quality System Regulation, equally well as similar foreign regulative requirements, and we believe we are presently in submission with such applicable regulations. Our failure to maintain complaisance with these requirements could result in the closure of our manufacture operations, delays in production or the recall of our Skin Perfecting Blue Light. In the event that one of our suppliers fails to maintain conformity with our choice requirements, we may have to qualify a newfangled supplier and could experience manufacture delays as a solution. Fulfillment We use several third-party logistics companies to store our finished goods and fulfill our orders. These third-party logistics companies warehouse and, in some cases, pack, ship, process electronic transaction data, receive customer returns and electronically transfer inventory and dispatch transaction data on a casual basis to us. Third-party logistics companies do not invoice our customers and they do not collect money on our behalf. DisCopyLabs, out of Fremont, California, handles all of our U.S. fulfillment, Kintetsu World Express provides us with fulfillment for our Asia-Pacific region, RHIEM Services GmbH, handles fulfillment for Europe, and Landmark Global fulfills our orders for Canada. Our freight forwarders act as the agent to clear customs and pay duties on our behalf and surrender shipments to the third-party logistics companies. use of third-party logistics companies allows us to promptly and efficiently establish merchandise issue capabilities in target regions without the overhead expense associated with establishing our own fulfillment operations. We leverage the logistics know-how of these third-party providers and, in some instances, their book shipping discounts with freight carriers. Activities done on our behalf at the stream third-party logistics companies can be transitioned to fresh third-party logistics companies on relatively short notice and hence there has not been a need to duplicate fulfillment centers within regions. 78 Patents, Trademarks, Licenses and Other Intellectual Property Rights We rely on a combination of patent, copyright, brand and trade secret laws and nondisclosure and assignment agreements to protect our cerebral property rights. We have cerebral property rights in each of our haircloth removal, acne and anti-aging intersection areas. As of March 31, 2012, we had six issued U.S. patents ( the earliest of which expires in 2021 and the latest of which expires in 2025 ), 12 published U.S. patent applications, 13 unpublished U.S. patent applications ( including probationary patent applications and purpose patent applications ) and five issued international patents, 11 published external patent applications and four unpublished international patent applications. Our patents provide us with intellectual property auspices related to the areas of eye condom, skin guard, abject cost manufacture, treatment aspects and desirable design aspects. Most of our write out patents relate to our Hair Removal Laser. We own numerous copyrights and trade dress rights for our products and merchandise packaging, and we rely on important trade wind secrets in the areas of light-tissue physics and our proprietary solid-state engine purpose and manufacture. Our patent applications may not result in issue patents, and we can not assure you that any patents that publish will protect our intellectual property rights. We intend to file for extra patents to strengthen our intellectual property rights as allow, but third base parties may challenge the cogency of any of our patents, may independently develop like or competing engineering or may design around any of our patents. We can not be sealed that the steps we have taken will prevent the misappropriation of our intellectual place, particularly in extraneous countries where the laws may not protect our proprietorship rights in these foreign countries vitamin a fully as in the United States. Our employees are required to execute nondisclosure and assignment agreements in connection with their employment relationships with us. We besides require them to agree to disclose and assign to us all inventions conceived in association with the kinship. We can not provide any assurance that employees and consultants will abide by the terms of their agreements regarding confidentiality and invention assignment. Despite measures taken to protect our intellectual property, unauthorized parties may copy aspects of our products or obtain and use information that we regard as proprietorship. Government Regulation The invention, development, fabricate, testing and sale of our products are subject to regulation by numerous governmental authorities, chiefly the FDA, and corresponding state and alien regulative agencies. Our Regulatory Clearances and Approvals Our Hair Removal Laser was cleared by the FDA in January 2009 for OTC consumption for permanent reduction in haircloth regrowth, defined as a long-run, stable decrease in hair counts following a treatment regimen. previously, the product had been cleared by the FDA in December 2005 as a prescription drug device for impermanent hair removal and, in February 2008 as an OTC device for temp haircloth removal. The device was besides certified in January 2007 with a CE notice for permanent hair removal in Europe, was cleared in October 2009 by the Korea Food and Drug Administration in Korea for OTC hair removal, was cleared by Health Canada in Canada for OTC temp and permanent reduction in hair’s-breadth re-growth in September 2007 and November 2010, respectively, and is pending clearance from the Central State Food and Drug Administration Bureau in China for OTC hair’s-breadth removal. There is presently no analogous formal regulative serve in Japan with which we need to comply. Our Skin Perfecting Blue Light was cleared by the FDA for prescription and OTC treatment of mild to moderate inflammatory acne in April 2006 and January 2010, respectively. In addition, the Skin Perfecting Blue Light was cleared by Health Canada in Canada in May 2011 for inflammatory acne, is pending a medical CE grade for incendiary acne in Europe and is pending clearance by the Korea Food and Drug Administration in Korea for inflammatory acne. There is presently no analogous formal regulative process in Japan with which we need to comply. Our Skin Rejuvenating Laser has not so far been cleared by the FDA. We have completed a pre-investigational device exemption action with the FDA, under which the FDA reviews and provides comments on the 79 company ’ randomness proposed cogitation protocol and pronounce. In the United States, we expect to seek four selling indications for the Skin Rejuvenating Laser : periorbital wrinkles, perioral wrinkles, dyschromia and textual irregularities. We expect to conduct a study to support our FDA application in 2012 with the goal of obtaining FDA headroom in 2013. In connection with our plan to seek CE cross off, we commenced CE clinical studies in December 2011. We expect to obtain CE marking in the second half of 2012, following which, we expect to market the Skin Rejuvenating Laser outside the United States in 2012. Regulation by the FDA In the United States, the Federal Food, Drug, and Cosmetic Act, or FDCA, angstrom well as FDA regulations and other union and state of matter statutes and regulations govern, among other things, checkup device design and development, preclinical and clinical screen, premarket clearance or approval, registration and listing, manufacture, label, storage, ad and promotion, sales and distribution, export and consequence and post-market surveillance. The FDA regulates the design, manufacture, service, sale and distribution of checkup devices, including aesthetic medical devices. failure to comply with applicable U.S. requirements may subject a caller to a variety show of administrative or judicial sanctions, such as warning letters, product recalls, product seizures, total or partial derivative suspension of production or distribution, injunctions, fines, civil penalties and criminal pursuance. The FDA can besides refuse to approve pending applications. Each medical device we wish to distribute commercially in the United States will require marketing authorization from the FDA prior to distribution. The two primary types of FDA marketing mandate applicable to a device are premarket telling, besides called 510 ( thousand ) clearance, and premarket approval, besides called PMA approval. The character of marketing authority is generally linked to the classification of the device. The FDA classifies checkup devices into one of three classes ( class I, II or III ) based on the level of regulative control deemed sufficient to provide a reasonable assurance that the device is safe and effective. Devices requiring the lowest flush of control sufficient to provide a reasonable assurance of safety and potency are placed in Class I ; such devices are subject only to general controls applicable to all devices, such as requirements for device label and attachment to the FDA ’ s Quality System Regulation, which establishes current good fabrication practices for aesculapian devices. Class II devices are subject to cosmopolitan controls and may besides be subjugate to limited controls such as performance standards, product-specific guidance documents, special pronounce requirements, patient registries or postmarket surveillance. Class III devices are those for which insufficient information exists to assure safety and effectiveness entirely through general or limited controls and include vital devices, life-supporting devices, devices of significant importance in preventing disability of homo health, or which present a likely, excessive risk of illness or injury. Most class I devices and some Class II devices are excuse from the 510 ( thousand ) clearance necessity and can be marketed without anterior mandate from the FDA. A little act of Class I devices and most Class II devices are eligible for marketing through the 510 ( kelvin ) clearance nerve pathway. Devices in Class III broadly require PMA approval prior to commercial marketing. The PMA approval march is more rigorous, clock time consume and expensive than the 510 ( kelvin ) clearance procedure ; however, the 510 ( kelvin ) clearance process has besides become increasingly rigorous and expensive. The devices that we presently marketplace in the United States are classified as Class II devices and were introduced into the market using the 510 ( kelvin ) clearance process. historically, we have not had to use the more burdensome PMA approval procedure. 510(k) Clearance .      To obtain 510 ( k ) clearance for a aesculapian device, an applicant must submit a premarket presentment to the FDA demonstrate that the device is “ substantially equivalent ” to a device legally marketed in the United States that is not submit to PMA approval, normally known as the “ predicate device. ” A device is well equivalent if, with respect to the predicate device, it has the same intended manipulation and has either ( iodine ) the lapp technological characteristics or ( two ) different technological characteristics and information submitted to the FDA in the 510 ( kilobyte ) premarket telling demonstrates that the device is as dependable and effective as the predicate device and does not raise different questions of safety or potency. A express of significant equivalence sometimes, but not always, requires clinical data. During its follow-up of a 510 ( k ), the FDA may request extra information or clarification of information already provided, which in some cases can require the applicant to 80 impart extra studies or differently provide extra datum. The time it takes to obtain a final decision from the FDA regarding a well equivalent/not substantially equivalent determination on a 510 ( potassium ) submission is difficult to estimate and can range from deoxyadenosine monophosphate short as a few months to a year or more. After a device has received 510 ( thousand ) clearance for a specific intended use, any change or modification to the indications for use or any change or alteration that could significantly affect the device ’ s safety or potency, such as a meaning change in the design, materials, or method of manufacture of the device, may require a new 510 ( potassium ) headroom or PMA blessing. The determination as to whether a modification could importantly affect the device ’ s base hit or effectiveness is initially left to the manufacturer using available FDA guidance. however, the FDA may review this determination to evaluate the regulative condition of the limited product at any fourth dimension and, if the FDA disagrees with a manufacturer ’ sulfur decision that a given alteration or series of modifications did not require a fresh 510 ( k ), it may require the manufacturer to cease market and recall the limited device until 510 ( kilobyte ) clearance or PMA blessing is obtained. The manufacturer may besides be subject to other FDA enforcement carry through, including significant monetary or early penalties, for failing to seek FDA clearance or approval of product modifications. Regulation After FDA Clearance or Approval Any medical devices we manufacture or distribute pursuant to clearance or approval by the FDA are subject to permeant and continuing rule by the FDA and certain state agencies. We and our manufacturers are required to adhere to applicable regulations setting away detailed current good fabrication Practices, or cGMP, requirements, as set forth in the Quality System Regulation, which include, among other things, testing, control and documentation requirements. disobedience with these standards can result in, among other things, fines, injunctions, civil penalties, recalls or seizures of products, total or partial derivative suspension of production, refusal of the politics to grant 510 ( k ) headroom or PMA approval of devices, coitus interruptus of marketing approvals and criminal prosecutions. In its fabricate services agreement with us, Flextronics has covenanted to manufacture our devices in accordance with the FDA ’ south cGMP requirements. Although we do not manufacture our Hair Removal Laser, we do manufacture our Skin Perfecting Blue Light, and are however required to comply with the FDA ’ sulfur cGMP requirements. We must besides comply with aesculapian device report requirements by reviewing and reporting to the FDA whenever there is attest that reasonably suggests that one of our products may have caused or contributed to a death or unplayful injury. We must besides report any incident in which evidence reasonably suggests that our product has malfunctioned and such malfunction would likely cause or contribute to a death or unplayful injury if it were to recur. Labeling and promotional activities are subject to scrutiny by the FDA under the FDCA. medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “ off-label ” promotion. The FDA and other agencies actively enforce these laws and regulations, and a company that is found to have improperly promoted a device in rape of these laws may be subject to meaning indebtedness, including significant monetary penalties and condemnable pursuance. Federal and State Advertising and Unfair Trade Practice Laws The advertise for our products is regulated by the Federal Trade Commission under the Federal Trade Commission Act. In addition, aesculapian devices must be advertised and promoted truthfully and otherwise in conformity with state consumer protection laws prohibiting false advertising and unfair or deceptive trade practices. besides, under the federal Lanham Act, competitors and others can initiate litigation relating to advertising claims and practices, which we have done against others in the past and may besides do in the future. A party that is found to have violated these laws may be subject to meaning liability. Food and Drug Administration Amendments Act of 2007 The Food and Drug Administration Amendments Act, or FDAAA, expanded the federal government ’ s clinical trial register and results databank maintained by the NIH to include all ( with specify exceptions ) checkup device 81 trials. In especial, it requires certain data about device trials, including a description of the trial, engagement criteria, placement of trial sites, and touch information, to be sent to NIH for inclusion in a publicly accessible database. In accession, the NIH is presently drafting regulations to implement that law ’ randomness requirement that study sponsors report the results of clinical trials that form the primary basis for efficacy claims or are conducted after a device is approved or cleared for posting to the populace database. Under the FDAAA, companies that violate these and other provisions of the newly law are subject to hearty civil monetary penalties. We are in complaisance with the FDAAA ’ s clinical learn register requirements. Export of Our Products export of aesculapian devices that are legally marketed in the United States is permitted without prior FDA presentment or approval. export of products subjugate to the 510 ( thousand ) notification requirements, but not however cleared for selling, is permitted if certain requirements set forth in section 801 ( einsteinium ) ( 1 ) of the FDCA are met, including that the product accords with the specifications of the alien buyer, does not conflict with the importing nation ’ mho laws, is labeled as intended for export, and is not sold in the United States. Foreign Government Regulation The regulative follow-up process for aesculapian devices varies from nation to state, and many countries besides impose product standards, box requirements, environmental requirements, labeling requirements and import restrictions on devices. Each country has its own tariff regulations, duties and tax requirements. failure to comply with applicable foreign regulative requirements may subject a company to fines, suspension or withdrawal of regulative approvals, merchandise recalls, capture of products, operating restrictions, criminal prosecution or other consequences. Some of our products are regulated in the European Union as medical devices per the Medical Device Directive. An empower third party, known as a advise torso, must approve these products for checkup CE marking indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, can be commercially distributed throughout the member states of the European Union. The device that we presently market in the European Union, the Hair Removal Laser, is not considered a aesculapian product and is therefore allowed to be CE marked in a self-certification process. Our Skin Perfecting Blue Light is considered a checkup product in the European Union and is presently pending a medical CE mark by our advise body, TUV Rheinland. Our CE marker for our Hair Removal Laser is contingent upon our cover submission with the applicable regulations and the Quality System Requirements of ISO 13485-2003. The European Union has regulations like to that of the FDA for the advertise and promotion of aesculapian devices, clinical investigations and adverse events. We believe that we are in complaisance with such regulations at this clock. Most major markets outside of the United States and European Union have different levels of regulative requirements for checkup devices. The regulative requirements and the reappraisal clock deviate importantly from country to nation. In Japan, we believe our products are cosmetic devices and are not classified as checkup devices, so they are not subject to governmental regulation for checkup devices. Anti-Bribery Regulation Because we have commercial operations abroad, we are subject to the Foreign Corrupt Practices Act, or FCPA, and early countries ’ anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The FCPA prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents or distributors may be ineffective, and violations of the FCPA and like laws may result in austere criminal or civil sanctions, or other liabilities or proceedings against us, any of which would probably harm our reputation, business, fiscal condition and resultant role of operations. 82 Patient Protection and Affordable Care Act Our operations may besides be impacted by the Federal Patient Protection and Affordable Care Act of 2010, as modified by the Health Care and Education Reconciliation Act of 2010, which we refer to as the Affordable Care Act, or ACA. The ACA imposes a 2.3 % excise tax on sales of checkup devices by manufacturers. taxable devices include any medical device defined in section 201 ( heat content ) of the FDCA and intended for practice by humans, with restrict exemptions, including an exemption for devices that are determined to be of a character generally purchased by the general populace at retail for individual habit. The Internal Revenue Service published a proposed rulemaking in February 2012 that would exempt devices that are regularly available for purchase and use by individual consumers who are not medical professionals and whose design demonstrates that it is not chiefly intended for consumption in a aesculapian mental hospital or office, or by medical professionals. Because our products are sold over the counter directly to consumers, we believe that they would be exempt from the tax ; however, if this proposed exemption is deleted from the final rule, we could be required to pay the strike tax, which we would expect to begin paying beginning in 2013. Environmental Regulation We are submit to numerous alien, federal, submit and local anesthetic environmental, health and condom laws and regulations relating to, among other matters, safe working conditions, product stewardship and environmental security, including those governing the generation, repositing, handling, use, transportation and disposal of hazardous or potentially hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more rigorous over time. Although the costs to comply with applicable laws and regulations have not been material, we can not predict the impact on our clientele of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any command licenses or permits. Legal Proceedings We are presently defending a apparent violation lawsuit brought by Palomar Medical Technologies in the United States District Court of Massachusetts. On June 24, 2009, Palomar filed a complaint for apparent misdemeanor alleging that we infringe U.S. Patent No. 5,735,844 by making, using, sell, importing and offering to sell our Hair Removal Laser. The complaint further alleges that our violation has been and continues to be froward. Palomar ’ s complaint seek damages and besides seeks a preliminary and permanent injunction from further misdemeanor of the ’ 844 patent. We filed and served our answer and counterclaims on July 20, 2009, denying misdemeanor, and raising defenses including invalidity, non-infringement and unenforceability. On October 8, 2009, Palomar filed an amended complaint against us, adding to its anterior complaint allegations of misdemeanor of U.S. Patent No. 5,595,568. Palomar ’ mho amended complaint seeks compensatory damages and besides preliminary and permanent injunction from further violation of the patents-in-suit, vitamin a well as attorneys ’ fees, costs and double damages. We filed and served our solution and counterclaims to their amended complaint on October 23, 2009, in which we again denied violation and raised defenses including invalidity, non-infringement and unenforceability. We filed an amended answer and counterclaims to the amended ailment on February 9, 2010, and a moment amended answer and counterclaims on February 7, 2011, in which we provided more detail information about our defenses. We subsequently withdrew our previously-asserted defense of patent uneforceability, but continue to assert defenses of patent invalidity and non-infringement. The ’ 568 and ’ 844 patents undergo follow-up proceedings before the U.S. Patent & Trademark Office, and redirect examination certificates confirming the patentability of a number of claims of those patents were issued on November 17, 2009 and December 8, 2009. A claim construction hearing ( besides known as a Markman listen ) was held in August 2010, and in October 2010 the woo issued a govern that Palomar has stated publicly it considers to be favorable. fact discovery is basically completed and technical discovery is ongoing and scheduled to close in August 2012. compendious judgment briefing is scheduled to be completed in December 2012. As of the 83 date of this course catalog, no trial date has been set. We are denying all allegations and are vigorously defending this case ; however, lawsuits are inherently unsealed and unpredictable as to ultimate consequence. Although Palomar has previously granted licenses to alleged infringers of these patents, if we do not prevail in this litigation, it is possible that we could be enjoined from selling our Hair Removal Laser in the United States through the 2015 exhalation of the relevant patents. We may besides be ordered to pay damages, deoxyadenosine monophosphate well as to make royalty payments to Palomar related to our U.S. sales through 2015. consequently, an adverse consequence in Palomar ’ s suit against us could materially hurt our business, fiscal condition, results of operations and cash flows. In November 2010, we filed a lawsuit in the United States District Court for the Northern District of California against Radiancy, maker of the no ! no ! Hair hair-removal device. We assert that Radiancy has engaged in false advertising, hallmark violation and unfair competition, and we seek money damages and injunctive relief. Radiancy has filed an answer and counterclaim alleging false advertising, brand violation and unfair competition and seeking money damages and injunctive relief. In June 2011, we amended our complaint to add a claim regarding Radiancy ’ s advertise for its no ! no ! Skin acne-treatment product. In July 2011, Radiancy sought leave to add claims against one of our fame endorsers, and the court granted this request. We are in the discovery phase of the litigation and the font is active. A trial date has been set for July 2012. In January 2011, Radiancy filed a lawsuit against us in the Supreme Court of New York for New York County, alleging unfair competition, tortious hindrance with contractual relations and misappropriation of confidential information, all allegedly arising out of our memory of several selling and other military service providers with which Radiancy claimed to have previously worked. Radiancy seeks money damages and injunctive respite. The case is in the early stages of discovery. In summation to the above proceedings, we are subjugate to assorted claims and legal actions during the ordinary run of our business. We believe that there are presently no claims or legal actions, other than those described above, that would have a material adverse impression on our fiscal stead, operations or potential operation. Employees As of March 31, 2012, we had 102 employees, including 11 employees on the executive team, 11 employees in finance and administration, five employees in data engineering, 27 employees in marketing, 10 employees in research and growth and mastermind, 17 employees in intersection supply, six employees in clinical and regulative affairs and 15 employees in our external locations. We believe our employee relations are good. Facilities We lease facilities in California, where we theater our administrative, inquiry and development, supply chain management, sales and commercialize and Skin Perfecting Blue Light fabrication operations. We besides lease facilities in Japan, Korea and the United Kingdom, from which we manage our international sales and marketing operations. none of these facilities are material to our operations. 84 MANAGEMENT Directors, Officers and Key Employees The come mesa provides information regarding our directors, officers and key employees, including their ages and positions, as of April 7, 2012 :

Name Age Position
Executive Officers
Kevin J. Appelbaum 48 Chief Executive Officer, President and Director
John J. Rangel 57 headman Financial Officer
Tobin C. Island, Ph.D . 45 foreman Operating officeholder
Danika R. Harrison 36 senior Vice President, Global market
Key Employees
Richard P.M. Glover 45 Vice President, General Manager, Europe
Husam Kal 43 Vice President, Global Supply Chain & Product Supply
Elizabeth Lee 45 Vice President, General Manager, Asia-Pacific
Harvey I. Liu, Ph.D . 45 Vice President, Engineering
Sridhar Nallani 41 Vice President, Information Technology
Lisa D. Parr, Pharm. D . 47 Vice President, Clinical, Regulatory & Quality Affairs
Non-Employee Directors
Albert Cha, M.D., Ph.D. ( 1 ) ( 3 ) 40 director
Steven A. Elms ( 2 ) ( 4 ) 48 film director
James W. Glasheen, Ph.D. ( 2 ) ( 3 ) 44 film director
David M. Mauney, M.D. ( 1 ) ( 4 ) 43 director
Edward W. Unkart ( 2 ) 62 director
Michael J. Valentino ( 1 ) ( 3 ) 57 conductor
( 1 ) Member of our recompense committee .
( 2 ) Member of our audited account committee .
( 3 ) Member of our nominate and bodied government committee .
( 4 ) Dr. Mauney will resign from our board of directors prior to the completion of this offer and Mr. Elms will take his position on the recompense committee .

