Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August 10, 2020,~~May 13, 2021 the registrant had ~~40,332,553~~54,069,630 shares of common stock, $0.0001 par value per share, outstanding.


	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	14,033		$	15,666		$	26,992		$	34,297
Restricted cash		83			83			83			83
Accounts receivable, net of allowance of $14,277 and $10,494 as of June 30, 2020, and December 31, 2019		57,539			58,977
Accounts receivable, net of allowance of $17,694 and $18,490 as of March 31, 2021, and December 31, 2020								51,070			52,764
Inventories		19,030			18,844			17,985			17,759
Deferred expenses		10			59
Prepaid expenses		2,422			2,523			2,131			2,240
Advances to suppliers		2,769			450			4,004			2,587
Other current assets		4,217			3,101			4,410			5,674
Total current assets		100,103			99,703			106,675			115,404
LONG-TERM ASSETS:
Long-term receivables		24,343			35,656			19,296			21,148
Deferred tax assets		1,265			622			964			884
Severance pay funds		638			710			680			685
Property and equipment, net		3,971			4,648			3,132			3,539
Intangible assets		20,602			22,338			18,010			18,865
Goodwill		—			27,450
Total long-term assets		50,819			91,424			42,082			45,121
TOTAL ASSETS	$	150,922		$	191,127		$	148,757		$	160,525
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Line of credit	$	3,861		$	7,789
Trade payables		9,139			9,401		$	6,143		$	6,322
Accrued expenses and other current liabilities		15,967			21,120			16,330			20,253
Taxes payable		2,579			2,172			1,376			1,132
Unearned interest income		2,937			3,942			2,444			1,950
Warranty accrual		1,160			1,254			1,222			1,106
Deferred revenues		1,915			2,495			1,616			1,752
Total current liabilities		37,558			48,173			29,131			32,515
LONG-TERM LIABILITIES:
Long-term debt		65,364			61,229			75,940			75,491
Government assistance loans		4,110			—			4,151			4,110
Taxes payable								478			478
Accrued severance pay		858			827			782			755
Deferred tax liabilities		423			1,017			574			811
Unearned interest income		1,246			1,681			1,034			1,778
Warranty accrual		499			723			471			533
Other long-term liabilities		530			799			247			293
Total long-term liabilities		73,030			66,276			83,677			84,249
TOTAL LIABILITIES		110,588			114,449			112,808			116,764
Commitments and Contingencies (Note 8)
STOCKHOLDERS’ EQUITY (Note 1):
Common Stock, $0.0001 par value: 300,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 39,830,122 and 28,686,116 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		25			24
Additional paid-in capital (Note 2)		174,622			149,840
Common Stock, $0.0001 par value: 300,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 54,069,630 and 53,551,126 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively								26			26
Additional paid-in capital (Note 1)								203,221			201,598
Accumulated deficit		(135,464	)		(75,686	)		(166,651	)		(157,392	)
TOTAL STOCKHOLDERS’ EQUITY		39,183			74,178			36,596			44,232
Non-controlling interests		1,151			2,500			(647	)		(471	)
		40,334			76,678			35,949			43,761
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	150,922		$	191,127		$	148,757		$	160,525

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended March 31
	2020			2019			2020			2019			2021			2020
Revenue
Leases	$	7,465		$	16,643		$	14,278		$	32,385		$	8,537		$	6,813
Products and services		9,531			11,175			17,226			20,013			14,060			7,695
		16,996			27,818			31,504			52,398			22,597			14,508
Cost of goods sold
Leases		1,541			3,283			2,993			6,762			1,770			1,452
Products and services		3,558			4,461			7,334			7,497			5,593			3,776
		5,099			7,744			10,327			14,259			7,363			5,228
Gross profit		11,897			20,074			21,177			38,139			15,234			9,280
Operating expenses:
Selling and marketing		4,545			10,250			13,156			19,782			7,854			8,611
General and administrative		14,975			11,853			29,151			20,192			12,165			14,176
Research and development		1,570			1,920			4,194			3,981			2,051			2,624
Goodwill impairment		—			—			27,450			—			—			27,450
Total operating expenses		21,090			24,023			73,951			43,955			22,070			52,861
Loss from operations		(9,193	)		(3,949	)		(52,774	)		(5,816	)		(6,836	)		(43,581	)
Other expenses:
Foreign exchange loss (income)		(1,166	)		(684	)		3,113			13
Foreign exchange loss														714			4,279
Finance expenses		2,371			2,152			4,625			3,807			1,885			2,254
Loss before income taxes		(10,398	)		(5,417	)		(60,512	)		(9,636	)		(9,435	)		(50,114	)
Income tax (benefit) expense		(633	)		61			(44	)		947
Income tax expense														—			589
Net loss		(9,765	)		(5,478	)		(60,468	)		(10,583	)		(9,435	)		(50,703	)
Deemed dividend (Note 13)		(3,564	)		-			(3,564	)		-
Loss attributable to stockholders of the Company		(13,152	)		(5,910	)		(63,342	)		(11,183	)		(9,259	)		(50,190	)
(Loss) income attributable to non-controlling interest		(177	)		432			(690	)		600
Loss attributable to non-controlling interest														(176	)		(513	)

Net loss per share:
Basic	$	(0.39	)	$	(1.24	)	$	(2.01	)	$	(2.34	)	$	(0.17	)	$	(1.68	)
Diluted	$	(0.39	)	$	(1.24	)	$	(2.01	)	$	(2.34	)	$	(0.17	)	$	(1.68	)
Weighted-average number of shares used in per share calculation:
Basic		33,315			4,776			31,564			4,776			53,744			29,812
Diluted		33,315			4,776			31,564			4,776			53,744			29,812

The accompanying notes are an integral part of these condensed consolidated financial statements.

Preferred Stock
Series A

Common Stock

Additional
Paid-

Accumulated

Non-
controlling

Total
Stockholders’

Shares

Amount

Shares

Amount

in-Capital

Deficit

Interest

Equity

Balance — January 1, 2020

—

$
-

28,686,116

$
24

$
149,840

$
(75,686
)

$
2,500

$
76,678

Issuance of common stock

—

—

1,208,169

—

—

—

—

—

2020 Private Placement shares, net of costs

660,000

—

2,300,000

—

12,115

—

—

12,115

2020 Private Placement Warrants, net of costs

—

—

—

—

4,621

—

—

4,621

Beneficial conversion feature

—

—

—

—

3,564

—

—

3,564

Dividends from subsidiaries

—

—

—

—

—

—

(218
)

(218
)
Net loss - the Company

—

—

—

—

—

(50,190
)

—

(50,190
)
Net loss - non-controlling interest

—

—

—

—

—

—

(513
)

(513
)
Stock-based compensation

—

—

—

—

517

—

—

517

Balance — March 31, 2020

660,000

$
-

32,194,285

$
24

$
170,657

$
(125,876
)

$
1,769

$
46,574

Issuance of common stock

—

—

1,013,060

—

3,393

—

—

3,393

Conversion of Preferred Stock Series A

(660,000
)

—

6,600,000

1

(1
)

—

—

—

Beneficial conversion feature

—

—

—

—

(3,564
)

—

—

(3,564
)
Deemed dividend

—

—

—

—

3,564

—

—

3,564

Disposal of subsidiary

—

—

—

—

—

—

(441
)

(441
)
Net loss - the Company

—

—

—

—

—

(9,588
)

—

(9,588
)
Net loss - non-controlling interest

—

—

—

—

—

—

(177
)

(177
)
Options exercised

—

—

22,777

—

34

—

—

34

Stock-based compensation

—

—

—

539

—

—

539

Balance — June 30, 2020

—

$
-

39,830,122

$
25

$
174,622

$
(135,464
)