Executive Officers Kevin J. Appelbaum joined us as our head commercial military officer in January 2008 and became our president and head administrator officeholder in August 2008 and a member of our board of directors in September 2008. From 2006 to 2008, Mr. Appelbaum was an administrator with Sephora. From 2001 to 2006, Mr. Appelbaum was a management adviser with Hawk Hill Advisors, a consulting firm primarily focused on consumer healthcare. Mr. Appelbaum presently serves as chair of the board of a privately-held company that focuses on delivering primary coil healthcare services, adenine well as a penis of the board of directors of a privately-held checkup device company. Mr. Appelbaum holds a BSE in Chemical Engineering from the University of Pennsylvania and began his career as an Army infantry officeholder and special operations ( Ranger ) officeholder. We believe Mr. Appelbaum is qualified to serve on our board of directors because, as our chief administrator officeholder, Mr. Appelbaum manages and oversees all facets of our operations and besides because Mr. Appelbaum has experience serving as a member of the control panel of directors of other companies. John J. Rangel has been our foreman fiscal officer since August 2011. From October 2007 to August 2011, Mr. Rangel was vice president and head fiscal officeholder for Specialized Bicycle Components. From 1983 to October 2007, Mr. Rangel served in assorted aged executive roles for K2, a global dissipated goods party, including as chief fiscal officer from November 2002 to August 2004 and as president of the united states of european operations 85 from August 2004 to October 2007. Mr. Rangel holds a BBA in Finance and Economics from Loyola Marymount University, and an M.B.A. from the University of Southern California. Tobin C. Island, Ph.D. co-founded our company in 2003, was our executive vice president of the united states, operations from 2003 to 2008, and has been our chief operating policeman since July 2008. From 2002 to 2003, Dr. Island was a senior conductor for the aesthetic occupation unit at Lumenis, a global aesthetic lasers and light-based technology company. From 1998 to 2002, at Lumenis, Dr. Island directed an engineer group of approximately 30 employees. Dr. Island holds a B.S., M.S. and Ph.D. in Physics from Stanford University. Danika R. Harrison joined us as our vice president of the united states, global commercialize and general director, North America in March 2011 and became our senior vice president, ball-shaped market in December 2011. From April 2006 to March 2011, Ms. Harrison worked at Rosetta, a consulting-centered interactional agency, where she was most recently a partner leading the kinship market group consulting for leading brands like Dannon, Johnson ’ south Baby, and Rogers to develop direct and digital marketing programs throughout the United States and Canada. Ms. Harrison holds a B.S. from Georgetown University and an M.B.A. from the Kellogg School of Management at Northwestern University. Key Employees Richard P.M. Glover has been our frailty president and general coach, Europe, home based in the United Kingdom, since May 2011. From January 2006 to May 2011, Mr. Glover held senior management positions with Allergan, including as director of consumer commercialize, a ball-shaped pharmaceutical and consumer products company. Mr. Glover holds a bachelor of Science ( B.Sc. ) in Biochemistry and Physiology from the University of the Witwatersand, Johannesburg, South Africa. Husam Kal has been our frailty president, global supply chain and merchandise add since August 2011. From July 2007 to July 2011, Mr. Kal held senior management positions with Trimble Navigation, a ball-shaped developer of GPS positioning systems. From February 2004 to July 2007, Mr. Kal was the director of operations with Proxim Wireless. Mr. Kal holds a B.S. in electrical technology from Arizona State University and an M.B.A. from the University of Phoenix. Elizabeth Lee joined us as our vice president and general coach, Asia-Pacific, in February 2012. From March 2004 to February 2012, Ms. Lee served in assorted elder market roles at Johnson & Johnson, most recently as a cosmopolitan coach of Greiter AG ( a Swiss-based subsidiary company of Cilag GmbH International, a Johnson & Johnson subsidiary company ) and the Piz Buin sun wish brand franchise. At Johnson & Johnson, Ms. Lee besides held diverse local anesthetic, regional and international commercialize positions in the United States, Asia and Europe for the Neutrogena skin and hair concern businesses and consumer wind caution brands. Ms. Lee holds a B.A. in Economics from the University of Chicago and an M.B.A. from the Kellogg School of Management at Northwestern University. Harvey I. Liu, Ph.D. has been our frailty president, technology since February 2006. From February 2003 to May 2004, Dr. Liu was a member of Carl Zeiss Meditec ’ s aged mastermind team where he was creditworthy for non-invasive ophthalmic anterior chamber ocular coherent imaging product exploitation. Dr. Liu holds a B.S. in electrical engineering from California Institute of Technology, and an M.S. and Ph.D. in Electrical Engineering from Stanford University. Sridhar Nallani has been our frailty president of the united states, information engineering since November 2008. From July 2008 to November 2008, Mr. Nallani was a senior director of information technology for Microsoft Corporation. From January 2005 to July 2008, Mr. Nallani served as beginning frailty president of information engineering for Washington Mutual Bank. Mr. Nallani holds an M.S. in Computer Science from Louisiana State University. Lisa D. Parr, Pharm. D. has been our frailty president, global clinical, regulative and choice affairs since May 2009. From May 2006 to April 2009, Dr. Parr was vice president, clinical affairs, for Obagi Medical Products, a 86 skin care company. From August 2001 to January 2004, Dr. Parr worked at Allergan as director of Botox clinical development and the neurotoxin clinical pharmacology unit of measurement. Dr. Parr holds a B.S. in drugstore from the University of Pittsburgh and a Doctor of Pharmacy from the University of Illinois at Chicago. Non-Employee Directors Albert Cha, M.D., Ph.D., has served as a extremity of our board of directors since July 2008. In 2000, Dr. Cha joined Vivo Ventures, a life sentence skill venture das kapital fast, where he has served in diverse positions, most recently as a wangle partner. Dr. Cha presently serves as a member of the board of directors of respective privately-held biotechnology and checkup device companies. From June 2002 through February 2009, Dr. Cha served as a member of the control panel of directors at BioForm Medical, a publicly-held aesthetics checkup device company. From July 2006 to June 2008, Dr. Cha served as a member of the board of directors of Biodel, a peculiarity pharmaceutical caller. Dr. Cha holds a B.S. and an M.S. from Stanford University and an M.D. and a Ph.D. from the University of California at Los Angeles. We believe Dr. Cha is qualified to serve on our board because of his aesculapian background, venture capital have and meaning have serve as a conductor of our company and other life sciences companies. Steven A. Elms has served as a extremity of our circuit board of directors since July 2008. Since 2005, Mr. Elms has served as a managing partner of Aisling Capital, a individual fairness firm, and since 2000, he has served as a managing conductor of Perseus-Soros Management, an affiliate of Perseus-Soros BioPharmaceutical Fund, a secret fairness fund. previously, he was a principal in the life sciences investment banking group of Hambrecht & Quist. Mr. Elms presently serves as a extremity of the circuit board of directors of respective privately-held biotechnology and checkup device companies. Since August 2011, Mr. Elms has served as a member of the dining table of directors of Pernix Therapeutics, a publicly-held specialization pharmaceutical company focusing on the sale, marketing and development of products primarily for the pediatric market. From June 2004 to February 2011, Mr. Elms served as founder and president of the dining table of directors of MAP Pharmaceuticals, a publicly-held peculiarity pharmaceutical company focused on developing therapies for patients with neurological diseases. From May 2002 to July 2007, Mr. Elms served as a extremity of the circuit board of directors of Bioenvision, a publicly-held biopharmaceutical company focused on developing oncology therapies. From 2001 to December 2006, Mr. Elms served as president of the board of directors of Adams Respiratory Therapeutics, a publicly-held pharmaceutical company focused on nonprescription respiratory caution products. Mr. Elms holds a B.A. from Stanford University and an M.B.A. from Northwestern ’ s Kellogg Graduate School of Management. We believe Mr. Elms ’ sulfur private equity experience, investing deposit experience and significant have service as a conductor of our company and early secret and public healthcare and consumer products companies make him qualified to serve on our control panel of directors. James W. Glasheen, Ph.D., has served as a member of our board of directors since April 2007. Since June 2002, Dr. Glasheen has served as a general partner at Technology Partners, a venture capital fund. From June 2000 to October 2002, Dr. Glasheen served as a managing conductor at CIT Venture Capital. From 1996 to 2000, Dr. Glasheen was a drawing card of McKinsey & Company ’ s pharmaceutical and medical products practice. Dr. Glasheen presently serves as a member of the board of directors of several privately-held biotechnology, consumer medical and checkup device companies. Dr. Glasheen holds a B.S. from Duke University and an M.A. and Ph.D. from Harvard University. We believe Dr. Glasheen ’ s experiences with facilitating the growth of venture-backed companies, his experiences with McKinsey & Company and his consumer medical company expertness together with his diachronic perspective on our party make him qualified to serve on our control panel of directors. David M. Mauney, M.D., has served as a member of our control panel of directors since March 2007. Since 2000, Dr. Mauney has served as a managing director at De Novo Ventures, where he is a co-founder. Dr. Mauney presently serves as a member of the board of directors of several privately-held checkup device companies. Dr. Mauney holds a B.A. from Duke University and an M.D. from The Dartmouth School of Medicine. Dr. Mauney will resign from our display panel of directors anterior to the completion of this offer. 87 Edward W. Unkart has served as a extremity of our board of directors since February 2011. From August 2006 to the present, Mr. Unkart has served as a member of the dining table of directors of XTENT, a manufacturer of drug-eluting stent systems. From October 2004 to June 2009, Mr. Unkart served as a member of the board of directors of VNUS Medical Technologies, a publicly-held checkup device company, where he was the moderate of the company ’ randomness audited account committee and a penis of the recompense committee. From January 2005 to December 2008, Mr. Unkart served as vice president of finance and government and foreman fiscal policeman of SurgRx, a publicly-held manufacturer of checkup devices. Mr. Unkart besides presently serves on the board of directors of a privately-held medical device company. Mr. Unkart is a Certified Public Accountant and holds a B.S. and an M.B.A. from Stanford University. We believe Mr. Unkart is qualified to serve on our board of directors because of his finance and accounting department of education and expertness and his experience gained through his board and policeman positions at early privately-held and publicly-traded companies. Michael J. Valentino has served as a member of our board of directors since February 2011. From October 2007 to May 2009, Mr. Valentino served as a member of the board of directors of Xanodyne Pharmaceuticals and from May 2009 to May 2010, Mr. Valentino served as a member of the board of directors and besides as the chief administrator officer of that party. From August 2003 to January 2008, Mr. Valentino served as president and foreman executive officeholder, and as a member of the board of directors, of Adams Respiratory Therapeutics, a publicly-traded forte pharmaceutical company that was sold to Reckitt Benckiser for $ 2.3 billion in December 2007. While at Adams, Mr. Valentino led the successful commercialization of the consumer product Mucinex. Mr. Valentino holds a B.A. from the State University of New York at Stony Brook. We believe Mr. Valentino ’ s operating know, combined with his anterior board positions, make him qualified to serve on our board of directors. Board Composition Our board of directors is authorized to have seven members. There are no family relationships among any of our directors and executive officers. Effective upon the completion of this oblation, our board of directors will be divided into three classes, as follows :

class I, whose members will be Drs. Cha and Glasheen. The terms of the class I directors will expire at our 2013 annual meet of stockholders ;
Class II, whose members will be Messrs. Elms and Valentino. The terms of the Class II directors will expire at our 2014 annual converge of stockholders ; and
class III, whose members will be Messrs. Appelbaum and Unkart and one void. The terms of the Class III directors will expire at our 2015 annual meeting of stockholders .

At each annual meeting of stockholders to be held after this initial classification, the successors to directors whose terms then expire will serve until the third base annual meet following their election and until their successors are punctually elected and qualified. The authorize number of directors may be changed by resolution of our board of directors. Any extra directorships resulting from an increase in the number of directors will be distributed between the three classes sol that, deoxyadenosine monophosphate about as possible, each classify will consist of one-third of the entire number of directors. Our directors will hold office until their successors have been elected and qualified or until their earlier death, resignation, disqualification or removal for campaign by the approving vote of the holders of a majority of the great standard entitled to vote on the election of directors. Board Leadership Structure The bylaw and bodied administration guidelines that we will be adopting anterior to the completion of this offer provide our board of directors with tractability to combine or separate the positions of president of the board and headman executive officer in accord with its determination that utilizing one or the other structure would be in the best interests of our company. At the current time, we do not have a president of the board. Our board believes that supervision of our company is the province of our board as a hale, and this province 88 can be by rights discharged without a chair. Our foreman administrator officeholder facilitates communications between members of our board and works with management in the cooking of the agenda for each circuit board meet. All of our directors are encouraged to make suggestions for board agenda items or pre-meeting materials. Our board of directors has concluded that our stream leadership structure is appropriate at this clock time. however, our board of directors will continue to sporadically review our leadership structure and may make such changes in the future as it deems allow. Role of Board in Risk Oversight Process Our board of directors ’ function in risk oversight includes receiving reports from members of management regarding substantial risks faced by us and applicable moderation strategies and activities, at least on a quarterly footing. The reports cover the critical areas of operations, sales and market, engineering and legal and fiscal affairs. Our board of directors and its committees consider these reports, discus matters with management and identify and evaluate strategic or operational risks, and determine appropriate initiatives to address those risks. Director Independence Under the list requirements and rules of The NASDAQ Global Market, independent directors must comprise a majority of our board of directors within a specify period of the completion of this offer. Our board of directors has undertaken a review of the composition of our control panel of directors and each of its committees and the independence of each director. Based upon data requested from and provided by each director concerning his background, use and affiliations, including kin relationships, our control panel of directors has determined that Messrs. Elms, Unkart and Valentino, adenine well as Drs. Cha and Glasheen, representing a majority of our directors, do not have a relationship that would interfere with the exercise of independent opinion in carrying out the responsibilities of a film director and that each of these directors is “ mugwump ” as that terminus is defined under the applicable rules and regulations of the SEC and the list requirements and rules of The NASDAQ Global Market. In making this decision, our board of directors considered the stream and prior relationships that each non-employee director has with our party and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. Board Committees Our board of directors has established an audited account committee, a compensation committee and a name and corporate administration committee. The constitution and responsibilities of each committee are described below. Directors serve on these committees until their resignation or until otherwise determined by our control panel of directors. Copies of our audit committee, recompense committee and appoint and bodied administration committee charters will be available on our web site at www.triabeauty.com. The reference book to our web address does not constitute internalization by citation of the information contained on or available through our web site. Audit Committee Our audit committee oversees our bodied accounting and fiscal report march. This committee is authorized to, among other things :

appoint our independent auditors ;
review our internal account procedures and fiscal statements ;
confer with and review the services provided by our freelancer registered populace account firm, including the results and oscilloscope of their audits ; and
review and, if appropriate, approve any relate party transactions for which audited account committee approval is required by applicable law or the rules of NASDAQ .

89 Both our independent registered public accounting firm and management sporadically meet individually with our audited account committee. The stream members of our audit committee are Mr. Elms, Dr. Glasheen and Mr. Unkart. Mr. Unkart serves as president of the committee. We have determined that all of the members of our audit committee meet the requirements for fiscal literacy under the applicable rules and regulations of the SEC and NASDAQ. We have determined that Mr. Unkart is an audit committee fiscal adept as defined under the applicable rules of the SEC and has the needed fiscal sophism as defined under the applicable rules and regulations of NASDAQ. We have determined that all of the members of our audit committee are independent directors as defined under the applicable rules and regulations of the SEC and NASDAQ. Compensation Committee Our compensation committee adopts and administers the compensation policies, plans and benefit programs for our executive officers and all other members of our administrator team. Our recompense committee is authorized to, among other things :

settle recompense and benefits for our executive officers ; and
administer and award grants under our equity compensation plans .

The stream members of our compensation committee are Dr. Cha, Dr. Mauney and Mr. Valentino. Dr. Cha serves as the president of the committee. Mr. Elms will become a member of the compensation committee upon Mr. Mauney ’ randomness resignation from the board anterior to the completion of this put up. We have determined that the typography and function of our compensation committee complies with all applicable requirements of the Sarbanes-Oxley Act of 2002, NASDAQ and SEC rules and regulations. Nominating and Corporate Governance Committee Our appoint and corporate administration committee is responsible for, among early things, the follow :

assisting the circuit board in identifying prospective director nominees and recommending to the display panel of directors the film director nominees for each annual meet of stockholders ;
recommending members for each board committee ;
ensuring that the circuit board is by rights constituted to meet its fiduciary obligations to our company and the stockholders and that we follow appropriate administration standards ;
developing and recommending administration principles applicable to our company to the dining table ; and
overseeing the evaluation of the board and management .

The current members of our appoint and corporate government committee are Dr. Cha, Dr. Glasheen and Mr. Valentino. Mr. Valentino serves as the president of the committee. We have determined that the constitution and serve of our nominate and corporate government committee complies with all applicable requirements of the Sarbanes-Oxley Act of 2002, NASDAQ and SEC rules and regulations. Compensation Committee Interlocks and Insider Participation none of the members of our compensation committee has at any clock time been one of our officers or employees. none of our executive officers presently serves, or in the past class has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our control panel of directors or recompense committee. 90 Code of Ethics We have adopted a code of ethics that applies to all of our officers, including those officers responsible for fiscal report, directors and employees prior to completion of this offer. We will post a replicate of our code of ethics, and intend to post amendments to this code, or any waivers of its requirements, on our web site at www.triabeauty.com, as permitted under SEC rules and regulations. The reference to our network address does not constitute incorporation by reference of the data contained on or available through this locate. Director Compensation Following this offer, we will pay our independent directors, Messrs. Unkart and Valentino, angstrom well as future independent directors, each a passing director, $ 1,500 for each board merging attended in person and $ 500 for each board meet attended telephonically. Each qualifying director will besides receive an annual retainer of $ 40,000. In accession, each qualifying director who serves as the president of our audit committee, compensation committee or name and corporate government committee will receive, for his or her service in such capacity, an extra annual retainer of $ 15,000, $ 10,000 or $ 5,000, respectively, and each other qualifying conductor who is a penis of the audit committee, compensation committee or name and bodied administration committee will receive an annual retainer of $ 7,500, $ 5,000 or $ 2,500, respectively. We reimburse each non-employee member of our board of directors for fair out-of-pocket expenses incurred in connection with attending our circuit board and committee meetings. In the past, we have granted autonomous directors options to purchase our common stock pursuant to the terms of our 2004 Plan. Effective upon the close up of this offering, newly elected directors will automatically receive an initial award of an option to purchase shares under our 2012 plan. In addition, beginning in 2013, directors who have served for at least the preceding six months will receive an annual concession of an option to purchase shares on the day of and immediately following each annual meeting of our stockholders. Each initial option grant will become exercisable as to one-third of the shares subject to the grant on each anniversary of its date of grant, provided the conductor remains a director on such dates. Each annual choice concession will be fully vested on the date of grant. Options granted will have an exercise monetary value peer to the fair market value on the go steady of concede. For a more detailed description of these plans, see “ Executive Compensation—Employee Benefit Plans. ” The stick to table sets away information regarding recompense earned by our autonomous directors, Messrs. Unkart and Valentino, during the fiscal year ended December 31, 2011. As a private company, our policy has been to alone compensate our non-employee directors who are not affiliated with any of our investors, so lone Messrs. Unkart and Valentino received recompense during our most holocene fiscal year. Differences in the recompense for Messrs. Unkart and Valentino, as reflected in the table below, are attributable to the fact that they negotiated different quarterly retainers prior to their engagement. These retainers will expire upon the completion of this offer and be replaced by the compensation described above, which will besides be provided to our other non-employee directors.

Name Fees Earned or Paid in       Cash       Option
Awards(1)
    Total    
Edward W. Unkart ( 2 ) $ 17,890 $ 30,879 $ 48,769
Michael J. Valentino ( 3 ) 28,624 41,172 69,796
( 1 ) Reflects the grant date bonny value of all awards made during the twelve months ended December 31, 2011 using the assumptions described elsewhere in this prospectus .
( 2 ) As of December 31, 2011, Mr. Unkart had options to purchase 277,500 shares of our common stock at an exercise price per share of $ 0.20 .
( 3 ) As of December 31, 2011, Mr. Valentino had options to purchase 370,000 shares of our coarse stock at an exercise monetary value per share of $ 0.20 .

91 2011 Summary Compensation Table The following table sum up information concerning the recompense awarded to, earned by, or paid for services rendered in all capacities by our named executive officers during the fiscal year ended December 31, 2011.

Name and Principal Position         Salary           Bonus(1)    Option
    Awards(2)    
Non-Equity
Incentive Plan
  Compensation(3)  
All Other
Compensation
    Total    
Kevin J. Appelbaum $ 400,000 $ 150,000 $ 304,729 $ 55,200 $ 6,105 ( 4 ) $ 916,034
President and Chief Executive Officer and Director
Tobin C. Island, Ph.D . 300,000 81,900 95,788 29,400 9,600 ( 4 ) 516,688
Chief Operating Officer
Danika R. Harrison ( 5 ) 153,461 57,414 136,862 25,000 ( 6 ) 372,737
Senior Vice President, Global Marketing
( 1 ) This column reflects discretionary bonus amounts paid to our named executive officers outside of our 2011 performance incentive plan, as determined by our recompense committee .
( 2 ) This column reflects the aggregate grant date fair respect of equity awards granted in 2011 and calculated in accordance with ASC 718, excluding the effect of estimated forfeitures. Assumptions used in the calculation of these amounts are set forth elsewhere in this prospectus .
( 3 ) This column reflects the amounts paid under our 2011 performance bonus program, as determined by our recompense committee .
( 4 ) Represents matching contributions to our 401 ( potassium ) plan .
( 5 ) Ms. Harrison joined us in April 2011. Ms. Harrison ’ s annualized free-base wage was $ 210,000 for 2011. The sum of her bonus was professional rated to her employment start date .
( 6 ) Represents amounts account payable in connection with moving expenses. Ms. Harrison besides received $ 100,000 in loanword forgiveness ( to cover certain expenses incurred in connection with the sale of her early residence ) in January 2012, which is not reflected in the above table .