$
1,151

$
40,334

	Preferred Stock Series A				Common Stock				Additional Paid-		Accumulated			Non- controlling			Total Stockholders’
	Shares		Amount		Shares		Amount		in-Capital		Deficit			Interest			Equity
Balance — January 1, 2021		—	$	-		53,551,126	$	26	$	201,598	$	(157,392	)	$	(471	)	$	43,761
December 2020 Public Offering warrants exercise		—		—		361,200		—		903		—			—			903
Options exercised		—		—		157,304		—		212		—			—			212
Net loss - the Company		—		—		—		—		—		(9,259	)		—			(9,259	)
Net loss - non-controlling interest		—		—		—		—		—		—			(176	)		(176	)
Stock-based compensation		—		—		—		—		508		—			—			508
Balance — March 31, 2021		—	$	-		54,069,630	$	26	$	203,221	$	(166,651	)	$	(647	)	$	35,949

Series A

Series B

Series C

Series C-1

Series D

Common Stock

Additional
Paid-

Accumulated

Non-
controlling

Total
Stockholders’

Preferred
Shares

Preferred
Shares

Preferred
Shares

Preferred
Shares

Preferred
Shares

Shares

Amount

in-Capital

Deficit

Interest

Equity

Balance — January 1, 2019 (as restated, Note 2)

1,264,565

2,632,109

4,615,567

56,983

647,189

4,772,956

$
5

$
67,495

$
(35,067
)

$
4,022

$
36,455

Net loss - the Company

—

—

—

—

—

—

—

—

(5,273
)

—

(5,273
)
Net income - non-controlling interest

—

—

—

—

—

—

—

—

—

168

168

Options exercised

—

—

—

—

—

3,506

—

7

—

—

7

Stock-based compensation

—

—

—

—

—

—

—

375

—

—

375

Balance — March 31, 2019 (as restated, Note 2)

1,264,565

2,632,109

4,615,567

56,983

647,189

4,776,462

$
5

$
67,877

$
(40,340
)

$
4,190

$
31,732

Net loss - the Company

—

—

—

—

—

—

—

—

(5,910
)

—

(5,910
)
Net income - non-controlling interest

—

—

—

—

—

—

—

—

—

432

432

Stock-based compensation

—

—

—

—

—

—

—

1,044

—

—

1,044

Balance — June 30, 2019 (as restated, Note 2)

1,264,565

2,632,109

4,615,567

56,983

647,189

4,776,462

$
5

$
68,921

$
(46,250
)

$
4,622

$
27,298

	Preferred Stock Series A				Common Stock				Additional 'Paid-		Accumulated			Non- controlling			Total Stockholders’
	Shares		Amount		Shares		Amount		in-Capital		Deficit			Interest			Equity
Balance — January 1, 2020		—	$	-		28,686,116	$	24	$	149,840	$	(75,686	)	$	2,500		$	76,678
Issuance of common stock		—		—		1,208,169		—		—		—			—			—
2020 Private Placement shares, net of costs		660,000		—		2,300,000		—		12,115		—			—			12,115
2020 Private Placement Warrants, net of costs		—		—		—		—		4,621		—			—			4,621
Beneficial conversion feature		—		—		—		—		3,564		—			—			3,564
Dividends from subsidiaries		—		—		—		—		—		—			(218	)		(218	)
Net loss - the Company		—		—		—		—		—		(50,190	)		—			(50,190	)
Net loss - non-controlling interest		—		—		—		—		—		—			(513	)		(513	)
Stock-based compensation		—		—		—		—		517		—			—			517
Balance — March 31, 2020		660,000	$	-		32,194,285	$	24	$	170,657	$	(125,876	)	$	1,769		$	46,574

The accompanyingnotesare an integralpartof these condensed consolidatedfinancialstatements.