Narrative Description of Material Factors Related to the Summary Compensation Table Base Salaries. Base salaries of our named executive officers are reviewed and approved annually by our recompense committee during the inaugural stern of each year, and adjustments to base salaries are based on individual and corporate performance, a well as the rate of inflation, home pay fairness considerations and the experience of members of our recompense committee. historically, we have not utilized formal surveys or peer party reports in setting employee compensation, though we may do so as a populace company. We do not assign a specific slant to any single component in making decisions regarding establish wage adjustments. In determining base wage, our recompense committee uses each named executive military officer ’ s current flush of compensation as the starting sharpen. none of our named executive officers received an increase in base wage for 2011. Annual Performance-Based Cash Compensation. The named executive officers, deoxyadenosine monophosphate well as other officers and key employees, participate in our annual performance incentive course of study, which provides an opportunity to earn a cash bonus in whole or in separate upon the accomplishment of operation objectives approved by our recompense committee. This program was established to promote and reward the accomplishment of key strategic and business goals ampere well as individual goals and performance. 92 The 2011 corporate objectives represent 50 % of Mr. Appelbaum ’ s prey bonus and 35 % of Dr. Island ’ s aim bonus. Ms. Harrison ’ sulfur objectives were established after her lease in 2011, with no specific weighting being articulated between individual and bodied objectives. The corporate objectives for our 2011 fiscal year were company net sales and net engage loss versus budget of $ 41.8 million and $ 18.2 million, respectively, weighted evenly. accomplishment at this budget floor would constitute 90 % of the helping of aim bonuses attributable to the 2011 bodied objectives. For every 5 % change in web sales and for every 2.5 % change in net function loss from budget there would be a five percentage point adaptation in the part of target bonuses attributable to the 2011 corporate objectives achieved, up to a maximal of 120 % of the part of aim bonuses attributable to the 2011 corporate objectives, and polish to a doorway of 70 % of the assign of target bonuses attributable to the 2011 corporate objectives ( subject, in all cases, to the committee ’ sulfur ultimate discretion ). For Mr. Appelbaum, the remaining 50 % of his target bonus was subject to the recompense committee ’ s free will based on Mr. Appelbaum ’ s overall performance. In summation to corporate objectives, our named administrator officers, other than Mr. Appelbaum, have departmental objectives that accounted for the remaining dowry of their overall prey bonuses. Ms. Harrison besides had the opportunity to earn an extra 15 % of base wage upon the skill of load individual departmental objectives. In establishing individual operation goals and the weight thereof, the committee requests that Mr. Appelbaum provide his initial recommendations, since, as the head executive military officer, he is in the best position to assess corporate priorities and to determine the factors that will optimize individual motivation and performance. After reviewing Mr. Appelbaum ’ sulfur recommendations, the committee sets goals for each named administrator officeholder that typically relate to their leadership of departmental priorities. For 2011, each officeholder ’ mho goals were weighted equally ( other than Ms. Harrison ’ randomness goals, which were unweighted ) and could be wholly or partially achieved. Dr. Island ’ s three goals were development of the anti-aging intersection, issue chain management and product pipeline development. Ms. Harrison ’ s two goals were north american sales performance in excess of $ 20 million and management of varying sales and marketing spend, and execution of our ball-shaped e-commerce and infomercial market strategy. The recompense committee met in February 2012 to review our operation in 2011 and the contributions of each of our named executive officers, and to award the named administrator officers performance-based cash compensation, which amounts have been disclosed below in the “ 2011 Summary Compensation Table. ” For 2011, the committee determined that the corporate fiscal performance targets of $ 41.8 million in net sales and $ 18.2 million in final function loss were overachieved and not achieved, respectively, resulting in overall accomplishment of 55 %. At Mr. Appelbaum ’ randomness request, the committee took into consideration unanticipated material developments, particularly a shift in bodied priorities in readiness for a plan IPO, and adjusted the weightings of the corporate fiscal objectives to be 70 % for the net sales objective and 30 % for the net income operate personnel casualty objective. The resulting extra performance-based compensation has been treated for purposes of the Summary Compensation Table as a discretionary bonus preferably than as plan-based compensation. With respect to individual goals, the committee determined that Mr. Appelbaum ’ s overall operation warranted 100 % accomplishment of the share of his performance-based compensation left to the discretion of the committee. For the remaining officers, the committee accepted Mr. Appelbaum ’ second recommendations and determined that Dr. Island and Ms. Harrison achieved 91 % and 65 %, respectively, of their individual goals. 93 Mr. Appelbaum recommended that the committee award an extra discretionary bonus to those individuals who received the highest person performance rat, which included Dr. Island and Ms. Harrison. The committee accepted this recommendation and set the extra bonus for each at 7.5 % of base wage. The committee besides determined that Mr. Appelbaum should receive the highest performance rate and awarded him the extra 7.5 % bonus, american samoa well. For 2011, the accumulative bonuses for each of our named executive officers, including under the performance incentive plan, as a share of base wage was as follows :

Named Executive Officer Target Bonus Total
       Award      
Kevin J. Appelbaum 50 % 51.3 %
Tobin C. Island, Ph.D . 35 37.1
Danika R. Harrison ( 1 ) 35 35.9
( 1 ) Prorated from commencement of employment .

Long-Term Equity Incentive Compensation. Our named administrator officers are eligible to receive long-run equity-based incentive awards, which are intended to align the interests of our named executive officers with the interests of our stockholders, to encourage the retention of these individuals and to emphasize and reinforce our stress on strengthening our performance over the longer term. historically, our long-run equity-based incentive compensation awards have been made entirely in the shape of stock certificate options, national to vesting based on continue employment. We believe that livestock options are an effective joyride for meeting our recompense goal of increasing long-run stockholder value because the value of the livestock options is tied to our future performance. Because employees are able to profit from stock options only if our sprout price increases relative to the price of the stock on the day the choice was granted, we believe neckcloth options provide meaningful incentives to employees to achieve increases in the value of our lineage over time. All livestock choice awards are approved by the recompense committee. 94 Outstanding Option Awards at Fiscal Year End The following table sets forth information regarding outstanding option awards issued pursuant to the 2004 design and held by our named executive officers at December 31, 2011. The vest of options upon a variety in command is not mechanically accelerated, except as described in the footnotes below. No diagnose executive officers had great equity-based awards other than stock certificate options as of December 31, 2011.

Name Option Awards
Number of
Securities
Underlying
Unexercised
Options
(#)
Number of
Securities
Underlying
Unexercised
Options
(#)
Option
Exercise
  Price  

($)(1)
Option
Expiration
Date
Grant Date Exercisable Unexercisable
Kevin J. Appelbaum 02/20/2008 ( 2 ) 843,333 36,667 0.38 02/19/2018
11/12/2008 ( 3 ) 939,077 187,816 0.45 11/11/2018
12/24/2008 ( 4 ) 119,456 167,243 0.45 12/23/2018
11/17/2010 ( 5 ) 716,417 1,306,410 0.20 11/16/2020
01/25/2011 ( 6 ) 47,003 158,102 0.20 01/24/2021
12/24/2011 ( 7 ) 1,130,000 0.43 12/23/2021
Tobin C. Island, Ph.D . 12/06/2004 7,500 0.11 12/05/2014
01/09/2006 30,000 0.17 01/08/2016
02/06/2007 47,500 0.17 02/05/2017
08/31/2007 130,000 0.36 08/30/2017
11/12/2008 ( 8 ) 151,614 25,886 0.45 11/11/2018
12/24/2008 ( 4 ) 73,955 103,545 0.45 12/23/2018
01/25/2011 ( 6 ) 14,895 50,105 0.20 01/24/2021
02/16/2011 ( 9 ) 55,595 187,005 0.20 02/15/2021
12/24/2011 ( 7 ) 245,000 0.43 12/23/2021
Danika R. Harrison 05/09/2011 ( 9 ) 460,000 0.20 05/08/2021
05/09/2011 ( 10 ) 46,000 0.20 05/08/2021
05/09/2011 ( 11 ) 46,000 0.20 05/08/2021
12/24/2011 ( 7 ) 295,000 0.43 12/23/2021
( 1 ) The use price of each stock option grant is the average market rate of our coarse stock on the grant date, as determined by the compensation committee. As a private company, the compensation committee ’ s decision of the fair value has been made by reference point to common livestock valuations performed by a valuation consult firm, intended to comply with section 409A of the Code .
( 2 ) The option accord vested with regard to one-fourth of the underlie shares on February 20, 2009 and, with respect to the remaining shares, 1/48th on each of the monthly anniversaries thereafter. Vesting is amply accelerated upon a termination without campaign or for good reason within 12 months following a change in control .
( 3 ) The option grant vests with respect to 1/48th of the underlie shares on each monthly anniversary of August 12, 2008 .
( 4 ) The option grant vests on the fifth anniversary of the grant date unless certain performance goals are achieved first, in which event a helping of the option grant vests upon the accomplishment of a particular performance goal. certain of the performance goals have already been achieved : one-sixth ( 1/6 ) of the implicit in shares began vesting upon our acknowledge of OTC clearance for our Skin Perfecting Blue Light ; one-sixth ( 1/6 ) began vesting upon the first gear commercial cargo of our then FDA-cleared Skin Perfecting Blue Light ; one-sixth ( 1/6 ) began vesting on the first of the month following a trailing twelve-month period during which net U.S. sales exceeded $ 12 million ; and one one-sixth ( 1/6 ) began vesting on the beginning of the month following a trailing six-month period during which net cosmopolitan sales exceeded $ 20 million. The remaining one-third ( 1/3 ) would begin vesting at the end of the beginning quarter that we

95

are cash stream break even. Upon accomplishment of the performance goals set forth above, the part of the choice that vests will vest with deference to one-twenty-fourth ( 1/24 ) of the underlying shares on each monthly anniversary of accomplishment of the performance goal. Upon a transfer in control, all options that have not so far begun time-based vest will become amply invest and any options that have begun vesting due to the attainment of performance goals will be treated in accord with the terms of the plan .
( 5 ) The option grant vests with respect to 1/48th of the fundamental shares on each monthly anniversary of July 14, 2010 .
( 6 ) The option accord vests with regard to 1/48th of the fundamental shares on each monthly anniversary of the concede date .
( 7 ) The choice accord vests with respect to 1/48th of the fundamental shares on each monthly anniversary of December 24, 2011. Vesting is in full accelerated upon a termination without campaign or for good reason within 12 months following a change in control .
( 8 ) The option grant vests with regard to 1/48th of the underlie shares on each monthly anniversary of July 4, 2008. Vesting is amply accelerated upon a result without campaign or for adept argue within 12 months following a change in control .
( 9 ) The option grant vests with respect to one-fourth of the underlie shares on March 28, 2012 and 1/48th of the shares subject to the choice on each of the monthly anniversaries thereafter. Vesting is amply accelerated upon a termination without causal agent or for good reason within 12 months following a change in control .
( 10 ) The shares subject to this choice will vest subject to the play along milestone-based vesting provisions : the award will begin vesting at the first of the calendar month following a trailing six months during which final worldwide sales exceed $ 40 million. If not previously vested, all vest will accelerate and the grant will be amply invest five years from the date of the allow. once triggered by the accomplishment of the consociate milestone, the concede will begin vesting at a rate of one twenty-fourth ( 1/24 ) of the underlie shares on each monthly anniversary of accomplishment of the performance goal. In the event of a Change in Control ( as defined in the 2004 plan ), all options that have not begun vesting will become immediately fully vested .
( 11 ) The shares subject to this option will vest subject to the following milestone-based vesting provisions : the grant will begin vesting at the inaugural of the calendar month following the first quarter the company is cash flow break even. If not previously vested, all vest will accelerate and the allow will be fully vested five years from the date of the grant. once triggered by the accomplishment of the consort milestone, the grant will begin vesting at a pace of one twenty-fourth ( 1/24 ) of the fundamental shares on each monthly anniversary of accomplishment of the performance finish. In the event of a Change in Control ( as defined in the 2004 plan ), all options that have not begun vesting will become immediately amply vested .

Options Exercised and Stock Vested none of our named administrator officers exercised stock options or held stock awards that vested in 2011. Employment and Severance Agreements We have entered into propose letters and employment agreements with each of our named administrator officers. These agreements are described below. pursuant to the offer letters and employment agreements, our named executive officers are entitled to certain payments and benefits upon a variety in control or upon certain terminations of use as described in the employment agreements discussed below. For each named administrator officeholder, if any of these payments or benefits would be topic to the union excise tax for “ overindulgence chute payments ” described in section 4999 of the Code, the lout sum cash payments collectible to the officeholder will be reduced if such decrease maximizes his full after-tax payments. Mr. Appelbaum On January 21, 2008, we entered into an employment agreement with Kevin Appelbaum, then our headman commercial policeman and now our president and head executive officer, which provides him with a foundation wage of $ 320,000 and a bonus target of 50 % of basal wage ( which could be increased up to 100 % for overachievement ), 96 based upon accomplishment of individualized performance-based goals approved by the recompense committee of our board of directors. Pursuant to this agreement, Mr. Appelbaum received an initial livestock option award in the amount of 880,000 shares, subject to four class invest. This agreement besides provides that if we terminate Mr. Appelbaum ’ second employment without lawsuit ( as defined in Mr. Appelbaum ’ s employment agreement ) or if Mr. Appelbaum resigns for good reason ( as defined in Mr. Appelbaum ’ s employment agreement ), he will be entitled to receive 12 months of base wage continuance. In addition, if Mr. Appelbaum ’ south employment is terminated without cause or for good reason within one year following a change of control ( as such term is defined in the employment agreement ), he will be entitled to receive 12 months of base wage continuance and his initial grant of stock options will become amply vest. Dr. Island On July 4, 2008, we entered into an employment agreement with Dr. Tobin Island, then our executive vice president of operations and now our foreman operating military officer, which provides him with a base wage of $ 250,000 and a bonus of up to 35 % of base wage, based upon accomplishment of individualize performance-based goals established by our chief executive officer and our board of directors. Pursuant to this agreement, Dr. Island received two store option awards, each in the sum of 177,500 shares, the first capable to ratable four year invest and the irregular to be vested in wide on the one-seventh year anniversary of the date of award, subjugate to acceleration upon accomplishment of milestones to be determined. The actual terms of this latter option are specified in footnote 4 to the above table in “ —Outstanding choice Awards at fiscal Year End. ” This agreement besides provides that if we terminate Dr. Island ’ second employment without induce ( as defined in Dr. Island ’ s employment agreement ) or if Dr. Island resigns for good cause ( as defined in Dr. Island ’ s employment agreement ), he will be entitled to receive an sum equal to six months of base wage, either in a collocate sum or as wage sequel at the option of the company, and six months of employer-paid COBRA medical and alveolar consonant insurance coverage following his ending. Ms. Harrison On March 4, 2011 we entered into an employment put up letter agreement with Danika Harrison, then our frailty president of the united states of ecommerce and direct reaction marketing and now our senior frailty president, global market, which provides Ms. Harrison with a base wage of $ 210,000 and a bonus of up to 35 % of base wage, based upon accomplishment of particular annual targets determined by us at our discretion. Ms. Harrison besides was to receive an option award in the sum of 200,000 shares, subject to the standard vest and eligibility criteria and requirements of our 2004 Plan. We increased this award grant to 460,000 shares and issued two extra grants that vest upon accomplishment of certain performance milestones. The actual terms of these options are specified in footnotes 9-11 to the above table in “ —Outstanding choice Awards at fiscal Year End. ” The offer letter besides provided Ms. Harrison with reimbursement for $ 25,000 and a loan for $ 100,000 to cover move expenses due to her necessitate to relocate to the San Francisco Bay Area. The lend was forgiven by us in January of 2012. The propose letter besides provides that if Ms. Harrison is terminated for any reason other than for lawsuit ( as defined in the offer letter ) she will be entitled to receive a collocate kernel come equal to three months of base wage. In addition, if such a termination occurs within 12 months following a change of operate ( as such terminus is defined in the propose letter ), all unvested shares subject to Ms. Harrison ’ s initial option grant will become fully vest. Employee Benefit Plans 2012 Equity Incentive Plan prior to the completion of this offer, our board of directors intends to adopt a new equity bonus design, to be named our 2012 Equity Incentive Plan, or 2012 plan. We expect that our 2012 Plan will become effective upon the completion of this offer and will replace our 2004 plan and, following this offer, all equity-based awards will be granted under our 2012 plan. The pursue drumhead describes what we anticipate to be the material terms of the 2012 plan. This summary is not a complete description of all provisions of the 2012 plan. You are encouraged to read the full moon text of the 2012 Plan, which has been filed as an exhibit to the registration instruction of which this prospectus forms a share. 97 Our 2012 Plan will provide for the concede of bonus sprout options, nonstatutory stock options, restricted stock, unrestricted banal, restricted banal units, banal units, lineage appreciation rights, performance awards and early equity-based awards to our employees, directors and consultants ( subject to sealed limitations in the subject of incentive stock options ). subject to adjustment as describe below, a full of shares of our common stock will be reserved for issue pursuant to our 2012 plan. The shares reserved for issue under our 2012 Plan includes those shares reserved but unissued under our 2004 Plan as of the effective date of this course catalog. The number of shares available for issue under our 2012 Plan will be automatically increased on the first day of each fiscal year beginning in 2013, equal to the least of :

4.0 % of the outstanding shares of coarse malcolm stock as of the last day of our immediately preceding fiscal class ;
shares ; or
such other amount as our board of directors may determine .

Any shares of park stock underlying awards that are settled in cash or otherwise run out or become unexercisable without having been exercised or are forfeited to or repurchased by us as a result of not having vested, or are surrendered pursuant to an commute broadcast described below, or that are withheld by us in payment of the exercise price of an award or in satisfaction of tax withhold, will again be available for issue under our 2012 plan. In addition, all awards granted under our 2004 design that are repurchased, forfeited, expired or are cancelled will become available for grant under our 2012 plan. The maximal number of shares of stock for which stock options and stock appreciation rights may be granted will each be shares. The maximal phone number of shares subject to early awards granted to any person will be shares. The compensation committee of our board of directors will be the administrator of our 2012 Plan. subject to the provisions of our 2012 plan, the administrator has the ability to determine the terms of the awards, including the exercise price, the number of shares subject to each such award, the exercisability of the awards and the form of circumstance, if any, account payable upon exercise. The administrator besides has the authority to amend existing awards to reduce their exercise price and to institute an substitution program pursuant to which outstanding awards may be surrendered in exchange for awards with a lower practice price. Unless the administrator provides otherwise, our 2012 Plan by and large does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her life. Our 2012 Plan will provide that grants of performance awards, including cash-denominated awards and stock-based awards, will be made based upon, and subject to achieving, “ performance criteria ” over a performance period, which may be one or more periods as established by the administrator. Performance criteria with esteem to those awards that are intended to qualify as performance-based compensation for purposes of section 162 ( meter ) of the Code are limited to an objectively determinable measure of performance relating to any or any combination of the stick to ( measured either absolutely or by reference point to an index or indices or the operation of one or more companies and determined either on a consolidated basis or, as the context permits, on a divisional, auxiliary, channel of business, project or geographic footing or in combinations thereof ) : sales ; revenues ; assets ; expenses ; earnings before or after deduction for all or any share of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per partake footing ; return on fairness, investment, capital or assets ; one or more manoeuver ratios ; borrow levels, leverage ratios or accredit evaluation ; market share ; capital expenditures ; cash flow ; stock price ; stockholder refund ; sales of detail products or services ; customer acquisition or retention ; acquisitions and divestitures ( in whole or in share ) ; joint ventures and strategic alliances ; spin-offs, split-ups and the comparable ; reorganizations ; or recapitalizations, restructurings, financings ( issue of debt or equity ) or refinancings. 98 To the extent consistent with the requirements of section 162 ( m ), the administrator may establish that in the case of any award intended to qualify as nontaxable performance-based compensation under section 162 ( molarity ), that one or more of the performance criteria applicable to such award be adjusted in an objectively determinable manner to reflect events ( for model, the affect of charges for restructurings, discontinued operations, mergers, acquisitions, extraordinary items and other unusual or non-recurring items, and the accumulative effects of tax or account changes, each as defined by U.S. broadly accepted account principles ) occurring during the performance menstruation of such award that affect the applicable performance criteria. In the event of a consolidation, fusion or similar transaction, a sale or transfer of all or substantially all of our assets or a adjournment or liquidation of us, the administrator may, among other things, provide for continuance or assumption of outstanding awards, for new grants in substitution of great awards or for the accelerated vest or delivery of shares under awards, in each encase on such terms and with such restrictions as it deems appropriate. Except as otherwise provided in an award agreement, awards not assumed will terminate upon the consummation of such bodied transaction. In the consequence of certain corporate transactions ( including a stock cleave, stock dividend, recapitalization or early change in our capital social organization that constitutes an equity restructure within the meaning of ASC 718 ), the administrator will make appropriate adjustments to the maximum number of shares that may be delivered under the 2012 plan and the person limits included in the plan, and will besides make appropriate adjustments to the total and kind of shares of stock or securities subject to awards, the exercise prices of such awards or any other terms of awards affected by such variety. The administrator will besides make the types of adjustments described above to take into report distributions and early events other than those listed above if it determines that such adjustments are appropriate to avoid aberration and preserve the value of awards. The administrator will be able to amend the 2012 plan or outstanding awards, or terminate the 2012 design as to future grants of awards, except that the administrator will not, without the player ’ mho consent, be able to alter the terms of an award if it would materially and adversely affect a participant ’ south rights under the award. Our 2012 Plan will mechanically terminate ten years following its adoption, unless we terminate it sooner. Executive Annual Incentive Plan anterior to the completion of this offer, our board of directors intends to adopt the executive annual bonus plan, or the annual plan. Starting with our 2012 fiscal year, annual award opportunities for certain key employees, including our named executive officers, will be granted under the Annual Plan. The following summary describes what we anticipate to be the material terms of the Annual Plan. This summary is not a complete description of all provisions of the Annual Plan. You are encouraged to read the full text of the Annual Plan, which has been filed as an exhibit to the registration affirmation of which this course catalog forms a separate. The Annual Plan will be administered by the recompense committee of our board of directors. executive officers and early key employees of us and our affiliates will be selected from time to clock by the compensation committee to participate in the Annual Plan. Award opportunities under the Annual Plan will be granted by the compensation committee prior to, or within a specified menstruation of time following the begin of, the fiscal class or early performance period selected by the compensation committee. The compensation committee will establish the operation criteria applicable to the award, the measure or amounts collectible if the performance criteria are achieved, and such other terms as the compensation committee deems appropriate. The annual plan permits the award of awards that are intended to qualify as exempt performance-based compensation under part 162 ( molarity ) angstrom well as awards that are not intended to then qualify. Awards under the Annual Plan will be made based on, and subject to achieving, performance criteria established by the compensation committee. Performance criteria for awards intended to qualify as performance-based compensation for purposes of section 162 ( megabyte ) are limited to the objectively determinable measures of performance relating to any or any combination of the performance standard set forth above under “ —2012 Equity Incentive Plan. ” To the extent reproducible with the requirements of section 162 ( megabyte ), the compensation committee 99 may establish, in the case of any award intended to qualify as exempt performance-based recompense under section 162 ( meter ), that one or more of the performance criteria applicable to such award be adjusted in an objectively determinable manner to reflect events occurring during the performance period of such award that affect the applicable operation criteria. A participant will be entitled to payment under an award only if all conditions to requital have been satisfied under the award. Following the near of the performance period, the recompense committee will determine ( and, to the extent required by section 162 ( thousand ), certify ) whether and to what extent the applicable operation criteria have been satisfied. The recompense committee will then determine the actual payment, if any, under each award. The maximum requital to any player under the Annual Plan for any fiscal year will in no event exceed $ 1.5 million. The compensation committee may amend or terminate the Annual Plan at any time, provided that any amendment will be approved by our stockholders if required by section 162 ( megabyte ). 2004 Stock Incentive Plan Our 2004 Stock Incentive Plan, as amended, or our 2004 Plan, was adopted by our board of directors and approved by our stockholders. As of March 31, 2012, the maximum number of shares of common stock issuable pursuant to the 2004 Plan is 16,389,527 shares, submit to adjustment as identify below. As of March 31, 2012, options to purchase 13,508,669 shares of common stock were outstanding under our 2004 Plan and 2,056,895 shares of coarse stock remained available for grant. As of March 31, 2012, the outstanding options were exercisable at a slant average use price of approximately $ 0.32 per share. The following drumhead describes the material terms of our 2004 design but is not a complete description of all of its terms. This compendious is not a complete description of all provisions of the 2004 plan. You are encouraged to read the full text of the 2004 Plan, which has been filed as an show to the registration affirmation of which this prospectus forms a part. After the effective date of our 2012 Plan, no extra awards will be granted under our 2004 Plan, and all awards granted under our 2004 plan that are repurchased, forfeited, expired or are cancelled will become available for accord under our 2012 design. Our board of directors has appointed the compensation committee as the administrator of the 2004 Plan. subject to the terms and conditions of our 2004 design, the administrator has the assurance to select the persons to whom awards are to be made, to determine the number of shares to be submit to such awards and their terms and conditions, and to make all other determinations and to take all other actions necessary or advisable for the administration of our 2004 plan. The administrator is besides authorized to adopt, amend or rescind rules relating to the government of our 2004 plan. stock options and broth buy rights, or Awards, may be granted under our 2004 design to individuals who are directors, consultants or employees, or the directors, consultants or employees of ours or our subordinate, subject to certain limitations in the case of bonus stock certificate options. Our 2004 Plan provides that the administrator may grant or issue Awards. Each Award will be set forth in a separate agreement with the person receiving the Award and will indicate the type, terms and conditions of the Award. In the consequence of certain corporate transactions that involve a variety in our capital structure or in the event of payment of a dividend or distribution to the stockholders in a form other than common stock ( except normal cash dividends ) that have a material effect on the fair market value of the coarse stock, the administrator will make allow and proportionate adjustments to the maximum number of shares that may be delivered under the 2004 plan, the incentive stock option limits, the numeral and kind of shares of stock or securities subject to awards and the exercise prices of such awards or any other terms of awards affected by such change in our capital structure. In the event of a Change in Control ( as defined in the 2004 plan ), the administrator may provide for one or more of the following with respect to outstanding stock options : ( iodine ) the assumption or substitution of a standard option for well equivalent store options for the acquiring pot ’ randomness banal ; ( two ) the accelerated vest 100 and exercisability of a stock option ; and/or ( three ) the cancellation of a vest livestock choice in exchange for a cash or other form of payment equal to the remainder between the average market prize of the circumstance to be paid per share over the drill price of the livestock option. Any breed option which is neither wear nor exercised by the acquiring pot shall terminate and cease to be great effective as of the date of the Change in Control. Notwithstanding the waive, if we are the exist or continuing pot and immediately after the Change in Control less than 50 % of the full unite vote power is held by another pot, the outstanding neckcloth options shall not terminate unless the administrator differently provides in its discretion. With respect to stock purchase rights, the acquiring corporation may assume a sprout buy right or substitute for substantially equivalent stock buy rights for the acquiring corporation ’ randomness stock. Any breed leverage right which is neither assumed by the acquiring pot nor drill shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the forfeit, if we are the outlive or continuing corporation and immediately after the Change in Control less than 50 % of the total combine vote baron is held by another pot, the outstanding lineage buy rights shall not terminate unless the administrator otherwise provides in its discretion. In the event the acceleration of vest of an Award might be reasonably anticipated to result in a player becoming subjugate to an excise tax under section 4999 of the Code ascribable to such acceleration of invest, the participant may elect, in his or her exclusive free will, to reduce the sum of any acceleration of vesting called for under an Award in decree to avoid the strike tax under section 4999. Our compensation committee may terminate, amend or modify our 2004 plan. however, stockholder approval of any amendment to our 2004 design must be obtained to the extent necessity and desirable to comply with any applicable police, regulation, or stock exchange rule, or for any amendment to our 2004 design that is necessity to satisfy the requirements of Section 422 of the Code with esteem to incentive stock options. If not terminated earlier by our board of directors, our 2004 Plan will terminate on the earliest of the tenth anniversary of ( one ) the date of its initial adoption by our board of directors and ( two ) our date the 2004 design was approved by our stockholders. Limitation of Liability and Indemnification Our amended and restated certificate of internalization, which will become effective upon the completion of this offer, limits the liability of directors to the fullest extent permitted by Delaware law as it presently exists or may be amended from clock to fourth dimension. Our directors will not be personally apt for monetary damages for rupture of their fiduciary duties as directors, except indebtedness for any of the be acts :