	Six Months Ended June 30						Three Months Ended March 31
	2020			2019			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(60,468	)	$	(10,583	)	$	(9,435	)	$	(50,703	)
Adjustments to reconcile net loss to net cash used in operating activities:
Goodwill impairment		27,450			—		—				27,450
Depreciation and amortization		2,514			735			1,304			1,245
Stock-based compensation		1,056			1,419			508			517
Provision for bad debt		5,416			2,017			1,106			1,547
Provision for inventory obsolescence		530			435			252			324
Finance expenses		4,134			72
Deferred tax expense		(1,237	)		630
Finance expenses and accretion								489			2,032
Deferred tax (recovery) expense								(317	)		281
Change in fair value of earn-out liability		244			578			—			179
Loss on sale of subsidiary		385			—
Loss on disposal of property and equipment		11			—			13			29
Changes in operating assets and liabilities:
Accounts receivable short- and long-term		6,187			(13,359	)
Accounts receivable short-term and long-term								2,448			10,194
Inventories		(986	)		(346	)		(478	)		(522	)
Prepaid expenses		88			(103	)		109			(29	)
Other current assets		(2,483	)		(353	)		(153	)		381
Other long-term assets		6			—			(9	)		5
Trade payables		(385	)		6,025			(178	)		(193	)
Accrued expenses and other current liabilities		(5,365	)		1,963			(3,554	)		(6,960	)
Severance pay funds		72			(39	)		5			52
Unearned interest income		(1,418	)		(122	)		(249	)		(973	)
Other long-term liabilities		(463	)		(411	)		(81	)		(261	)
Net cash used in operating activities		(24,712	)		(11,442	)		(8,220	)		(15,405	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(108	)		(346	)		(53	)		(61	)
Cash received from sale of subsidiary, net of cash relinquished		89			—
Net cash used in investing activities		(19	)		(346	)		(53	)		(61	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt, net of financing fees		—			9,739
(Repayment of) proceeds from line-of-credit		(3,928	)		2,531
Proceeds from government assistance loans		4,110			—
Proceeds from issuance of common stock		2,956			—
Exercises of 2020 December Public Offering Warrants								903			—
Payment of earn-out liability								(147	)		(77	)
Drawdown of line-of-credit								—			423
Proceeds from 2020 Private Placement, net of costs of $1,950		20,300			—			—			20,300
Dividends from subsidiaries paid to non-controlling interest		(218	)		—			—			(218	)
Proceeds from issuance of convertible promissory notes, net of cash issuance costs of $280		—			7,520
Payment of earn-out liability		(156	)		(138	)
Installment payments		—			(250	)
Proceeds from exercise of options		34			7			212			—
Net cash provided by financing activities		23,098			19,409			968			20,428
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		(1,633	)		7,621
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH								(7,305	)		4,962
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period		15,749			6,758			34,380			15,749
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	14,116		$	14,379		$	27,075		$	20,711
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	496		$	471		$	73		$	329
Cash paid for interest	$	173		$	3,036		$	1,731		$	104
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Beneficial conversion feature of preferred stock recorded as deemed dividend	$	3,564		$	-
Common stock issuance costs	$	620		$	-
Conversion of Series A convertible preferred stock	$	660		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

Venus Concept Inc. ~~(formerly Restoration Robotics, Inc.)~~ is a global medical technology company that develops, commercializes, and sells minimally invasive and non-invasive medical aesthetic and hair restoration technologies and related services. The Company’s systems have been designed on cost-effective, proprietary and flexible platforms that ~~enables~~enable it to expand beyond the aesthetic industry’s traditional markets of dermatology and plastic surgery, and into non-traditional markets, including family and general practitioners and aesthetic medical spas. The Company was incorporated in the state of Delaware on November 22, 2002. In these notes to the condensed consolidated financial statements, the “Company” and “Venus Concept”, ~~“Venus Concept,” refers~~refer to Venus Concept Inc. and its subsidiaries on a consolidated basis.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the foreseeable future, and, as such, the unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