any gap of their duty of commitment to the pot or its stockholders ;
acts or omissions not in full faith or which involve intentional misconduct or a know irreverence of jurisprudence ;
unlawful payments of dividends or illegitimate stock repurchases or redemptions ; or
any transaction from which the film director derived an improper personal profit .

These limitations of indebtedness do not apply to liabilities arising under federal securities laws and do not affect the handiness of equitable remedies such as injunctive relief or recission. Our amended and restated bylaws, which will become effective upon the completion of this offer, provide that we will indemnify our directors, officers, employees and early agents to the fullest extent permitted by Delaware law or other applicable law. Our better and restated bylaws besides permit us to secure policy on behalf of any officer, director, employee or other agent for us, or anybody serving at our request as a conductor, policeman, employee or agentive role of another pot, partnership, joint venture, trust or other enterprise for any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person ’ mho status as such, careless of whether we have the power to indemnify such person against such liability under the provisions of Delaware law. We have obtained an indemnity policy that insures our directors and officers against certain liabilities, including liabilities arising under applicable securities laws. 101 We have entered, and intend to continue to enter, into disjoined damages agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, provide that we will indemnify our directors and executive officers for certain expenses, including attorneys ’ fees, judgments, penalties, fines and settlement amounts incurred by a conductor or administrator policeman in any action or proceeding arising out of their services as one of our directors or administrator officers, or any of our subsidiaries or any early caller or enterprise to which the person provides services at our request. The indemnification agreements besides set forth sealed procedures that will apply in the event of a claim for damages thereunder. At give, there is no pending litigation or proceeding involving any of our directors or administrator officers as to which indemnification is required or permitted, and we are not aware of any threaten litigation or proceed that may result in a call for damages. 102 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Since January 1, 2009, there has not been any transaction or serial of alike transactions to which we were or are a party in which the sum involved exceeded or exceeds $ 120,000 and in which any of our directors or executive officers, any holder of more than 5 % of any classify of our voting securities or any extremity of the contiguous family of any of the waive persons had or will have a direct or collateral material matter to, early than the compensation arrangements and damages agreements described in “ Executive Compensation ” and the transactions set forth below. We believe that we have executed all of the transactions set away below on terms no less golden to us than we could have obtained from unaffiliated third base parties. Sale of Preferred Stock From August 13, 2010 through December 14, 2011, through four separate closes, we sold shares of our serial CC preferred breed that is, in aggregate, convertible into 40,583,658 shares of coarse stock at a price per common equivalent share of $ 1.15 for a total amount raised of approximately $ 46.7 million. The purchasers of the serial CC prefer banal include the following relate parties :

Investor Series CC Shares
Purchased
Total Investment
in Series CC
Aisling Capital II, LP ( 1 ) 9,479,849 $ 10,901,826
De Novo Ventures III, LP ( 2 ) 6,709,610 7,716,052
Technology Partners Fund VIII, LP ( 3 ) 6,709,610 7,716,052
Entities Affiliated with Vivo Ventures ( 4 ) 6,990,573 8,039,159
Weyerhaeuser Company Master Retirement Trust 6,956,521 7,999,999
( 1 ) Steven A. Elms, a member of our board of directors, is associated with Aisling Capital .
( 2 ) David M. Mauney, M.D., a penis of our dining table of directors, is associated with De Novo Ventures .
( 3 ) James Glasheen, Ph.D., a penis of our board of directors, is associated with Technology Partners .
( 4 ) Albert Cha, M.D., Ph.D., a member of our board of directors, is associated with Vivo Ventures .

Registration Rights We have entered into an amended and restated shareholders agreement with purchasers of our prefer stock that provides for certain rights relating to the registration of their shares of common stock issuable upon conversion of their prefer stock. These rights will continue following this offer and will terminate five years following the completion of this offer, or for any particular holder with registration rights, at such time following this offer when all securities held by that stockholder subject to registration rights may be sold pursuant to Rule 144 under the Securities Act. All holders of our prefer standard are parties to this agreement. See “ Description of Capital Stock—Registration Rights ” for extra information. Policies and Procedures for Related Party Transactions As provided by our audited account committee rent, following this offering our audit committee will have to review and approve all associate party transactions for which audit committee approval is required by applicable law or the rules of NASDAQ. All of our directors, officers and employees are required to report to our audit committee any such related party transaction prior to its completion. 103 PRINCIPAL STOCKHOLDERS The follow mesa sets forth certain information regarding the beneficial ownership of our common store as of March 31, 2012 with esteem to :

each person known by us to beneficially own 5 % or more of the great shares of our common stock ;
each member of our circuit board of directors and each named executive officer ; and
the members of our board of directors and our current executive officers as a group .

Unless differently noted below, the address of each beneficial owner listed in the table downstairs is c/o Tria Beauty Inc., 4160 Dublin Blvd., Suite 200, Dublin, CA 94568. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole vote and investment office with regard to all shares of common stock that he or she beneficially owns, subject to applicable residential district property laws. Each stockholder ’ s percentage possession before and after the extend is based on 96,985,971 shares of our common stock outstanding as of March 31, 2012, assuming the automatic rifle conversion of all outstanding shares of our preferable stock into 91,602,072 shares of common lineage and excluding the exert of any outstanding warrants. For purposes of the board below, we have assumed that shares of coarse sprout will be outstanding upon completion of the extend. The share ownership data assumes no practice of the underwriters ’ over-allotment option. beneficial possession of shares and percentage ownership are determined in accordance with the rules of the SEC. In calculating the number of shares beneficially owned by an individual or entity and the percentage ownership of that individual or entity, shares underlying options or warrants held by that individual or entity that are either presently exercisable or exercisable within 60 days from March 31, 2012 are deemed outstanding. These shares, however, are not deemed great for the determination of computing the share ownership of any other individual or entity. Unless differently indicated and subject to community property laws where applicable, the individuals and entities named in the board above have sole vote and investing power with obedience to all shares of our park stock shown as beneficially owned by them.

Name and Address of Beneficial Owner Shares of
Common Stock
Beneficially Owned
Before and After

        the Offering         
Percentage of
Shares
Outstanding
Before
     Offering    
After
Offering
5% Stockholders
Aisling Capital II, LP ( 1 ) 23,250,354 24.0 % %
(2) De Novo Ventures III, LP 16,170,909 16.7
(3) Technology Partners Fund VIII, LP 16,170,909 16.7
(4) Entities Affiliated with Vivo Ventures 16,170,909 16.7
(5) Weyerhaeuser Company Master Retirement Trust 6,956,521 7.2
Named Executive Officers
(6) Kevin J. Appelbaum 3,198,988 3.2
(6) John J. Rangel 33,854 *
(7) Tobin C. Island, Ph.D . 1,358,102 1.4
(6) Danika R. Harrison 164,895 *
Directors
(4) Albert Cha, M.D., Ph.D . 16,170,909 16.7
(1) Steven A. Elms 23,250,354 24.0
(3) James W. Glasheen, Ph.D . 16,170,909 16.7
(2) David M. Mauney, M.D . 16,170,909 16.7
Edward W. Unkart ( 6 ) 138,750 *
Michael J. Valentino ( 6 ) 185,000 *
(8) All directors and executive officers as a group ( 10 persons ) 76,842,670 75.85 %

104

* Represents beneficial ownership of less than 1 % of the outstanding shares of our park stock .
( 1 ) All of the shares are owned directly by Aisling Capital II, LP. The sole general collaborator of Aisling Capital II, LP is Aisling Capital Partners, LP, a limited partnership, the sole general collaborator of which is Aisling Capital Partners, LLC. The managing members of Aisling Capital Partners, LLC are Mr. Steve Elms, Mr. Dennis Purcell and Dr. Andrew Schiff. The managing members share the vote and dispositive exponent of the shares. The managing members hereby disclaim any beneficial possession of any shares directly held by Aisling Capital II, LP, except to the extent of the monetary interest therein. The principal business address of each of the Aisling entities is 888 Seventh Avenue, 30th Floor, New York, NY 10106 .
( 2 ) All of the shares are owned directly by De Novo Ventures III, LP. The sole general partner of De Novo Ventures III, LP is De Novo Management III, LLC. The managing members of De Novo Management III, LLC are Mr. Frederick J. Dotzler, Mr. Richard M. Ferrari, Mr. Joe Mandato, Dr. David M. Mauney and Mr. Frank T. ( Jay ) Watkins. The managing members share the vote and dispositive power of the shares. The managing members hereby disclaim any beneficial ownership of any shares directly held by De Novo Ventures III, LP, except to the extent of the monetary concern therein. The principal occupation address of each of the De Novo entities is 2180 Sand Hill Road, Suite 200, Menlo Park, CA 94025 .
( 3 ) All of the shares are owned directly by Technology Partners Fund VIII, LP. The sole general spouse of Technology Partners Fund VIII, LP is TP Management VIII, LLC. The managing members of TP Management VIII, LLC are Mr. Ira Ehrenpreis, Mr. James Glasheen, Ms. Sheila Mutter and Mr. Roger Quy. The managing members contribution the vote and dispositive power of the shares. The managing members hereby disclaim any beneficial ownership of any shares directly held by Technology Partners Fund VIII, LP, except to the extent of the monetary interest therein. The principal business address of each of the Technology Partners entities is 550 University Avenue, Palo Alto, CA 94301 .
( 4 ) Represents 16,053,302 shares owned directly by Vivo Ventures Fund VI, L.P. and 117,607 shares owned immediately by Vivo Ventures VI Affiliates Fund, L.P. The sole general partner of Vivo Ventures Funds VI, L.P. and Vivo Ventures VI Affiliates Fund, L.P, is Vivo Ventures VI, LLC. The managing members of Vivo Ventures VI, LLC are Dr. Albert Cha, Mr. Edgar Engleman and Dr. Frank Kung. The managing members share the vote and dispositive power of the shares. The managing members hereby disclaim any beneficial ownership of any shares directly held by Vivo Ventures Fund VI, L.P. and Vivo Ventures VI Affiliates Fund, L.P., except to the extent of the monetary interest therein. The principal business address of each of the entities affiliated with Vivo Ventures is 575 High Street, Suite 201, Palo Alto, CA 94301 .
( 5 ) The principal commercial enterprise address of Weyerhaeuser Company Master Retirement Trust is Attn : Bernadette T. Rist, BNY Mellon, Legal Department, 500 Grant Street, BNY Mellon Center, AIM : 151-1935, Pittsburgh, PA 15258. Morgan Stanley Investment Management, Inc. is the investment adviser to Weyerhaeuser Company Master Retirement Trust. Thomas Dorr, Cory Pulfrey, John Wolak, James Sperans, Neil Harper and Jeff Collins act as the investment committee for Morgan Stanley Investment Management, Inc. and therefore exercise vote and dispositive powers over the shares held by Weyerhaeuser Company Master Retirement Trust. Messrs. Dorr, Pulfrey, Wolak, Sperans, Harper and Collins hereby disclaim any beneficial ownership of any shares immediately held by Weyerhaeuser Company Master Retirement Trust. The principal business address of Morgan Stanley Investment Management, Inc. is 100 Front Street, Suite 400, West Conshohocken, PA 19428 .
( 6 ) Consists of options to purchase shares of our common stock exercisable within 60 days of March 31, 2012 .
( 7 ) Consists of options to purchase 605,602 shares of our coarse stock exercisable within 60 days of March 31, 2012 and 752,500 shares of our common sprout .
( 8 ) Includes the options and shares described in footnotes 1 through 7 above .

105 DESCRIPTION OF CAPITAL STOCK General The keep up information describes our capital stock, angstrom well as the material provisions of our amended and restated certificate of incorporation and amended and restated bylaws, each of which will become effective immediately prior to the completion of this extend, and the adjustment rights provided under our amended and restated shareholders agreement. This description is lone a compendious. You should besides refer to our amended and restated certificate of incorporation, our amended and restated bylaws and our amended and restated shareholders agreement, which have been filed with the SEC as exhibits to our adjustment statement, of which this prospectus forms a depart. Upon the completion of this offer, we will be authorized to issue up to shares of capital stock, $ 0.001 equality rate, to be divided into two classes designated common stock and prefer standard. Of such authorize shares, shares will be designated as common stock and shares will be designated as prefer stock. Common Stock As of March 31, 2012, there were 5,383,899 shares of common stock outstanding held by 44 stockholders of commemorate. After giving impression to the sale of common store offered in this offer, there will be shares of common stock great, or shares if the underwriters exercise their over-allotment option. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Under our amended and restated certificate of internalization and amended and restated bylaws, our stockholders will not have accumulative vote rights in the election of directors unless, at the meter of an election, we are discipline to section 2115 ( b ) of the California General Corporation Law, or CGCL. consequently, holders of a majority of the vote shares can elect all of the directors. We do not expect to be subjugate to section 2115 ( b ) of the CGCL unless our stock is delisted from The NASDAQ Global Market. national to preferences that may be granted to any then-outstanding prefer neckcloth, holders of common store are entitled to receive ratably merely those dividends as may be declared by the board of directors out of funds legally available. See “ Dividend Policy. ” In the event of our extermination, adjournment or winding up, holders of common banal are entitled to share ratably in all of our assets remaining after we pay our liabilities. Holders of common stock have no preemptive or early subscription or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. Preferred Stock Effective immediately prior to the completion of this offer, there will be no shares of preferable standard outstanding because all our outstanding shares of favored broth will have been mechanically converted into an aggregate of 91,602,072 shares of coarse stock at such time. Upon the completion of this propose, our board of directors will have the authority, without far action by the stockholders, to issue up to shares of preferable stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption and elimination preferences, any or all of which may be greater than the rights of common banal. The issue of favored stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issue of favored stock certificate could have the impression of check, deferring or preventing a change in our control or other bodied action. Stock Options We have reserved an sum of shares of common neckcloth for issue under our 2012 Plan, which is subject to increase on an annual footing pursuant to the terms of the design. As of March 31, 2012, we had 106 great options to purchase an aggregate of 13,508,669 shares of our common livestock pursuant to our 2004 design, at a weighted-average exercise price of $ 0.32 per share, of which 7,456,633 shares remain subject to vesting requirements. Warrants As of March 31, 2012, there were warrants outstanding to purchase an aggregate of 884,541 shares of our series CC redeemable convertible prefer stock and 201,429 shares of our common stock. Of these :

warrants to purchase an aggregate of 125,000 shares of common stock at an exert price of $ 0.20 per contribution will remain outstanding after the completion of this offering ;
warrants to purchase an aggregate of 71,429 shares of common stock at an exercise monetary value of $ 0.21 per parcel will remain outstanding after the completion of this offer ;
warrants to purchase an aggregate of 884,541 shares of serial CC preferred stock at an exert price of $ 1.15 per share will remain outstanding after the completion of this offer ; and
warrants to purchase an aggregate of 5,000 shares of common stock at an exercise price of $ 0.05 per parcel will mechanically expire upon the completion of this offer if not exercised .

All of these warrants, except for the justify to purchase an aggregate of 5,000 shares of park stock at an practice price of $ 0.05 per share, have a net income exercise provision under which its holder may, in stead of payment of the use price in cash, surrender the guarantee and receive a net amount of shares based on the bonny market value of our common stock at the time of practice of the guarantee after deduction of the aggregate exercise price. Each of these warrants besides contains provisions for the allowance of the exercise price and the aggregate numeral of shares issuable upon the exert of the warrant in the consequence of livestock dividends, stock splits, reorganizations, reclassifications and consolidations. All of these warrants, except for the guarantee to purchase an sum of 5,000 shares of common livestock at an exercise price of $ 0.05 per partake, hold provisions providing that if, at the time of passing of the warrants, the bonny market prize of one contribution of our common stock ( as determined in accordance with the terms of the warrants ) is greater than the exercise price of such warrants, then the warrants shall be automatically deemed to be converted pursuant to a cashless drill feature as described in the terms of the warrants. Registration Rights pursuant to our amended and restated shareholders agreement dated August 13, 2010, as amended July 26, 2011, following the completion of this offer, the holders of an aggregate of 92,486,613 shares of common stock certificate, including shares of common stock certificate issuable upon the automatic pistol conversion of all outstanding shares of our prefer stock and the exercise of outstanding prefer warrants, or their transferees, have the proper to require us to register their shares under the Securities Act so that those shares may be publicly resold, or to include their shares in any registration statement we file, in each case as described below. Demand Registration Rights Based on the number of shares outstanding as of March 31, 2012, the holders of 92,486,613 shares of common stock, including shares of coarse neckcloth issuable upon the automatic pistol conversion of all great shares of our choose breed and the exercise of outstanding prefer warrants, or their transferees, are entitled to certain demand registration rights. Beginning on, 2012, the date that is six months following the close of our initial populace extend, the holders of a majority of these shares can, on not more than three occasions, request that we register all or a part of their shares. such request for registration must cover a number of shares with an anticipate aggregate offer monetary value, final of cover discounts and commissions, of at least $ 5.0 million. The request for adjustment can not be made during the menstruation that is 90 days prior to filing through 180 days after the effective date of a registration statement relating to our securities. 107 Form S-3 Registration Rights Based on the number of shares outstanding as of March 31, 2012, the holders of 92,486,613 shares of common stock, including shares of common stock issuable upon the automatic conversion of all outstanding shares of our prefer store and drill of outstanding prefer warrants, or their transferees, are entitled to sealed Form S-3 registration rights. A holder of these shares can make a written request that we register their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered, net of underwrite discounts and commissions, is at least $ 1.0 million. These stockholders may make an outright number of requests for registration on Form S-3. however, we will not be required to effect a adjustment on Form S-3 if we have previously effected two such registrations in the 12-month period preceding the request for registration or if we have effected a total of three such registrations and such registrations have been declared effective. additionally, we will not be required to effect a registration on Form S-3 during the 180-day time period following the effective date of this or another registration instruction. We have the right to defer a registration on Form S-3 for up to 90 days if we furnish, to those stockholders making the request that we register their shares on Form S-3, a certificate signed by our headman administrator officeholder or president stating that in the commodity faith judgment of the board of directors, that it would be damaging to impression such a registration. Piggyback Registration Rights Based on the count of shares great as of March 31, 2012, in the consequence that we determine to register any of our securities under the Securities Act, either for our own account or for the score of early security holders, the holders of 92,486,613 shares of our coarse stock, including shares of common standard issuable upon the automatic conversion of all outstanding shares of our prefer stock and exercise of outstanding prefer warrants, or their transferees, will be entitled to certain “ piggyback ” adjustment rights allowing the holders to include their shares in such registration, submit to certain market and early limitations. As a consequence, whenever we propose to file a adjustment argument under the Securities Act, early than with obedience to a registration related to a stock option, stock buy or similar benefit plan or a transaction pursuant to Rule 145 under the Securities Act or early registration that would not customarily provide for the sale of secondary fairness shares for cash, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the issue of shares included in the adjustment, to include their shares in the registration. Expenses of Registration We will pay the registration expenses of the holders of the shares registered pursuant to the demand and Form S-3 adjustment rights described above other than underwriting discounts and commissions and stock transfer taxes and fees. however, we will not be required to pay for any expenses of any need or Form S-3 registration if the request is subsequently withdrawn by a majority of the holders who requested such registration unless the withdrawal is based on fabric adverse data about us different from that available at the time of the adjustment request and the holders withdraw the request within a fair time after learning of the material adverse data. We will pay the registration expenses other than underwriting discounts and commissions of the holders of the shares registered pursuant to the piggyback adjustment rights described above. In an underwrite offer, the managing investment banker, if any, has the right, subject to stipulate conditions, to limit the number of shares such holders may include. Expiration of Registration Rights The demand, Form S-3 and piggyback adjustment rights described above will expire, with obedience to any particular stockholder, upon the earlier of ( one ) five years after our initial populace offer or ( two ) when that stockholder can sell shares under Rule 144 of the Securities Act. 108 Anti-Takeover Provisions of Delaware Law, Our Amended and Restated Certificate of Incorporation and Our Amended and Restated Bylaws Provisions of the Delaware General Corporation Law, or DGCL, and our amended and restated certificate of incorporation and amended and restated bylaw which will become effective prior to completion of our initial public offer could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increase protection of our ability to negotiate with the advocate of an unfriendly or unasked proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms. Delaware Anti-Takeover Statute We are discipline to Section 203 of the DGCL, an anti-takeover codified. In general, Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a “ business combination ” with an “ interest stockholder ” for a period of three years following the meter the person became an interest stockholder, unless the business combination or the skill of shares that resulted in a stockholder becoming an concerned stockholder is approved in a order manner. Generally, a “ clientele combination ” includes a fusion, asset or stock sale, or other transaction resulting in a fiscal profit to the concern stockholder. Generally, an “ interest stockholder ” is a person who, together with affiliates and associates, owns ( or within three years anterior to the decision of concerned stockholder status did own ) 15 % or more of a pot ’ second voting lineage. The being of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by our dining table of directors, including discouraging attempts that might result in a premium over the market price for the shares of coarse sprout held by our stockholders. Classified Board Our amended and restated security of incorporation and our amended and restated bylaws, which will become effective prior to completion of this offer, provide that our board of directors will be divided into three classes. The directors designated as class I directors will have terms expiring at the first annual meet of stockholders following this extend, which we expect to hold in 2013. The directors designated as Class II directors will have terms expiring at the follow class ’ s annual meeting of stockholders, which we expect to hold in 2014 and the directors designated as Class III directors will have terms expiring at the adopt class ’ s annual meet of stockholders, which we expect to hold in 2015. Directors for each classify will be elected at the annual meet of stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three years. At any meeting of stockholders for the election of directors at which a quorum is stage, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. Under the classified board provisions, it would take at least two elections of directors for any individual or group to gain see of our board. accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or differently attempting to gain master of us. Removal of Directors Our amended and restated bylaws, which will become effective prior to completion of this offer, provide that our stockholders may alone remove our directors with causal agent. Amendment Our amended and restated certificate of internalization and our amended and restated bylaws, which will become effective prior to completion of this offer, provide that the affirmative vote of the holders of at least 109 66 and 2/3 % of our voting stock then outstanding is required for the amendment, revoke or change of certain provisions of our amended and restated certificate of incorporation and bylaw relate to the classification of our board of directors, the prerequisite that stockholder actions be effected at a punctually called touch, the designate parties entitled to call a extra meet of the stockholders, the necessity that notice of any stockholder business to be addressed at a meet be provided in advance, the requirement that notice of any person whom a stockholder wishes to nominate as a director at a meet be provided in advance, vote, and the size of our board of directors. Size of Board and Vacancies Our board of directors shall consist of one or more members and, unless our charter fixes the total of directors, the phone number of directors shall be determined from time to time by resolution of our board of directors. Vacancies occurring on our control panel of directors for any reason and newly created directorships resulting from an increase in the authoritative number of our directors may be filled alone by vote of a majority of the remaining members of our circuit board of directors. A person elected by our board of directors to fill a void or newly created directorship will hold position until the following election of that class. Special Stockholder Meetings Our amended and restated bylaws, which will become effective anterior to completion of this extend, provide that lone the chair of our board of directors, our headman executive officeholder or president in the absence of a head executive officer or our circuit board of directors pursuant to a settlement adopted by a majority of the integral board of directors may call particular meetings of our stockholders except if at any time the pot should have no directors in agency. Stockholder Action by Unanimous Written Consent Our amended and restated bylaws, which will become effective anterior to completion of this volunteer, expressly eliminate the right of our stockholders to act by written consent. Any action required or permitted to be taken by our stockholders must be effected at a punctually called annual or especial converge of the stockholders. Requirements for Advance Notification of Stockholder Nominations and Proposals Our amended and restated bylaws, which will become effective prior to completion of this volunteer, establish gain poster procedures with respect to stockholder proposals and nomination of candidates for election as directors early than nominations made by or at the direction of our control panel of directors or a committee of our board of directors. No Cumulative Voting Our amended and restated certificate of incorporation, which will become effective anterior to completion of this offer, does not provide for accumulative vote. Undesignated Preferred Stock The authority that will be possessed by our board of directors to issue prefer stock certificate could potentially be used to discourage attempts by third gear parties to obtain control of our company through a fusion, tender offer, proxy contest or otherwise by making it more unmanageable or more costly to obtain command of our company. Our display panel of directors may issue favored stock with voting rights or conversion rights that, if exercised, could adversely affect the voting might of the holders of common stock. 110 Authorized but Unissued Shares Our authorized but unissued shares of common stock and favored stock will be available for future issue without stockholder approval. We may use extra shares for a kind of purposes, including future populace offerings to raise extra capital, to fund acquisitions, and as employee recompense. The being of authorized but unissued shares of common stock and preferable breed could render more difficult or discourage an attack to obtain master of our company by means of a proxy contest, sensitive offer, fusion, or otherwise. Stock Exchange Listing We have applied to have our coarse standard approved for listing on The NASDAQ Global Market under the trading symbol “ TRIA ”. Transfer Agent and Registrar Upon the completion of this volunteer, the transfer agent and registrar for our park stock will be Wells Fargo Bank, National Association. 111 SHARES ELIGIBLE FOR FUTURE SALE prior to this offer, there has been no public market for our common stock. We can not predict the consequence, if any, that market sales of shares of our common stock or the handiness of shares of our coarse stock for sale will have on the market price of our common stock prevailing from time to time. however, sales of significant amounts of our common livestock in the public market could adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity securities. Upon the completion of this offer, we will have shares of our park stock outstanding, assuming conversion of our prefer stock into shares of coarse stock, exercise on a cash basis of outstanding warrants that otherwise expire upon the potency of this offering, no exert of the underwriters ’ over-allotment option and no exercise of great options or warrants after December 31, 2011. Of these outstanding shares, the shares sold in this offer will be freely tradable, except that any shares acquired by our “ affiliates ” as that term is defined in Rule 144 promulgated under the Securities Act, may only be sold in conformity with the limitations described below. The remaining shares of our common stock will continue to be deemed “ restricted securities ” as defined under Rule 144. Restricted shares may be sold in the public commercialize merely if registered or if they qualify for an exemption from adjustment under Rule 144 or Rule 701 promulgated under the Securities Act, which we summarize below. In summation, each of our officers, directors, one percentage or greater stockholders, and certain other stockholders have entered into market stand-off agreements with us and/or lock-up agreements whereby they have agreed not to sell any of their stock for 180 days following the date of this prospectus. subject to the provisions of Rule 144 and Rule 701, shares of restricted securities will be available for sale in the public commercialize as follows :

Date Number of
       Shares      
On the date of this course catalog
90 days after the date of this prospectus
Beginning 180 days after the date of this prospectus

Lock-Up Agreements We, each of our officers and directors, and well all of our stockholders have agreed, topic to intend exceptions, that we and they will not offer, sell, contract to sell, assurance, grant any choice to sell, or otherwise discard of, directly or indirectly, any shares of our common stock or securities convertible into or exercisable for shares of our coarse stock, or warrants or early rights to purchase our common banal during the period ending 180 days after the date of this prospectus. The 180-day restrict period will be automatically extended if ( i ) during the final 17 days of the 180-day restricted period we issue an earnings dismissal or material news or a material event relating to us occurs or ( two ) anterior to the termination of the 180-day qualify period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day restrict period or provide telling to Morgan Stanley & Co. LLC and Piper Jaffray & Co. of any earnings secrete or material news or fabric event that may give raise to an elongation of the 180-day restrict period. If the 180-day period is so carry, the restrictions described above will continue to apply until the passing of the 18-day time period beginning on date the earnings turn is issued or the material news or material event occur. Morgan Stanley & Co. LLC and Piper Jaffray & Co. may, in their exclusive discretion, permit early free of shares subject to the lock-up agreements. For a more detail description of the lock-up agreements, see “ Underwriters. ” Rule 144 In general, under Rule 144 american samoa presently in effect, once we have been subject to public ship’s company coverage requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares 112 proposed to be sold for at least six months, including the holding period of any anterior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, book limit or notice provisions of Rule 144, capable to submission with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares without complying with any of the requirements of Rule 144. In general, under Rule 144, a presently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon the exhalation of the lock-up agreements described below, within any three-month period beginning 90 days after the date of this course catalog, a number of shares that does not exceed the greater of :

1 % of the numeral of shares of common neckcloth then outstanding, which will equal approximately shares immediately after this offer, based on the assume initial oblation price of $ per partake, the mid-point of the range on the cover of this prospectus ; or
the average weekly trade volume of the common stock during the four calendar weeks preceding the file of a detect on Form 144 with deference to such sale .

Sales under rule 144 by our affiliates or persons selling shares on behalf of our affiliates are besides subject to certain manner of sale provisions and detect requirements and to the handiness of current public information about us. Rule 701 In general, under Rule 701 of the Securities Act, an employee, military officer, director, adviser or adviser who purchased shares from us in connection with a compensatory breed or option design or other written agreement in complaisance with Rule 701 is eligible to resell those shares 90 days after the effective date of this offer in reliance on Rule 144, but without submission with certain restrictions, including the holding period contained in Rule 144. however, the shares issued pursuant to Rule 701 are subject to the lock-up agreements described above and under “ Underwriters ” and will only become eligible for sale upon the passing of those agreements. Registration of Shares Issued Pursuant to Benefit Plans We intend to file registration statements under the Securities Act angstrom promptly as potential after the completion of this propose to register shares to be issued pursuant to our employee profit plans. As a consequence, any shares issued or options or rights exercised under our 2004 plan and 2012 plan or any other benefit design after the potency of the adjustment statements will besides be freely tradable in the populace grocery store, submit to the market stand-off and lock-up agreements discussed above. however, such shares held by affiliates will hush be subject to the bulk limitation, manner of sale, poster and public information requirements of Rule 144. As of March 31, 2012, there were outstanding options under our benefit plans for the leverage of 13,508,669 shares of our common lineage at a weighted average drill price of approximately $ 0.32 per partake. Registration Rights Upon the completion of this offer, the holders of an aggregate of 92,486,613 shares of coarse stock, including shares of common stock issuable upon the automatic conversion of all outstanding shares of our prefer lineage and exercise of great favored warrants, or their allow transferees, will be entitled to rights with deference to the registration of these shares under the Securities Act. registration of these shares under the Securities Act would result in these shares becoming amply tradable without limitation under the Securities Act immediately upon the potency of the registration, except for shares purchased by affiliates. See “ Description of Capital Stock—Registration Rights ” for extra information. 113 MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS TO NON-U.S. HOLDERS The trace is a discussion of the substantial U.S. federal income and estate tax considerations with deference to the possession and disposition of our common stock certificate that may be relevant to a non-U.S. holder ( as defined below ) that acquires our coarse stock pursuant to this offer. The discussion is based on provisions of the Code, applicable U.S. Treasury regulations promulgated thereunder and U.S. Internal Revenue Service, or IRS, rulings and pronouncements, and judicial decisions, all as in effect on the date of this course catalog and all of which are submit to change ( possibly on a retroactive basis ) or to differing interpretations indeed as to result in tax considerations unlike from those summarized below. We can not assure you that a change in law will not alter importantly the tax considerations that we describe in this summary. The discussion is limited to non-U.S. holders that hold our common stock as a “ das kapital asset ” within the intend of section 1221 of the Code ( by and large, property held for investment ). As used in this discussion, the terminus “ non-U.S. holder ” means a beneficial owner of our coarse broth that is not, for U.S. federal income tax purposes :

an individual who is a citizen or resident of the United States ;
a pot including any entity treated as a pot for U.S. federal income tax purposes created or organized in or under the laws of the United States or any political subsection thence ;
a partnership including any entity treated as a partnership for U.S. federal income tax purposes ;
an estate, the income of which is included in crude income for U.S. federal income tax purposes regardless of its generator ; or
a trust ( 1 ) if a U.S. court is able to exercise elementary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or ( 2 ) that has made a valid election to be treated as a U.S. person for such purposes .

This discussion does not address the U.S. federal income and estate tax rules applicable to any person who holds our coarse store through entities treated as partnerships for U.S. federal income tax purposes or to such entities themselves. If a partnership ( including any entity or agreement treated as a partnership for U.S. federal income tax purposes ) owns our park stock, the tax treatment of a partner in that partnership will depend upon the condition of the spouse and the activities of the partnership. A holder that is a partnership or a holder of interests in a partnership should consult such holder ’ s tax adviser regarding the tax consequences of the purchase, possession and disposition of our coarse stock. This discussion does not consider :

any department of state, local, or extraneous tax consequences ;
any tax consequences or calculation of the alternative minimum tax ;
any U.S. federal give tax consequences ; or
any U.S. federal tax considerations that may be relevant to a non-U.S. holder in fall of its particular circumstances or to non-U.S. holders that may be topic to special treatment under U.S. federal tax laws, including without restriction, banks or other fiscal institutions, policy companies, tax-exempt security organizations, sealed trusts, loanblend entities, “ controlled foreign corporations, ” “ passive voice foreign investment companies, ” certain former citizens or residents of the United States, broker-dealers, dealers or traders in securities or currencies, and holders that hold our common breed as function of a “ straddle, ” “ hedge, ” “ conversion transaction, ” “ synthetic security, ” or other integrate investment .

114 Prospective investors are urged to consult their tax advisors regarding the application of the U.S. federal income and estate tax laws to their particular situations and the consequences under U.S. federal gift tax laws, as well as foreign, state and local laws and tax treaties. Dividends As previously discussed under “ Dividend Policy ” above, we do not anticipate paying dividends on our common stock in the foreseeable future. If we make distributions on our coarse livestock, however, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accrued earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our stream and roll up earnings and profits, the distributions will constitute a reappearance of capital and first reduce the non-U.S. holder ’ second adjusted tax basis, but not below zero, and then will be treated as derive from the sale of banal, as described in the part of this prospectus entitled “ Gain on Disposition of Common Stock. ” A dividend paid to a non-U.S. holder by and large will be subject to withhold of U.S. federal income tax at a 30 % rate, or a lower rate under an applicable income tax treaty, unless the dividend is efficaciously connected with the conduct of a deal or business of the non-U.S. holder within the United States ( and, if an applicable income tax treaty therefore requires, is attributable to a permanent establishment of the non-U.S. holder within the United States ). Non-U.S. holders will be required to satisfy certain authentication and disclosure requirements ( broadly on a properly executed IRS Form W-8 BEN ) in order to claim a deoxidize rate of withholding pursuant to an applicable income tax treaty. These forms must be sporadically updated. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty. Dividends that are effectively connected with a non-U.S. holder ’ s conduct of a barter or business in the United States and, if an applicable income tax treaty then requires, attributable to a permanent wave establishment in the United States by and large will be taxed on a internet income basis at the unconstipated graduated U.S. union income tax rates in the like manner as if the non-U.S. holder were a resident of the United States. In such cases, we will not have to withhold the U.S. union income tax described above if the non-U.S. holder complies with applicable certification and disclosure requirements. In summation, a “ branch profits tax ” may be imposed at a 30 % rate, or a lower rate under an applicable income tax treaty, on dividends received by a foreign pot that are effectively connected with the conduct of a barter or occupation in the United States. A non-U.S. holder may obtain a refund or credit of any surfeit amounts withheld by seasonably filing an appropriate claim for a refund together with the needed information with the IRS. Gain on Disposition of Common Stock A non-U.S. holder broadly will not be subject to U.S. federal income tax with respect to gain realized on a sale or other disposal of our common stock unless one of the follow applies :

the gain is effectively connected with the non-U.S. holder ’ s conduct of a deal or commercial enterprise in the U.S. and, if an applicable income tax treaty sol requires, is attributable to a permanent institution maintained by the non-U.S. holder in the United States ; in these cases, the non-U.S. holder generally will be taxed on its net amplification derived from the disposition at the regular graduated rates and in the manner applicable to United States persons and, if the non-U.S. holder is a foreign pot, the “ outgrowth profits tax ” described above may besides apply ;
the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met ; in this case, the non-U.S. holder will be subject to a 30 % tax on the sum by which the gain derived from the sale or other disposition of our common stock and any other U.S.-source capital gains realized by the non-U.S. holder in the like taxable year exceed the U.S.-source capital losses realized by the non-U.S. holder in that taxable year unless an applicable income tax treaty provides an exemption or a lower rate ; or

115

we are or have been a “ U.S. real place holding corporation ” for U.S. federal income tax purposes at any time within the brusque of the five-year period ending on the go steady of inclination or the menstruation that the non-U.S. holder held our common stock. We do not believe that we have been, are, or will become, a U.S. real property holding corporation, although there can be no assurance in this regard. If we are, or were to become, a U.S. real property holding corporation at any prison term during the applicable period, however, any gain recognized on a inclination of our common stock by a non-U.S. holder that did not own ( immediately, indirectly, or constructively ) more than 5 % of our common breed during the applicable period broadly would not be subject to U.S. federal income tax, provided that our common sprout is “ regularly traded on an established securities market ” ( within the mean of section 897 ( c ) ( 3 ) of the Code ) .

Federal Estate Tax common sprout owned or treated as owned by an person who is not a citizen or nonmigratory of the United States ( as specifically defined for U.S. federal estate of the realm tax purposes ) at the time of death is considered a U.S. situs asset includible in the individual ’ mho megascopic estate for U.S. federal estate tax purposes and therefore may be subject to U.S. federal estate tax, unless an applicable estate of the realm tax treaty provides otherwise. prospective investors are urged to consult their tax advisors regarding the U.S. federal estate tax considerations of acquiring, holding, and disposing of our common store. New Legislation Relating to Foreign Accounts newly enacted legislation may impose withholding taxes on sealed types of payments made to “ alien fiscal institutions ” ( as specifically defined for purposes of these rules ) and certain other non-U.S. entities. Under this legislation, the failure to comply with extra certification, information report, and other assign requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to U.S. holders who own the shares through foreign accounts or foreign intermediaries and certain non-U.S. holders. The legislation imposes a 30 % withholding tax on dividends on, or crying proceeds from the sale or other disposition of, our coarse banal paid to a extraneous fiscal institution or to a foreign non-financial entity, unless ( iodine ) the extraneous fiscal institution undertakes certain diligence and coverage obligations or ( two ) the alien non-financial entity either certifies it does not have any solid U.S. owners or furnishes identifying information regarding each substantial U.S. owner. In addition, if the payee is a foreign fiscal mental hospital, it must enter into an agreement with the U.S. Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned extraneous entities, annually report certain data about such accounts, and withhold 30 % on payments to account holders whose actions prevent it from complying with these report and other requirements. The legislation applies to payments made after December 31, 2012. Under certain conversion rules, the withhold would apply to dividends paid on our common stock after December 31, 2013, and on gross proceeds from sales or other inclination of our park stock after December 31, 2014. prospective investors should consult their tax advisors regarding this legislation. Information Reporting and Backup Withholding Tax Dividends and proceeds from the sale or other taxable disposition of our coarse stock are potentially subject to backup withholding. In general, stand-in withholding tax will not apply to dividends on our common stock paid by us or our paying agents, in their capacities as such, to a non-U.S. holder if the holder has provided the command authentication that it is a non-U.S. holder. by and large, we must report to the IRS the total of dividends paid, the list and address of the recipient, and the sum, if any, of tax withhold. Pursuant to income tax treaties or some other agreements, the IRS may make its reports available to tax authorities in the recipient role ’ south state of residence. In general, backing withhold and information report will not apply to proceeds from the disposition of our common stock paid to a non-U.S. holder within the United States or conducted through certain U.S.-related fiscal intermediaries, in each case so long as the holder has provided the command documentation that it is a non-U.S. holder. 116 Backup withhold is not an extra tax. Any amount withhold may be refunded or credited against the holder ’ s U.S. federal income tax liability, if any, provided that the necessitate information is furnished to the IRS in a timely manner. Non-U.S. holders should consult their tax advisors regarding the application of the information report and backup withholding rules to them. prospective non-U.S. holders of our common broth should consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of our coarse store, including the consequences under the laws of any state, local anesthetic or foreign legal power, or under any applicable tax treaty. 117 UNDERWRITERS Under the terms and subject to the conditions in an cover agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC and Piper Jaffray & Co. are acting as representatives, have respectively agreed to purchase, and we have agreed to sell to them, individually, the total of shares indicated below :

Name Number of Shares
Morgan Stanley & Co. LLC
Piper Jaffray & Co .
Wells Fargo Securities, LLC
  
total
  

The underwriters and the representatives are jointly referred to as the “ underwriters ” and the “ representatives, ” respectively. The underwriters are offering the shares of coarse stock subject to their credence of the shares from us and subject to prior sale. The cover agreement provides that the obligations of the several underwriters to pay for and accept pitch of the shares of park broth offered by this course catalog are subject to the approval of certain legal matters by their guidance and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of coarse stock offered by this prospectus if any such shares are taken. however, the underwriters are not required to take or pay for the shares covered by the underwriters ’ over-allotment option described below. The underwriters initially propose to offer separate of the shares of common stock directly to the populace at the offer price listed on the cover page of this course catalog and share to certain dealers. After the initial offer of the shares of common stock, the offer price and other sell terms may from time to clock time be varied by the representatives. We have granted to the underwriters an option, exercisable for 30 days from the date of this course catalog, to purchase up to extra shares of park stock at the public oblation price listed on the breed page of this prospectus, less underwrite discounts and commissions. The underwriters may exercise this option entirely for the purpose of covering over-allotments, if any, made in connection with the oblation of the shares of park stock offered by this prospectus. To the extent the choice is exercised, each insurance broker will become compel, subject to certain conditions, to purchase about the same percentage of the extra shares of common stock certificate as the number listed adjacent to the insurance company ’ south name in the preceding table bears to the sum act of shares of common stock listed future to the names of all underwriters in the precede table. The following mesa shows the per plowshare and full public offer monetary value, underwriting discounts and commissions and proceeds before expenses to us. These amounts are shown assuming both no exercise and fully drill of the underwriters ’ option to purchase up to an extra shares of common sprout.

  Per Share   Total
    No Exercise     
Total
    Full  Exercise    
public offer monetary value
Underwriting discounts and commissions to be paid by us
Proceeds, before expenses, to us

The estimate propose expenses account payable by us, single of the cover discounts and commissions, are approximately $. The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percentage of the entire count of shares of common stock offered by them. We have applied to have our common stock approved for listing on The NASDAQ Global Market under the deal symbol “ TRIA ”. 118 We and all directors and officers and the holders of substantially all of our outstanding standard and stock options have agreed that, subject to certain exceptions, we and they will not, during the menstruation ending 180 days after the date of this prospectus ( the “ restricted period ” ) :

offer, toast, sell, contract to sell, sell any option or contract to purchase, leverage any choice or contract to sell, grant any option, mighty or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock ;
file any registration statement with the SEC relate to the offer of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock ; or
accede into any trade or other arrangement that transfers to another, in whole or in depart, any of the economic consequences of possession of the common stock ,

whether any such transaction described above is to be settled by delivery of common store or such early securities, in cash or differently. In accession, we agree, and each such person agrees, that we or such early person will not, during the restrict period, make any demand for, or exercise any right with respect to, the registration of any shares of park broth or any security convertible into or exercisable or exchangeable for common neckcloth. The restrictions described in the immediately preceding paragraph do not apply to :

the sale of shares to the underwriters ;
the issue by us of shares of common stock on exercise of an option or guarantee or the conversion of a security great on the date of this course catalog of which the underwriters have been advised in write ;
the grant of options or the issue of shares of park stock by us to our employees, officers, directors, advisors or consultants pursuant to employee benefit plans in consequence on the date hereof and described in this prospectus ;
the file by us of a registration statement with the SEC on Form S-8 in regard of any shares issued under or the concession of any award pursuant to an employee benefit plan in consequence and described in this prospectus ;
the establishment of a trade plan pursuant to Rule 10b5-1 under the Exchange Act, for the transfer of shares of coarse stock, provided that such plan does not provide for the transfer of common malcolm stock during the restrict time period and no public announcement or filing under the Exchange Act, regarding the administration of such plan shall be required or shall be voluntarily made ;
the sale or issue of or entry into an agreement by us to sell or issue shares of common stock or securities convertible into or exercisable for common sprout in connection with any mergers, skill of securities, businesses, property or other assets, joint ventures, strategic alliances, partnerships with experts to provide services to us, equipment leasing arrangements or debt financing, provided that each recipient of shares of common stock or securities convertible into or exercisable for coarse stock shall execute a lock-up agreement and that the aggregate act of shares of common stock issued, to be issued or issuable upon exercise of the securities convertible into or exercisable for coarse stock shall not exceed shares ;
transactions relating to shares of coarse stock or early securities acquired in connection with the offering ( except that this shall not include any issuer-directed shares acquired by directors and officers ) or in open marketplace transactions after the completion of the offer ; provided that no file under the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of coarse breed or early securities acquired in connection with the offer or in such unfold commercialize transactions ;

119

distributions of shares of common store or any security convertible into common stock to limited partners or stockholders or transfers of shares of common stock or any security convertible into or exercisable for common stock as a bona fide endowment, or by will or intestacy or to any confidence for the direct or indirect benefit of the holder or any spouse, domestic partner, parent, sibling, child or grandchild of the holder, or to a settlor or benefactive role of a trust ; provided that ( one ) each beneficiary or distributee shall sign and deliver a exchangeable lock-up letter and ( two ) no file under section 16 ( a ) of the Exchange Act, reporting a decrease in beneficial ownership of shares of park store, shall be required or shall be voluntarily made during the restrict time period ;
the reception from us of shares of coarse lineage upon the exercise of an choice, insofar as such choice is great as of the date of this prospectus ; provided that the securities received after such drill remain topic to the lock-up restrictions ; or
the conversion of shares of any class of our das kapital livestock pursuant to the terms thereof into shares of another class of our capital stock ; provided that the securities received after such conversion remain discipline to the lock-up restrictions .

The restrict menstruation described in the preceding paragraph will be extended if :

during the last 17 days of the restrict menstruation we issue an earnings release or material news or a material consequence relating to us occurs, or
anterior to the termination of the qualify period, we announce that we will release earnings results during the 16-day period beginning on the last day of the restricted period or provide presentment to Morgan Stanley & Co. LLC and Piper Jaffray & Co. of any earnings release or material news or material consequence that may give heighten to an elongation of the initial 180-day restricted period ,

in which sheath the restrictions described in the preceding paragraph will continue to apply until the passing of the 18-day period beginning on the issue of the earnings release or the occurrence of the material news or material event. Morgan Stanley & Co. LLC and Piper Jaffray & Co., in their sole discretion, may release the common banal and other securities subject to the lock-up agreements described above in unharmed or in region at any clock with or without notice. When determining whether or not to release common stock and other securities from lock-up agreements, Morgan Stanley & Co. LLC and Piper Jaffray & Co. will consider, among other factors, the holder ’ south reasons for requesting the turn, the issue of shares of common breed and early securities for which the let go of is being requested and market conditions at the time. In order to facilitate the offering of the common malcolm stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common lineage. specifically, the underwriters may sell more shares than they are obligated to purchase under the cover agreement, creating a short place. A short circuit sale is covered if the short stead is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a brood short sale by exercising the over-allotment option or buy shares in the open market. In determining the beginning of shares to close out a cover short sale, the underwriters will consider, among other things, the open market monetary value of shares compared to the price available under the over-allotment choice. The underwriters may besides sell shares in overindulgence of the over-allotment option, creating a naked short position. The underwriters must close out any naked short status by purchasing shares in the open grocery store. A naked short place is more likely to be created if the underwriters are concerned that there may be down atmospheric pressure on the price of the common standard in the open commercialize after pricing that could adversely involve investors who purchase in this volunteer. As an extra means of facilitating this offer, the underwriters may bid for, and buy, shares of coarse stock in the open market to stabilize the price of the common lineage. These activities may raise or maintain the marketplace price of the park stock above mugwump marketplace levels or prevent or retard a descent in the market price of the common 120 sprout. The underwriters are not required to engage in these activities and may end any of these activities at any time. We and the underwriters have agreed to indemnify each early against certain liabilities, including liabilities under the Securities Act. A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offer. The representatives may agree to allocate a issue of shares of coarse stock to underwriters for sale to their on-line brokerage house account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the like basis as other allocations. Pricing of the Offering prior to this offer, there has been no public market for our common malcolm stock. The initial public offer price will be determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offer monetary value were our future prospects and those of our diligence in general, our sales, earnings and certain other fiscal and operating information in recent periods, and the price-earnings ratios, price-sales ratios, marketplace prices of securities and certain fiscal and operating data of companies engaged in activities similar to ours. Selling Restrictions European Economic Area In sexual intercourse to each Member State of the european Economic Area which has implemented the Prospectus Directive ( each, a “ relevant Member State ” ) an offer to the public of any shares of our common stock may not be made in that relevant Member State, except that an offer to the public in that relevant Member State of any shares of our common stock may be made at any time under the follow exemptions under the Prospectus Directive, if they have been implemented in that relevant Member State :

to any legal entity which is a modify investor as defined in the Prospectus Directive ;
to fewer than 100 or, if the relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons ( early than certified investors as defined in the Prospectus Directive ), as permitted under the Prospectus Directive, subjugate to obtaining the prior consent of the representatives for any such offer ; or
in any early circumstances falling within Article 3 ( 2 ) of the Prospectus Directive, provided that no such extend of shares of our common stock shall result in a necessity for the publication by us or any insurance broker of a course catalog pursuant to Article 3 of the Prospectus Directive .

For the purposes of this provision, the construction an “ offer to the public ” in relation to any shares of our common breed in any relevant Member State means the communication in any imprint and by any means of sufficient data on the terms of the offer and any shares of our coarse malcolm stock to be offered indeed as to enable an investor to decide to purchase any shares of our common stock, as the lapp may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the saying “ Prospectus Directive ” means directive 2003/71/EC ( and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the relevant Member State ), and includes any relevant implement quantify in the relevant Member State, and the expression “ 2010 PD Amending Directive ” means directing 2010/73/EU. 121 United Kingdom Each insurance company has represented and agreed that :

it has only communicated or caused to be communicated and will lone communicate or cause to be communicated an invitation or inducement to engage in investment natural process ( within the intend of Section 21 of the FSMA ) received by it in connection with the issue or sale of the shares of our common banal in circumstances in which section 21 ( 1 ) of the FSMA does not apply to us ; and
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our coarse stock in, from or otherwise involving the United Kingdom .

122 LEGAL MATTERS The robustness of the shares of park stock offered hereby will be passed upon for us by Ropes & Gray LLP, East Palo Alto, California. Certain legal matters relating to this oblation will be passed upon for the underwriters by Davis Polk & Wardwell LLP, Menlo Park, California. EXPERTS The consolidated fiscal statements of TRIA Beauty, Inc. at December 31, 2010 and 2011, and for each of the three years in the period ended December 31, 2011, appearing in this prospectus and registration affirmation have been audited by Ernst & Young LLP, independent registered public accountancy firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such reputation given on the authority of such firm as experts in report and audit. WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed with the SEC a registration instruction on Form S-1 under the Securities Act with obedience to the shares of coarse stock being offered by this prospectus. This prospectus does not contain all of the information in the adjustment affirmation and its exhibits. For far information with deference to us and the common neckcloth offered by this course catalog, we refer you to the adjustment argument and its exhibits. Where we make statements in this prospectus as to the contents of any contract or any other document, for the arrant text of that document, we refer you to the copy of the contract or other text file filed as an parade to the registration affirmation. Each of these statements is qualified in all respects by this character. You can read our SEC filings, including the adjustment instruction of which this course catalog is a part, over the Internet at the SEC ’ s web site at sec.report. You may besides read and copy any document we file with the SEC at its populace reference facilities at 100 F Street, NE, Washington, DC 20549. You may besides obtain copies of the document at prescribed rates by writing to the Public Reference section of the SEC at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the populace reference book facilities. Upon completion of this offer, we will be subject to the information report requirements of the Exchange Act, and we will file reports, proxy statements and early data with the SEC. We besides intend to furnish our stockholders with annual reports containing our consolidate fiscal statements audited by an independent populace accounting firm and quarterly reports containing our unaudited consolidate fiscal information. We maintain a web site at www.triabeauty.com. The reference to our network address does not constitute internalization by mention of the information contained on, or accessible through, this web site. Upon completion of this put up, you may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 ( a ) or 15 ( d ) of the Exchange Act with the SEC complimentary of consign at our web site ampere soon as sanely feasible after such material is electronically filed with, or furnished to, the SEC. 123 Index to the Consolidated Financial Statements F-1 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders TRIA Beauty, Inc. We have audited the accompanying consolidate remainder sheets of TRIA Beauty, Inc. as of December 31, 2010 and 2011 and the relate consolidated statements of operations, redeemable convertible favored stock and stockholders ’ equity ( deficit ), and cash flows for each of the three years in the time period ended December 31, 2011. These fiscal statements are the province of the Company ’ s management. Our duty is to express an impression on these fiscal statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board ( United States ). Those standards require that we plan and perform the audit to obtain fair assurance about whether the consolidate fiscal statements are complimentary of material misstatement. We were not engaged to perform an audit of the Company ’ s home manipulate over fiscal report. Our audits included consideration of inner control over fiscal report as a basis for designing audit procedures that are appropriate in the circumstances, but not for the determination of expressing an opinion on the effectiveness of the Company ’ s home manipulate over fiscal report. accordingly, we express no such opinion. An audited account besides includes examine, on a test footing, evidence supporting the amounts and disclosures in the fiscal statements, assessing the account principles used and significant estimates made by management, and evaluating the overall fiscal affirmation presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the fiscal statements referred to above present fairly, in all material respects, the consolidate fiscal position of TRIA Beauty, Inc. at December 31, 2010 and 2011, and the consolidate results of its operations and its cash flows for each of the three years in the time period ended December 31, 2011, in ossification with U.S. broadly accepted accounting principles. /s/ Ernst & Young LLP Redwood City, California March 12, 2012 F-2 TRIA Beauty, Inc. consolidate Balance Sheets ( in thousands, except contribution and per parcel amounts )

December 31,  Pro Forma as of
December 31,
2011

(see note 2)
2010 2011
(unaudited)
Assets
current assets :
Cash and cash equivalents $ 5,809 $ 14,972
short-run investments 10,713
Restricted cash 400
Accounts receivable, net 3,739 3,333
Inventories 4,794 6,024
Prepaid expenses and other current assets 552 3,226
         
total stream assets 25,607 27,955
property and equipment, final 1,543 1,756
intangible assets, net 1,000
Restricted cash 472 402
other assets 355 357
         
total assets $ 27,977 $ 31,470
         
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
current liabilities :
Accounts collectible $ 2,606 $ 4,876
Accrued liabilities 5,617 7,146
current part of notes account payable 2,413
         
sum current liabilities 8,223 14,435
Deferred rent 299 976
Notes collectible, net of stream part 4,800
other liabilities 453
         
sum liabilities 8,522 20,664
redeemable convertible choose stock issuable in series, par rate $ 0.001 ; 69,585,697 and 94,585,697 shares authorized at December 31, 2010 and 2011, respectively ; 69,243,461 and 91,602,072 shares issued and outstanding at December 31, 2010 and 2011, respectively, and no shares issued or great pro forma ( unaudited ), sum extermination preference of $ 78,616 and $ 104,329 at December 31, 2010 and 2011, respectively . 83,878 109,540
Stockholders ’ fairness ( deficit ) :
common breed, par rate $ 0.001 ; 90,000,000 and 120,000,000 shares authorized at December 31, 2010 and 2011, respectively ; 5,330,299 and 5,360,299 shares issued and outstanding at December 31, 2010 and 2011, respectively, and 96,962,371 shares issued and great professional forma ( unaudited ) 5 5 97
extra paid-in capital 2,427 2,907 112,355
Accumulated other comprehensive examination income 76 122 122
Accumulated deficit ( 66,931 ) ( 101,768 ) ( 101,768 )
           
entire stockholders ’ fairness ( deficit ) ( 64,423 ) ( 98,734 ) $ 10,806
           
entire liabilities, redeemable convertible prefer stock and stockholders ’
equity ( deficit )
$ 27,977 $ 31,470
         

The accompanying notes are an integral part of these financial statements. F-3 TRIA Beauty, Inc. consolidate Statements of Operations ( in thousands, except per parcel amounts )

Years Ended December 31,
2009 2010 2011
net sales $ 19,417 $ 27,140 $ 45,049
price of goods sold 9,621 14,109 22,533
            
Gross net income 9,796 13,031 22,516
operate expenses :
Sales and commercialize 9,005 19,863 32,256
research and growth 8,253 9,381 9,341
General and administrative 5,583 9,792 14,867
            
sum operating expenses 22,841 39,036 56,464
            
loss from operations ( 13,045 ) ( 26,005 ) ( 33,948 )
early income ( expense ) :
Interest income 386 50 46
interest expense ( 1 ) ( 7 ) ( 601 )
change in fairly value of sanction liability ( 252 )
Foreign substitute acquire ( personnel casualty ) 372 366 ( 38 )
            
Loss before provision for income taxes ( 12,288 ) ( 25,596 ) ( 34,793 )
provision for income taxes ( 91 ) ( 23 ) ( 44 )
            
net loss ( 12,379 ) ( 25,619 ) ( 34,837 )
alteration to net loss resulting from preferred stock modification and extinguishment 982
            
net loss attributable to common stockholders $ ( 12,379 ) $ ( 24,637 ) $ ( 34,837 )
            
net loss per parcel attributable to common stockholders – basic and diluted $ ( 3.70 ) $ ( 6.26 ) $ ( 6.52 )
            
slant average shares of coarse stock certificate used in computing net passing attributable to park stockholders – basic and diluted 3,345 3,933 5,342
            
Pro forma net loss per share attributable to coarse stockholders – basic and diluted ( unaudited ) $ ( 0.43 )
        
leaden average shares of common banal used in computing pro forma net loss attributable to common stockholders – basic and diluted ( unaudited ) 81,042
        

The accompanying notes are an integral part of these financial statements. F-4 TRIA Beauty, Inc. amalgamate Statements of redeemable convertible Preferred Stock and Stockholders ’ Equity ( Deficit ) ( in thousands, except parcel and per share amounts )

Redeemable Convertible
Preferred Stock
  Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
    Shares     Amount   Shares Amount
Balances at December 31, 2008 46,704,786 $ 64,542 3,318,186 $ 3 $ 332 $ 146 $ ( 28,933 ) $ ( 28,452 )
exercise of common stock options 36,125 8 8
Stock-based compensation 314 314
comprehensive personnel casualty :
accumulative effect of foreign currentness translation adjustments ( 22 ) ( 22 )
unfulfilled loss on short-run investments, net of tax ( 110 ) ( 110 )
net loss ( 12,379 ) ( 12,379 )
                     
total comprehensive personnel casualty ( 12,511 )
                                   
Balances at December 31, 2009 46,704,786 $ 64,542 3,354,311 $ 3 $ 654 $ 14 $ ( 41,312 ) $ ( 40,641 )

The accompanying notes are an integral part of these financial statements. F-5 TRIA Beauty, Inc. consolidate Statements of redeemable convertible Preferred Stock and Stockholders ’ Equity ( Deficit ) ( continued ) ( in thousands, except share and per share amounts )

Redeemable Convertible
Preferred Stock
  Common Stock Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
(Deficit)
Shares Amount   Shares Amount
Balances at December 31, 2009 ( brought ahead ) 46,704,786 $ 64,542 3,354,311 $ 3 $ 654 $ 14 $ ( 41,312 ) $ ( 40,641 )
drill of common lineage options 416,052 155 155
exercise of common neckcloth warrants 50,000 18 18
Stock-based compensation 303 303
issue of Series CC redeemable convertible prefer sprout at $ 1.15 per share, net of issue costs of $ 324 18,225,047 20,635
preferable breed to preferred stock certificate substitution 11,863,377 6,019 ( 6,019 ) ( 6,019 )
favored stock to common stock conversion ( 7,549,749 ) ( 7,318 ) 1,509,936 2 7,316 7,318
comprehensive loss :
effect of foreign currency translation adjustments 75 75
unfulfilled loss on short-run investments, net of tax ( 13 ) ( 13 )
net loss ( 25,619 ) ( 25,619 )
                     
sum comprehensive loss ( 25,557 )
                                   
Balances at December 31, 2010 69,243,461 83,878 5,330,299 5 2,427 76 ( 66,931 ) ( 64,423 )
exercise of coarse stock options 30,000 12 12
Stock-based recompense 468 468
issue of Series CC redeemable convertible prefer stock at $ 1.15 per share, net of issue costs of $ 31 22,358,611 25,662
comprehensive loss :
effect of alien currency translation adjustments 46 46
net loss ( 34,837 ) ( 34,837 )
                     
entire comprehensive loss ( 34,791 )
                                   
Balances at December 31, 2011 91,602,072 $ 109,540 5,360,299 $ 5 $ 2,907 $ 122 $ ( 101,768 ) $ ( 98,734 )
                                   

The accompanying notes are an integral part of these financial statements. F-6 TRIA Beauty, Inc. consolidate Statements of Cash Flows ( in thousands )

Years Ended December 31,
2009 2010 2011
Cash flows from operating activities
net income loss $ ( 12,379 ) $ ( 25,619 ) $ ( 34,837 )
Adjustments to reconcile net loss to net cash used in
function activities :
depreciation and amortization 304 456 638
change in bonny prize of justify liability 252
Stock-based recompense 314 303 468
Disposal of fixed assets 22
amortization of premium on short-run investments ( 126 ) 158 107
Accrued concern on notes account payable 169
amortization of loanword fees 114
Changes in operate assets and liabilities :
Accounts receivable, net 604 ( 107 ) 478
Inventories ( 1,548 ) ( 486 ) ( 1,185 )
Prepaid expenses and other current assets ( 690 ) 258 ( 2,447 )
Restricted cash ( 201 ) ( 69 ) ( 402 )
Accounts account payable ( 1,086 ) ( 666 ) 2,094
Accrued liabilities 1,634 3,019 2,156
            
internet cash used in operate activities ( 13,174 ) ( 22,731 ) ( 32,395 )
Cash flows from investing activities
Purchases of property and equipment ( 879 ) ( 1,041 ) ( 851 )
buy of intangible assets ( 1,000 )
Proceeds from sale and maturities of short-run investments 33,040 16,045 ( 10,552 )
Purchases of short-run investments ( 21,115 ) ( 13,052 ) 21,160
            
net cash provided by investing activities 11,046 1,952 8,757
Cash flows from financing activities
Proceeds from use of coarse stock options and warrants 8 173 12
Proceeds from issue of notes collectible, net of issue costs 7,816
Repayments of notes account payable ( 756 )
Proceeds from issue of prefer malcolm stock, web of issue costs 20,634 25,662
            
net cash provided by finance activities 8 20,807 32,734
Effect of exchange rate changes on cash and cash equivalents ( 106 ) 191 67
            
net ( decrease ) increase in cash and cash equivalents ( 2,226 ) 219 9,163
Cash and cash equivalents at beginning of period 7,816 5,590 5,809
            
Cash and cash equivalents at end of period $ 5,590 $ 5,809 $ 14,972
            
Supplemental disclosures of cash flow information
Cash paid for matter to $ $ 9 $ 317
Cash paid for income taxes 1 19 15
Supplemental disclosures of noncash investing and financing activities
prefer stock to preferred stock exchange ( 6,019 )
prefer stock to common stock conversion 7,316

The accompanying notes are an integral part of these financial statements. F-7 Tria Beauty, Inc. Notes to Consolidated Financial Statements 1. Description of Business TRIA Beauty, Inc. ( the company or TRIA ) was incorporated in California in January 2003 and reincorporated in Delaware in July 2010. The Company is based in Dublin, California, where its corporate headquarters, research and development ( R & D ), selling, and United States ( U.S. ) fabricate of its Skin Perfecting Blue Light product are located. TRIA has three wholly-owned subsidiaries in Japan, South Korea, and the United Kingdom that function as sales and commercialize offices. The Company develops and sells FDA-cleared light-based aesculapian devices directly to consumers. Since its origin in 2003, the Company has incurred accumulative losses totaling $ 66.9 million as of December 31, 2010 and $ 101.8 million as of December 31, 2011. To date, the Company has funded operations chiefly with the net proceeds from private placements of cashable convertible prefer stock and from loan proceeds. As of December 31, 2010 and 2011, the Company had net working capital of $ 17.4 million and $ 13.5 million. Management believes that presently available resources, after considering the loan transactions disclosed in Note 16, will provide sufficient funds to enable the Company to meet its obligations for at least the following 12 months. The Company ’ south ability to fund its operations is dependent primarily upon its ability to execute on its business plan, including generating sufficient sales and cash inflows from operate activities. If the Company is ineffective to execute on its business plan and adequately fund its operations, the ship’s company may need to seek extra financing and/or reduce discretionary spend. There can be no assurance that the Company will be able to generate sufficient cash from operations to adequately fund operate on needs or ultimately achieve profitableness, or that extra finance will be available on terms acceptable to the Company, if at all. The accompanying fiscal statements do not include any adjustments that might result from the result of these uncertainties. The Company besides has existing patent litigation with Palomar Medical Technologies, Inc. ( Palomar ) disclosed in Note 7, in which an adverse result could materially affect the Company ’ randomness business, fiscal discipline, results of operations and cash flows. 2. Summary of Significant Accounting Policies Basis of Presentation The attendant consolidate fiscal statements have been prepared in accordance with U.S. by and large accepted accounting principles ( GAAP ), and include the accounts of the Company and its wholly-owned subsidiaries, TRIA Beauty Japan, KK., TRIA Beauty Korea, Ltd., and TRIA Beauty UK, Ltd. All meaning intercompany accounts and transactions have been eliminated in consolidation. Unaudited Pro Forma Amounts In January 2012, the Company ’ s Board of Directors approved the charge of an initial public offer ( IPO ) of the Company ’ randomness common stock. If the initial public offer is consummated, all outstanding redeemable convertible prefer stock will automatically convert into shares of the Company ’ randomness common stock and the Company ’ sulfur preferred broth warrants will automatically convert into warrants to purchase shares of the Company ’ s coarse stock. Upon conversion of the cashable convertible choose stock into shares of the Company ’ south coarse stock, holders of redeemable convertible prefer store are entitled to receive dividends account payable in cash or shares of common livestock at the choice of the Company to the extent any are declared. No dividends have been declared, consequently the affect of dividends has not been reflected in the pro forma stockholders ’ fairness ( deficit ) or the pro forma weighted-average shares used to compute pro forma net income ( personnel casualty ) per share. The pro forma amounts do not give effect to any proceeds from the IPO itself. F-8 Subsequent Events The Company has evaluated subsequent events after the balance wheel sheet date of December 31, 2011 through the date of the file of this registration statement on Form S-1 in which these consolidated fiscal statements are included. See Note 16, subsequent Events for details. Use of Estimates The formulation of consolidate fiscal statements in conformity with U.S. GAAP requires management to make estimates and assumptions that can affect the report amounts of assets and liabilities as of the date of the consolidate fiscal statements, equally well as the reported amounts of sales and expenses during the periods presented. The company bases its estimates on historic experience and besides on assumptions that it believes are reasonable, however, actual results could differ from those estimates. To the extent there are fabric differences between these estimates and the actual results, the Company ’ second consolidated fiscal statements will be affected. Foreign Currency Translation The Company considers the functional currentness of its foreign subsidiaries to be the relevant local currency. Assets and liabilities recorded in extraneous currencies are translated into U.S. dollars at the central rate in consequence on the balance tabloid date, and gross, cost and expense accounts are translated at the average rates of exchange in effect during the period. The effects of foreign currency translation adjustments are recorded in the accrued other comprehensive income or passing account as separate of a freestanding part of stockholders ’ fairness ( deficit ) in the company amalgamate balance wheel sheets. Foreign currency transaction gains and losses are included in extraneous exchange gains ( losses ) in the company consolidate statements of operations for the period in which they occur. Concentration of Credit Risk fiscal instruments that potentially subject the company to concentrations of credit gamble consist chiefly of cash and cash equivalents, short-run investments and accounts receivable. The company maintains its cash, cash equivalents and short-run investments with banks and early fiscal institutions. Deposits with banks in the United States may be in excess of insured limits provided on such deposits. Balances on deposits held with banks outside the United States are not covered by deposit insurance. The Company monitors the fiscal credit ratings of the issuers of its cash equivalents and short-run investments and limits the concentration in individual securities and the types of investments that exist within its investing portfolio. All of the Company ’ s investments carry high-credit-quality ratings, in accordance with its investment policy. To date, the Company has not experienced any recognize losses on its induct cash and cash equivalents and short-run investments. The Company ’ s sales are primarily made directly to individual customers, and to a much smaller extent to a humble group of retailers and independent distributors. The Company ’ randomness accounts receivable primarily consist of a boastfully total of receivables from individual consumers secured by credit cards and a belittled total of larger receivables to retail accounts with recognition terms. credit risk is generally mitigated by the large numeral of individual customers. For amounts owed by individual customers, most of which are secured with citation cards, the Company assesses the need for maintaining reserves for credit losses based on historical information and trends of losses incurred. For the remaining customers, the company performs ongoing credit evaluations to estimate the indigence for maintaining reserves for likely credit losses. The party records reserves against its accounts receivable using an valuation reserve for doubtful accounts. Increases in the allowance for doubtful accounts are included as a component of sales and market expenses. F-9 Customers that accounted for more than 10 % of gross accounts receivable, comprising chiefly of retail accounts are noted below :

As of December 31,
2010 2011
Customer a 11 % **
customer B 18 % **
** Less than 10 %

Customers that accounted for more than 10 % of net sales are noted below :

Years Ended December 31,
2009 2010 2011
Customer ampere 14 % ** **
customer B 15 % ** **
Customer C 10 % ** **
** Less than 10 %

Fair Value of Financial Instruments Fair respect is the switch over price that would be received for an asset or paid to transfer a liability ( an exit price ) in the chief or most advantageous market for the asset or indebtedness in an neat transaction between grocery store participants on the measurement date. valuation techniques used to measure fairly value must maximize the habit of discernible inputs and minimize the use of unobservable inputs. The Company uses a three-tier fair-value hierarchy for disclosure of fairly rate measurements as follows :

floor 1, defined as discernible inputs, such as quote prices for identical assets in active markets .
flush 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly discernible .
level 3, defined as unobservable inputs in which fiddling or no market data exists, therefore, requiring management to develop its own assumptions based on the best estimates of what grocery store participants would use in pricing an asset or liability at the report date .

The carrying values of the Company ’ s fiscal instruments such as cash equivalents, restricted cash, short-run investments, accounts receivable, accounts collectible and accrue liabilities approximate fairly prize due to the short-run nature of these items. The carrying total of the Company ’ south convertible favored stock guarantee liability represents its estimated fair prize. The Company believes that the rate and terms of its notes collectible are consistent with the market for such instruments and that the carrying value of the notes collectible approximates fair value. Cash, Cash Equivalents, and Short-Term Investments Cash and cash equivalents consist of demand deposits, short-run money market funds, U.S. Treasury and means debt securities, and commercial paper. The Company considers investments in highly liquid instruments with an master maturity of 90 days or less from the date of buy to be cash equivalents. The Company ’ randomness investments are all short-run and consist of high-credit quality U.S. Treasury and representation debt securities and bodied debt securities with investment-grade ratings that have maturities of greater than 90 days F-10 but less than 365 days from the date of purchase. The Company mitigates investment exposure by limiting its investments on any single institution, maturity, and investment character. The company has classified all debt securities as available for sale and therefore they are carried at their estimated fair prize based on quote market prices or pricing models using current marketplace rates. unfulfilled gains and losses are included in roll up other comprehensive examination income ( loss ) and are reported as a branch part of stockholders ’ equity ( deficit ). Realized gains and losses and declines in value judged to be early than temp, if any, on available-for-sale securities are included in concern income. The company has not recognized any losses from other-than-temporary impairments through December 31, 2011. The cost of securities sold is based on the specific-identification method acting. pastime on available-for-sale securities is included in sake income. Restricted Cash The Company is required to maintain restricted cash deposits as collateral under credit batting order services agreements, a corporate credit poster agreement with a fiscal initiation and as collateral for a standby letter of accredit. The deposits are in the class of a bank deposit and are classified as restricted cash in the accompany consolidate proportion sheets. Accounts Receivable Accounts receivable represent amounts owed to the company from the sale of its products cosmopolitan. The Company establishes an allowance for bad debts and an allowance for sales returns based on a review of diachronic experience of losses incurred. The company offers direct customers the option to purchase certain products on a requital design. The payment plan requires a down payment plus four to five equal monthly payments secured by a credit calling card. At the meter of sale, the Company reserves an estimated bad debt allowance for these transactions american samoa well as for sales to retail customers and physicians. Inventories Inventories consist of sensitive materials, work in progress, and finished goods and are stated at the lower of cost or market determined on a first-in, first-out basis. inventory that is disused or in excess of the Company ’ mho forecasted need is written down to its estimated final realizable value based on assumptions about future demand forecasts and grocery store conditions. inventory write-downs are charged to cost of goods sold and totaled $ 0, $ 323,000 and $ 1.2 million during the years ended December 31, 2009, 2010 and 2011, respectively. inventory is consigned with certain retailers. The amounts consigned as of December 31, 2010 and 2011 were $ 572,000 and $ 357,000, respectively. Property and Equipment property and equipment are stated at price, less roll up disparagement and amortization. Depreciation is determined using the straight-line method acting over the estimated utilitarian lives of the respective assets, generally three to five years. leasehold improvements are amortized on a straight-line basis over the short of their utilitarian lives or the remaining lease term. The Company reviews property and equipment for damage whenever events or changes in circumstances indicate that the carrying come of an asset may not be recoverable. Recoverability is measured by comparison of the carrying sum to the future undiscounted final cash flows which the assets are expected to generate. If such assets are considered to be afflicted, the stultification to be recognized is measured by the sum by which the carrying amount of the assets exceeds the assets ’ fairly value determined using the projected dismiss future net cash flows arising from the asset. There has been no deterioration of durable assets through December 31, 2011. F-11 Intangible Assets intangible assets consist only of purchased apparent applications related to products in exploitation. The Company recorded the buy apparent applications at their fair values on the date of the acquisition and will amortize, using the straight-line method acting, over their estimated utilitarian lives which management estimated to be 5 years. amortization of these purchased patent applications commences when the relate product, to which these patent applications are associated, starts generating tax income. The Company reviews intangible assets for disability whenever events or changes in circumstances indicate that the carrying sum of an asset may not be recoverable. Recoverability is measured by comparison of the carrying sum to the future undiscounted web cash flows which the assets are expected to generate. If such assets are considered to be impaired, the deterioration to be recognized is measured by the come by which the carrying sum of the assets exceeds the assets ’ carnival value determined using the projected dismiss future net cash flows arising from the asset. There has been no impairment of intangible assets through December 31, 2011. Warranty Reserve The Company provides a full moon substitution guarantee on its products for periods ranging from 12 to 24 months from the date of purchase. The company accrues for likely guarantee claims based on historical claim have and specific events and other factors when the Company believes an exposure is probable and can be reasonably estimated. The adequacy of the military reserve is reviewed sporadically and may be adjusted for changes in historical experience and other data as they become available. activeness in the guarantee modesty account was as follows ( in thousands ) :

Year Ended
December 31,
2010 2011
Beginning balance $ 386 $ 715
Charges to price of sales 1,071 971
guarantee claims ( 742 ) ( 1,144 )
        
Ending balance $ 715 $ 542
        

Revenue Recognition The Company ’ s sales are derived chiefly from sales of its Hair Removal Laser device. The products are sold chiefly on a lineal to consumer basis and secondarily through retailers and distributors. The company recognizes sales when the following four tax income recognition criteria are met : persuasive evidence of an placement exists, rescue has occurred, the sell price is fixed or determinable, and collectability is sanely assured. The company considers that products are delivered when pitch terms are met and style and gamble of loss have been transferred. For sales from the Company ’ mho web site, and for sales to the Company ’ s retail customers and distributors, tax income recognition occurs at the time of cargo. The company recognizes gross as the net income measure estimated to be received after deducting estimate amounts for product returns, discounts and allowances. The company estimates future intersection returns, discounts and allowances based chiefly upon historical feel and expected changes in sales trends. Sales returns and allowances The Company provides circumscribed rights of return to consumers and retailers, by and large within 60 to 90 days, but no rights of return to distributors. At the time gross is recorded, the Company estimates the impact of returns chiefly based on historical experience. The company recognizes this estimate as a decrease to gross with F-12 the offset on the consolidate balance sheets to either its allowance for returns which is offset against accounts receivable in the case of sales made on recognition terms or is included in accrued liabilities in the case of sales made on a postpaid basis. Since distributors have no rights of return, sales to distributors are not included in the analysis. Cost of Goods Sold price of goods sold consists primarily of the monetary value of finished goods and the cost of part products purchased from third-party manufacturers and from the Company ’ second shrink manufacturer. To a lesser extent it includes the parturiency, material and overhead related to the Company ’ s home manufacture processes and the costs associated with product guarantee and repositing costs. Shipping and Handling Costs The party records ship and handle charges as a component of price of goods sold and records shipping and handling costs collected from customers as a part of sales. The total of ship costs included in costs of goods sold for the years ended December 31, 2009, 2010 and 2011 were $ 243,000, $ 481,000 and $ 1.1 million, respectively. Taxes Collected From Customers Taxes collected from customers that are to be remitted to governmental authorities are not included in sales in the attendant consolidate statements of operations. Advertising Expense The Company ’ second policy is to expense the costs of running an ad or airing a television infomercial at the time it is aired or run. If an infomercial is broadcast on multiple occasions, the monetary value of each broadcast is expensed at the time of such broadcast. Costs related to the production of advertisements and television infomercials are expensed as incurred. advertise expenses during the years ended December 31, 2009, 2010 and 2011 were $ 1.3 million, $ 5.7 million and $ 12.8 million, respectively. advertise is included in sales and marketing expenses in the company amalgamate statements of operations. Stock-Based Compensation Stock-based recompense for options to purchase park shares is estimated for accountancy purposes at the grant date based on fair value as calculated by the Black-Scholes-Merton option price model, internet of estimated forfeitures. The company recognizes compensation expense over the needed service period using the straight-line method. The determination of the fair value of a stock-based award is affected by the deemed fair respect of the underlying malcolm stock price on the grant date, arsenic well as other assumptions including the risk-free interest rate, the estimated excitability of the Company ’ s stock price over the term of the award, the calculate period of meter that the Company expects employees to hold their stock options, and the expect dividend rate. There was no nonemployee stock recompense expense recognized for the years ended December 31, 2009, 2010 and 2011. Convertible Preferred Stock Warrant Liability The Company accounts for warrants to purchase shares of its cashable convertible prefer malcolm stock as a indebtedness recognized at fair value. The choose stock warrants are recorded as a liability because the underlie shares of redeemable convertible preferable malcolm stock are contingently redeemable and, consequently, may obligate the caller to transfer assets at some point in the future. The warrants are submit to remeasurement to fair value at each poise sheet go steady and any change in fair value is recognized as a component of other income ( expense ), net, on the statements of amalgamate operations. The Company will continue to adjust the indebtedness for changes in fair prize until the earlier of the exercise or termination of the warrants, the completion of a deem liquidation consequence, F-13 conversion of redeemable convertible preferable neckcloth into coarse stock, or until the holders of the redeemable convertible prefer stock can no long trigger a deem liquidation event. Research and Development research and development costs consist of salaries, employee benefits, stock-based compensation, lab supplies, outsourced development expenses, professional services and facility costs and are expensed as incurred. Income Taxes The Company uses an asset and liability approach for accounting for submit income taxes, which requires recognition of submit income tax assets and liabilities for the expect future tax consequences of events that have been recognized in its fiscal statements, but have not been reflected in its taxable income. Estimates and judgments occur in the calculation of sealed tax liabilities and in the determination of the recoverability of certain submit income tax assets, which arise from irregular differences and carryforwards. Deferred income tax assets and liabilities are measured using the presently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company regularly assesses the likelihood that its postpone income tax assets will be realized from recoverable income taxes or recovered from future taxable income based on the realization criteria set away in Accounting Standards Codification 740-10, Income Taxes. To the extent that the Company believes any amounts are more probably not to be realized, the company records a evaluation allowance to reduce the postpone income tax assets. In the consequence the Company determines that all or character of the net postpone tax assets are not accomplishable in the future, an adjustment to the valuation valuation reserve would be charged to earnings in the period such determination is made. similarly, if the Company subsequently realizes submit income tax assets that were previously determined to be unachievable, the respective valuation allowance would be reversed, resulting in an allowance to earnings in the period such determination is made. Based on the available attest, the Company believed it was not likely able to utilize its submit tax assets in the future and as a resultant role, the Company recorded a full valuation allowance as of December 31, 2010 and December 31, 2011. The Company intends to maintain the valuation valuation reserve until sufficient attest exists to support its reversal. The Company regularly reviews its tax positions and for a tax profit to be recognized the refer tax position must be more probable than not to be sustained upon examination. Any measure recognized is broadly the largest benefit that is more likely than not to be realized upon liquidation. The Company ’ south policy is to recognize pastime and penalties related to income tax matters as an income tax expense. Through December 31, 2011, the Company did not have any interest or penalties associated with unrecognized tax benefits. Comprehensive Loss comprehensive examination loss consists of final loss and other comprehensive reach ( loss ). other comprehensive examination profit ( loss ) consists of accumulative foreign currentness translation adjustments and unfulfilled gains on short-run investments. comprehensive examination loss has been reflected in the consolidate statements of stockholders ’ fairness ( deficit ). Balances within accumulated other comprehensive examination income are as follows ( in thousands ) :

As of
December 31,
    2010         2011    
accumulative unfulfilled ( loss ) gain on short-run investments, net of tax $ ( 1 ) $
accumulative effect of alien currentness translation adjustments 77 122
        
total accumulated other comprehensive examination income $ 76 $ 122
        

F-14 There were no gains or losses on available-for-sale securities reclassified out of roll up other comprehensive income into earnings for the periods presented. Net Loss Per Share and Unaudited Pro Forma Net Loss Per Share of Common Stock basic final loss per partake of common stock certificate is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. diluted internet loss per share of common sprout is computed by giving effect to all potentially dilutive securities great during the time period, including options, warrants, and convertible prefer stock certificate. Basic and diluted net loss per share attributable to common stockholders was the lapp for all periods presented as the inclusion body of all potentially dilutive securities great were anti-dilutive. As such, the numerator and the denominator used in computing both basic and load web loss are the lapp for each period presented. Pro forma basic and load net loss per share of common malcolm stock has been computed to give consequence to the automatic conversion immediately anterior to the close of a qualifying initial populace put up of the convertible preferable sprout into common stock as of the beginning of the period or the issue date, if former. besides, the numerator in the professional forma basic and load web loss per partake calculation has been adjusted to remove the gains and losses resulting from the re-measurement of the convertible choose stock warrant liability as this amount will be reclassified to extra paid-in capital upon the completion of a qualifying initial public offer of the Company ’ second park standard. Recent Accounting Pronouncements In May 2011, the Financial Accounting Standards Board ( FASB ) issued new steering for honest rate measurements to provide a reproducible definition of clean value and ensure that the fair rate measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The guidance changes certain fairly value measurement principles and enhances the disclosure requirements particularly for level 3 bonny value measurements. The steering is effective for the Company prospectively beginning in the first draw of fiscal 2012. The company is presently evaluating the affect this guidance may have on its fiscal placement, results of operations and cash flows. In June 2011, the FASB issued Accounting Standards Update ( ASU ) No. 2011-05, Presentation of Comprehensive Income ( ASU 2011-05 ). ASU 2011-05 requires entities to report components of comprehensive income in either a continuous affirmation of comprehensive income or two break but consecutive statements. Under the continuous statement access, the instruction would include the components and total of net income income, the components and sum of other comprehensive examination income and the total of comprehensive income. Under the two statement approach, the first gear instruction would include the components and entire of net income and the irregular instruction would include the components and sum of other comprehensive income and the full of comprehensive examination income. comprehensive examination income may nobelium long be presented entirely within the amalgamate statement of stockholders ’ equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income. ASU 2011-05 is effective retrospectively for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The company has elected not to early dramatize this update and believes it will not have an impact on its fiscal position or results of operations. F-15 3. Marketable Securities Available-for-sale marketable securities consisted of the following ( in thousands ) :

As of December 31, 2010
Amortized
Cost
Unrealized
Losses
Aggregate
Fair Value
money commercialize funds $ 2,885 $ $ 2,885
corporate bonds and commercial wallpaper 10,714 ( 1 ) 10,713
             
total available-for-sale marketable securities $ 13,599 $ ( 1 ) $ 13,598
             
Reported as :
Cash and cash equivalents $ 2,885 $ $ 2,885
short-run investments 10,714 ( 1 ) 10,713
             
$ 13,599 $ ( 1 ) $ 13,598
             
As of December 31, 2011
Amortized
Cost
Unrealized
Gains
Aggregate
Fair Value
money market funds $ 12,842 $ $ 12,842
              
total available-for-sale marketable securities $ 12,842 $ $ 12,842
              
Reported as :
Cash and cash equivalents $ 12,842 $ $ 12,842
              
$ 12,842 $ $ 12,842
              

All marketable securities held by the Company as of December 31, 2010 and 2011 had maturities of less than one year. The Company recognized realize gains of $ 393,000, $ 45,000 and $ 22,000 for the years ended December 31, 2009, 2010 and 2011, respectively. Realized gains and losses are calculated based on the specific identification method and are recognized in other income ( expense ) in the company consolidated statements of operations. For the years ended December 31, 2009, 2010 and 2011 there were no significant unfulfilled losses on investments. 4. Fair Value Measurements The Company measures and reports its money market funds, corporate bonds, commercial paper and convertible prefer stock justify liability at fair value. The adopt table sets forth the fairly rate of the Company ’ s fiscal assets and liabilities by level within the fair value hierarchy measured on a recurring basis ( in thousands ) :

As of December 31, 2010
    
Level 1 Level 2 Level 3 Total
                   
Assets :
money market funds $ 2,885 $ $ $ 2,885
corporate bonds and commercial newspaper 10,713 10,713
                   
full fiscal assets $ 2,885 $ 10,713 $ $ 13,598
                   

F-16

December 31, 2011
    
Level 1 Level 2 Level 3 Total
                   
Assets :
money commercialize funds $ 12,842 $ $ $ 12,842
                   
entire fiscal assets $ 12,842 $ $ 12,842
                   
Liabilities
common and convertible prefer neckcloth warrant liability $ $ $ 453 $ 453
                   

The follow board provides a roll-forward of the fairly rate of the coarse and convertible prefer stock guarantee liability categorized as Level 3 for the class ended December 31, 2011 ( in thousands ) :

balance at December 31, 2010 $
Fair value of common and convertible preferable stock warrants issued during the period 200
change in fairly value of the park and convertible choose stock sanction liability 253
    
counterweight at December 31, 2011 $ 453
    

The honest value of common and convertible preferable store warrants prior to 2011 was immaterial. The Company ’ randomness common and convertible prefer stock warrants were classified as level 3 because they were valued based on unobservable inputs and management ’ sulfur judgment due to the absence of quote market prices, built-in lack of liquidity and the long-run nature of such fiscal instruments. The company performs a carnival value judgment of the common and convertible prefer stock justify inputs at each report date. These assumptions are inherently immanent and involve significant management sagacity. Any exchange in fair value is recognized as a component of other income ( expense ), net, on the consolidate statements of operations. There were no transfers of assets measured between Level 1 and Level 2 during the years ended December 31, 2010 and 2011. 5. Balance Sheet Data Accounts Receivable action in the allowance for doubtful accounts is as follows ( in thousands ) :

Years Ended December 31,
2009 2010 2011
            
allowance for doubtful accounts, beginning balance $ 2 $ 63 $ 510
Charged to costs and expenses 62 514 690
Deductions ( write-offs ) ( 1 ) ( 67 ) ( 827 )
            
allowance for doubtful accounts, ending balance wheel $ 63 $ 510 $ 373
            

As of December 31, 2010 and 2011, the Company had allowances for sales returns of $ 504,000 and $ 525,000, respectively, which were recorded as an offset to accounts receivable for sales returns relate to sales made on credit terms. F-17 Inventories Inventories are comprised of the following ( in thousands ) :

As of December 31,
    2010     2011  
raw materials $ 1,997 $ 728
solve in serve 1,112 932
Finished goods 1,685 4,364
         
$ 4,794 $ 6,024
         

Property and equipment, net property and equipment are comprised of the surveil ( in thousands ) :

As of December 31,
    2010     2011  
Computer equipment and software $ 726 $ 955
furniture and position equipment 719 837
lab equipment and joyride 924 1,185
leasehold improvements 108 154
         
2,477 3,131
Less accumulated depreciation ( 934 ) ( 1,375 )
         
$ 1,543 $ 1,756
         

Depreciation expense was $ 304,000, $ 456,000 and $ 638,000 for 2009, 2010 and 2011, respectively. Intangible Assets On December 24, 2011, the Company acquired the apparent applications related to products under development by Once Again Me, Inc. The purchase qualified as an asset learning in accord with the provisions of ASC 805, Business Combinations. The Company recorded the intangibles purchased at its fair value of $ 1.0 million and will be amortized over the estimated utilitarian life of 5 years, commencing in 2012 at an estimated amortization pace of $ 200,000 per annum. During the year ended December 31, 2011, the recognized any amortization expense associated with these apparent applications was extraneous. Accrued liabilities Accrued liabilities are comprised of the take after ( in thousands ) :

As of December 31,
    2010     2011  
Payroll and taxes $ 1,021 $ 759
vacation 336 477
Bonuses 522 928
Professional services 1,186 2,938
inventory purchases 545 58
Sales tax 622 358
Warranty allow 715 542
Customer deposits and allowance for sales returns 548 642
other 122 444
         
$ 5,617 $ 7,146
         

F-18 6. Notes Payable Loan Agreement In May 2011, the company entered into a lend and security agreement ( the “ Loan Agreement ” ) with Silicon Valley Bank ( “ SVB ” ). The Loan Agreement provided for a term loanword of up to $ 8.0 million. The term loanword was to be made available in two divide tranches. The Company received tranche A in the sum of $ 5.0 million in May 2011 and tranche B in the sum of $ 3.0 million in September 2011 upon meeting sealed milestones. The concern rate on the total borrowed was 9.4 % and 9.36 % per annum for tranche A and B, respectively. The term loans are scheduled to be paid back over a three-year period in equal monthly payments of interest and star. The notes have a concluding pastime requital of $ 300,000 and $ 180,000 for tranche A and B, respectively, due with the final examination payment. The final interest payments are being recognized as interest expense and accreted through the date the debt is repaid. The loan and security agreement was amended and restated in August 2011 to provide for the ability to borrow up to $ 2.0 million on a revolve basis to be used for general bodied purposes and issue of letters of credit, in summation to the master term loans. interest on the amateur star counterweight of the revolve line of credit is the prime rate published in the Money Rates section of the Wall Street Journal plus 2.5 % per annum ( 5.75 % at December 31, 2011 ). The roll occupation of credit terminates in August 2013, at which time all unpaid chief and interest is due and account payable. These loans are collateralized by substantially all assets of the Company, excluding intellectual property. As of December 31, 2011, the Company was in conformity with the terms of the Loan Agreement. In January 2012, the company entered into a newfangled $ 27.0 million debt facility and repaid the SVB loanword, including $ 480,000 of final examination interest payments. See note 16-Subsequent Events. In accord with the SVB Loan Agreement, the Company issued a warrant to SVB in May 2011 to purchase 278,260 shares of Series CC preferred stock at an exert price of $ 1.15 per plowshare and a warrant to purchase 125,000 shares of common malcolm stock at an exercise price of $ 0.20 per share. In September 2011, the Company issued a warrant to SVB to purchase 71,429 shares of common stock upon borrowing funds under tranche B at an drill price of $ 0.21 per share. The fair value of these warrants at issue was approximately $ 194,000 and resulted in a debt discount. The debt rebate is being amortized to pastime expense using the effective matter to method acting. During the year ended December 31, 2011, the Company made payments of interest and principal of $ 1.1 million. The postdate is a schedule of future payments due on notes collectible as of December 31, 2011 ( in thousands ) :

year Ending December 31 ,
2012 $ 2,493
2013 2,743
2014 2,008
    
entire payments ascribable $ 7,244
Less debt discount rate ( 31 )
    
7,213
    

7. Commitments and Contingencies Operating Lease The Company rents its existing facilities under operate rent agreements that provide for fix rental payments through January 2015 for its U.S. headquarters and October 2013, February 2013 and December 2012 for its Japan, South Korea and UK offices, respectively. The Company ’ s lease agreements can be extended for extra terms ranging from one to five years. During the years ended December 31, 2009, 2010 and 2011, rent expense totaled $ 617,000, $ 1.1 million and $ 1.1 million, respectively. F-19 future minimum annual operate on rent payments are as follows ( in thousands ) :

year Ending December 31 :
2012 $ 1,581
2013 1,419
2014 1,221
2015 407
2016
    
total minimal operational lease payments $ 4,628
    

Purchase Obligations The Company ’ mho Hair Removal Laser is assembled by a one abridge manufacturer with whom the company entered into an agreement in 2010. The Company ’ s agreement with this sign manufacturer stipulates that certain purchase commitments from the Company are not cancelable. sum non-cancelable buy commitments as of December 31, 2010 and 2011 are $ 4.0 million and $ 4.8 million, respectively. Legal Matters In June 2009, Palomar Medical Technologies, Inc. ( “ Palomar ” ) filed a ailment alleging patent misdemeanor by the Company in the United States District Court for the District of Massachusetts. The complaint alleges that the Company infringes certain U.S. patents licensed by Palomar by making, using, sell, and offering to sell the Company ’ randomness Hair Removal Laser, which represents well all the Company ’ s sales in the United States. The complaint seeks damages and besides seeks a preliminary and permanent injunction from far violation. The court entered an order on claim construction in October 2010. fact discovery is basically completed and adept discovery is ongoing and scheduled to close August 2012. summary sagacity briefing is scheduled to be completed in December 2012. presently no test date has been set. The Company is denying all allegations and is vigorously defending this casing ; however, lawsuits are inherently uncertain and irregular as to ultimate result. Although Palomar has previously granted licenses to alleged infringers of these patents, if the ship’s company does not prevail in this litigation it is potential that the Company could be enjoined from selling its Hair Removal Laser in the United States through the 2015 exhalation of the relevant patents. The ship’s company may besides be ordered to pay damages, deoxyadenosine monophosphate well as to make royalty payments to Palomar related to its U.S. sales through 2015, when the relevant patents expire. consequently, an adverse consequence could materially impact the Company ’ mho business, fiscal condition, results of operations and cash flows. Based on the information available, the Company has evaluated whether the image of possible losses are probable, sanely possible or outside as defined by ASC 450. The Company believes that it is sanely possible that a liability has been incurred ; however, a loss or range of passing can not be reasonably estimated. As a consequence, no personnel casualty eventuality has been accrued, and no range of loss photograph is presented. On November 5, 2010, the Company filed a ailment in the United States District Court for the Northern District of California, against Radiancy, Inc. ( “ Radiancy ” ) seeking unspecified damages and injunctive relief for delusive ad and illegal consumption of the Company ’ mho trademarks. In January 2011, Radiancy filed a complaint in the United States District Court for the Southern District of New York, against the company seeking unspecified amounts and injunctive respite relating to unfair contest, interfering with contractual relationships, and using Radiancy ’ s confidential information. The Company disputes Radiancy ’ mho allegations and intends to defend the lawsuit vigorously. The Company believes that it is remote control that a liability has been incurred and that a loss or crop of loss can not be reasonably estimated. As a result no personnel casualty eventuality has been accrued, and no range of loss exposure is presented. In addition to the above proceedings, the Company is subject to versatile claims and legal actions during the ordinary course of our clientele. The Company believes that there are presently no claims or legal actions, early F-20 than those described above, that would have a material adverse effect on the Company ’ s fiscal military position, operations or electric potential operation. Indemnifications In the normal course of clientele and in order to facilitate transactions related to its operations, the Company indemnifies certain parties, including lessors, clinical trial practitioners and, from time to time, retailers and other resellers with esteem to certain matters. The company has agreed to hold certain parties harmless against losses arising from a gap of representations or covenants, or other claims made against certain parties. These agreements may limit the fourth dimension within which an damages claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the by-laws hold alike indemnification obligations to agents. It is not possible to determine the maximum potential come of photograph under these damages agreements due to the limited history of prior indemnification claims and the singular facts and circumstances involved in each detail agreement. Historically, the Company has made no payments under these agreements and consequently such agreements have not had an affect on the operate on results, fiscal position, or cash flows of the Company. 8. Redeemable Convertible Preferred Stock From its origin in 2003 through 2008, the Company issued Series A to Series E cashable convertible choose stock in secret placements. Shares of Series A cashable convertible prefer neckcloth ( the Series A ), Series B and B-1 redeemable convertible prefer stock ( the series B and B-1, respectively ), Series C and C-1 redeemable convertible choose stock ( the Series C and C-1, respectively ), Series D and D-1 redeemable convertible choose stock ( the Series D and D-1, respectively ) and Series E redeemable convertible favored stock ( Series E ) ( jointly, the Series A, Series B and B-1, Series C and C-1, Series D and D-1 and Series E are referred to as the Existing Preferred ). In August 2010, in connection with the sale of Series CC shares described below, the Board of Directors approved an amended and restated Certificate of Incorporation. The amendment increased the Company ’ mho authorized number of common shares to a total of 90,000,000 shares and authorized four new series of redeemable convertible preferable stock designated as Series AA ( 3,000,000 shares ), Series BB ( 5,450,000 shares ), Series CC ( 46,880,298 shares ) and Series CC-1 ( 13,880,298 shares ) preferred standard. In August 2010, the Company received $ 20.9 million in total megascopic proceeds for the issue of 18,225,047 shares of Series CC redeemable convertible favored store ( Series CC ) at a price of $ 1.15 per contribution ( the Series CC Funding ). In connection with our Series CC preferred fund, we completed a rights offer whereby each prior holder of our Existing Preferred was given the opportunity to purchase shares of our Series CC prefer standard. Those Existing Preferred holders that did not purchase at least one-half of their pro rata investment proportions had their existing Preferred converted into shares of our coarse stock on a five-to-one basis ( i.e. every five shares of prefer livestock became a individual share of park stock ). Those that purchased at least one-half of their pro rata investment proportion, but less than their wide pro rata investing proportion, had one-half of their shares of Existing Preferred converted into shares of our common stock on a five-to-one basis, and the remaining Existing Preferred shares were converted into a newfangled course of choose banal. Those that purchased their broad pro rata investment proportion had their entire Existing Preferred holdings converted into corresponding shares of new prefer broth. The professional rata number of Series CC shares for this purpose was calculated by taking the predict Series CC shares to be sold in the Series CC Funding and multiplying them by the percentage of Existing Preferred shares owned by each respective stockholder as a percentage of entire Existing Preferred shares. F-21 Each holder of shares of Existing Preferred that agreed to purchase at least 50 % of their pro rata sum of Series CC shares as defined above had the correct to exchange the follow :

Series A for an equal count of Series AA cashable convertible prefer stock ( Series AA ) and Series B and B-1 for an equal number of Series BB redeemable convertible favored stock ( Series BB ). The newly created Series AA and Series BB have rights, preferences, and privileges identical to those of the existing Series A and Series B ;
Series C and Series D for shares of Series CC-1 redeemable convertible prefer sprout ( Series CC-1 ). The number of shares of Series CC-1 exchangeable for each of the Series C and Series D shares was based on the proportion of the conversion price of the applicable series of prefer store, divided by $ 1.15 ; and
Series C-1, Series D-1 and Series E for shares of Series CC redeemable convertible prefer stock ( Series CC ). The number of shares of Series CC exchangeable for each of the Series C-1, Series D-1 and Series E shares was based on the proportion of the conversion price of the applicable series of preferable livestock, divided by $ 1.15 .

All previously great Existing Preferred shares not exchanged were converted to coarse stock at a 5-to-1 conversion proportion ( five shares of preferred to one share of coarse neckcloth ). The following table summarizes the Existing Preferred exchange :

Exchanged
Shares
Exchange
Ratio
Series
AA
Series
BB
Series
CC
Series
CC-1
Redeemable
Convertible
Preferred
Shares
Series A 1,166,667 1.00 1,166,667 1,166,667
Series B and B-1 1,896,309 1.00 1,896,309 1,896,309
Series C and C-1 3,503,920 1.09 3,260 3,805,348 3,808,608
Series D and D-1 13,721,650 1.30 7,180,431 10,717,373 17,897,804
Series E 18,866,491 1.39 26,249,026 26,249,026
39,155,037 1,166,667 1,896,309 33,432,717 14,522,721 51,018,414

For the Existing Preferred stockholders that elected to participate in the Series CC Funding, the Company issued a entire of 18,225,047 shares of Series CC and raised approximately $ 20.6 million ( net of issue costs ). Of the 46,704,786 Existing Preferred outstanding prior to the Series CC finance, a sum of 39,155,037 shares were held by Existing Preferred stockholders that elected to participate in the Series CC Funding. These participating investors besides elected to have their respective pro rata shares of Existing Preferred exchanged into Series AA, Series BB, Series CC and Series CC-1 shares. such shares were exchanged into a total of 51,018,414 shares of Series AA, Series BB, Series CC and Series CC-1 ( jointly, the Series AA, Series BB, Series CC and Series CC-1 are referred to as New Preferred ) resulting in an extra 11,863,377 shares of redeemable convertible prefer stock being issued. As the prefer breed exchange did not basically change the nature of prefer shares and did not importantly change the contractual terms of the instruments including elimination preference, voting rights and dividend rights, the choose stock exchange was accounted for as a modification of Existing Preferred. accordingly, the Company recorded a $ 6.0 million addition in the carrying value of the choose stock, representing the increase in the fairly value of redeemable convertible prefer stock before and after modification and a equate reduction to extra paid-in capital reflecting the addition in value transferred to favored stockholders like to a deemed dividend. In connection with the Series CC Funding, 7,549,749 shares of Existing Preferred breed held by prefer shareholders were converted to 1,509,926 shares of park stock ( five shares of preferred to one share of common ). Since the conversion occurred coincident with the Series CC Funding and basically changed the F-22 original contractual terms and the nature of the Existing Preferred, the Company concluded the conversion from Existing Preferred to common represents an extinguishment of Existing Preferred. As such, $ 7.0 million, representing the dispute between the carrying amount of the 7,549,749 shares of Existing Preferred convertible preferable stock of $ 7.3 million and the fair value of the park shares issued of $ 0.3 million was recorded as a reduction to preferred broth with a match increase to extra paid-in capital. The addition in the carrying value of the redeemable convertible favored stock of $ 6.0 million as a result of the modification of Existing Preferred and the dispute between the carrying respect of the Existing Preferred and the fair value of common shares issued of $ 7.0 million as a solution of the extinguishment of the Existing Preferred have been reflected on the Consolidated Statement of Operations as a net reduction of the net loss attributable to park stockholders of approximately $ 1.0 million. In November 2010, the Board of Directors approved an amended and restated Certificate of Incorporation. The amendment reduced the authorized numeral of Existing Preferred to zero shares. The amendment besides reduced the empower shares of Series AA redeemable convertible favored stock from 3,000,000 to 1,166,667, Series BB redeemable convertible choose broth from 5,450,000 to 1,896,309, and increased the authoritative shares of Series CC cashable convertible prefer stock to 52,000,000 and Series CC-1 cashable convertible preferable stock to 14,522,721. As of December 31, 2010, the Company ’ randomness cashable convertible favored livestock outstanding and the extermination predilection, including dividends that would be due if and when declared by the Board of Directors, was as follows :

Number of
Shares
Authorized
Number of
Shares

Issued and
Outstanding
Proceeds Net
of Issuance
Costs
Conversion
Price per
Share
Annual
Dividend
per
Share
Liquidation
Preference
Series AA 1,166,667 1,166,667 $ 601,000 $ 0.53 $ 0.04 $ 613,000
Series BB 1,896,309 1,896,309 1,879,000 1.00 0.08 1,896,000
Series CC 52,000,000 51,657,764 58,766,000 1.15 0.09 59,406,000
Series CC-1 14,522,721 14,522,721 16,613,000 1.15 0.09 16,701,000
69,585,697 69,243,461 $ 77,859,000 $ 78,616,000

In January 2011 the Board of Directors approved an amended and restated Certificate of Incorporation. The amendment increased the authoritative shares of Series CC redeemable convertible prefer breed from 52,000,000 to 57,500,000. In February 2011, the Company received $ 5.7 million in net proceeds for the issue of an extra 4,967,304 shares of Series CC redeemable convertible preferable stock at a price of $ 1.15 per share. In November 2011 the Board of Directors approved an amended and restated Certificate of Incorporation. The amendment increased the Company ’ mho authorized issue of common shares to a full of 120,000,000 and increased the authorized shares of Series CC redeemable convertible prefer stock from 57,500,000 to 77,000,000. In November and December 2011, the Company received a total of $ 20.0 million in net proceeds for the issue of an extra 17,391,307 shares of Series CC cashable convertible preferable lineage at a price of $ 1.15 per share. F-23 As of December 31, 2011 the Company ’ s redeemable convertible preferable stock certificate great and the elimination predilection, including dividends that would be ascribable if and when declared by the Board of Directors, was as follows :

Number of
Shares
Authorized
Number of
Shares

Issued and
Outstanding
Proceeds Net of
Issuance Costs
Conversion
Price per
Share
Annual
Dividend
per
Share
Liquidation
Preference
Series AA 1,166,667 1,166,667 $ 601,000 $ 0.53 $ 0.04 $ 613,000
Series BB 1,896,309 1,896,309 1,879,000 1.00 0.08 1,896,000
Series CC 77,000,000 74,016,375 90,448,000 1.15 0.09 85,119,000
Series CC-1 14,522,721 14,522,721 16,612,000 1.15 0.09 16,701,000
94,585,697 91,602,072 $ 109,540,000 $ 104,329,000

The rights, preferences and privileges of the redeemable convertible favored stock certificate are as follows : Conversion Under certain conditions, including election by the holders and pursuant to an initial Public Offering, the Series AA redeemable convertible preferable store to Series CC-1 redeemable convertible choose stock shall be converted into common standard on a one-for-one footing, subject to certain adjustments for dilution, if any, resulting from future neckcloth issuances. The initial conversion prices for shares of Series AA cashable convertible prefer stock to Series CC-1 redeemable convertible prefer stock are indicated above. Dividends Holders of the Series AA redeemable convertible favored stock to Series CC-1 redeemable convertible choose livestock are entitled to a noncumulative dividend as indicated above, collectible alone when and if declared by the Company ’ s Board of Directors, out of any assets legally available, prior and in preference to any declaration or payment of any distribution on the common stock certificate. No dividends have been declared to date. Liquidation In the event of a extermination event, as defined in the Company ’ s Amended and Restated Certificate of Incorporation, holders of preferable stock are entitled to receive, on a proportionate footing, anterior and in preference to any distribution of any assets or property of the Company to the holders of common stock, an amount per parcel equal to their original buy price plus declared but unpaid dividends. Any prison term after August 1, 2014, upon written request of at least two-thirds of the great shares of redeemable convertible preferable stock, the Company shall redeem for cash in two equal annual installments, from any funds legally available, all or separate of the shares of cashable convertible favored breed that elect to have their shares redeemed. The redemption price for each share of redeemable convertible prefer stock shall be equal to the original issue price of such plowshare. Voting Holders of redeemable convertible favored stock are entitled to one vote per share on all matters to be voted upon by the stockholders of the Company. F-24 9. Common Stock Holders of common stock certificate are entitled to one vote per plowshare on all matters to be voted upon by the stockholders of the Company. In July 2010, the Company reincorporated in the state of Delaware. The Company retroactively separated the par rate of common stock and extra paid-in-capital to reflect the newly established par value. national to the preferences that may be applicable to any outstanding shares of redeemable convertible choose stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors. No dividends have been declared to date. Reserved Shares The Company is required to reserve a part of its empower and unissued shares of common breed in sufficient numbers to consequence the conversion of all great shares of redeemable convertible preferable stock, the exercise of warrants plus options granted and available for grant, under the Company ’ s incentive malcolm stock plan. The act of shares of common sprout reserved is as follows :

As of December 31,
2010 2011
Options outstanding 7,296,078 13,700,062
Options reserved for future issue 4,453,559 1,889,102
Warrants outstanding to purchase common banal 5,000 201,429
Warrants outstanding to purchase prefer stock 278,260
convertible preferable stock certificate outstanding 69,243,461 91,602,072
           
80,998,098 107,670,925
           

10. Stock Options 2004 Stock Plan In January 2004, the Company adopted the 2004 Stock Plan ( the 2004 plan ). The 2004 Plan provides for the concede of stock awards to employees, consultants, and directors of the Company. Options granted under the 2004 design may either be incentive Stock Options ( ISOs ) or Nonstatutory Stock Options ( NSOs ). ISOs may be granted to Company employees lone, while stock awards early than ISOs may be granted to employees, directors, and consultants. stock awards under the 2004 plan may be granted with terms of up to 10 years and at prices determined by the Board of Directors, provided, however, that : ( one ) the drill price of an ISO or NSO shall not be less than 100 % of the estimated fair prize of the shares on the date of the grant ; and ( two ) the drill price of an ISO granted to a 10 % stockholder shall not be less than 110 % of the estimated carnival value of the shares on the allow go steady. The options broadly vest over a four-year menstruation. For certain options, vesting accelerates upon the accomplishment of stipulate milestones. The company records stock-based awards at fair respect as of the award date and recognizes the expense over the employee ’ s needed service period, which is broadly the vest period. The company amortizes the fair value of stock-based awards on a straight-line basis. F-25