The Company has had recurring net operating losses and negative cash flows from operations. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had an accumulated deficit of ~~$135,464~~$166,651 and ~~$75,686,~~$157,392, respectively. The Company was in compliance with all required covenants as of ~~June 30, 2020~~March 31, 2021 and ~~as of~~ December 31, ~~2019.~~2020. The Company’s recurring losses from operations and negative cash flows raise substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date that the unaudited condensed consolidated financial statements are issued. In addition, the coronavirus pandemic (“COVID-19” or “pandemic”) has had a significant negative impact on the Company’s unaudited condensed consolidated financial statements as of ~~June 30, 2020~~March 31, 2021 and for the ~~six~~three months then ended, and management expects the pandemic to continue to have a negative impact in the foreseeable future, the extent of which is uncertain and largely subject to whether the severity of the pandemic worsens, or duration lengthens. In the event that the COVID-19 pandemic and the economic disruptions it has caused continue for an extended period of time, the Company cannot assure that it will remain in compliance with the financial covenants in its credit facilities.

In order to continue its operations, the Company must achieve profitable operations and/or obtain additional equity or debt financing. Until the Company achieves profitability, management plans to fund its operations and capital expenditures with cash on hand, borrowings, and issuance of capital stock. ~~In March~~On December 22, 2020, the Company ~~completed~~ ~~a private placement that~~ ~~raised net proceeds of $20,300~~, as described below. On June 16, 2020, the Company entered into a purchase agreement (the “Equity Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the termsissued and ~~subject~~sold to the ~~conditions and limitations set forth therein, the Company may sell to Lincoln Park up to $31,000 of~~investors 11,250,000 shares of its common stock ~~from time~~(“December 2020 Public Offering”), par value $0.0001 per share, at a combined offering price to ~~time over~~ the ~~two-year term~~public of ~~the agreement. Any~~$2.00 per share and warrants (“December 2020 Public Offering Warrants”) to purchase up to 5,625,000 shares of common stock ~~sold to Lincoln Park will be sold at~~with an exercise price of $2.50 per share. The December 2020 Public Offering Warrants have a ~~purchase price that is based on the prevailing prices~~five-year term and are exercisable immediately. Total gross proceeds were $22,500. In February 2021, several investors exercised an aggregate of ~~the common stock~~361,200 December 2020 Public Offering Warrants at the ~~time~~exercise price of ~~each sale. During the three months ended June 30, 2020,~~$2.50 per share. The total proceeds received by the Company ~~raised net cash proceeds of~~ ~~$2,956 under~~from the ~~Equity~~ ~~Purchase Agreement~~ ~~as described below.~~December 2020 Public Offering Warrants exercises were $903. Until the Company generates revenue at a level to support its cost structure, the Company expects to continue to incur substantial operating losses and net cash outflows from operating activities.

Given the COVID-19 pandemic, the Company cannot anticipate the extent to which the current economic turmoil and financial market conditions will continue to adversely impact the Company’s business and the Company may need additional capital to fund its future operations and to access the capital markets sooner than planned. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital, it may be compelled to reduce the scope of its operations and planned capital expenditures or sell certain assets, including intellectual property assets. These unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from the uncertainty. Such adjustments could be material.

On November 7, 2019, the Company (formerly Restoration Robotics, Inc.), completed its business combination with Venus Concept Ltd., in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of March 15, 2019, as amended from time to time (the “Merger Agreement”), by and among the Company, Venus Concept Ltd. and Radiant Merger Sub Ltd., a company organized under the laws of Israel and a direct, wholly-owned subsidiary of the Company (“Merger Sub”). Under the Merger Agreement, Merger Sub merged with and into Venus Concept Ltd., with Venus Concept Ltd. surviving as a wholly owned subsidiary of the Company (the “Merger”). Following the completion of the Merger, the Company changed its corporate name to Venus Concept Inc., and the business conducted by Venus Concept Ltd. became the primary business conducted by the Company.

At the effective time of the Merger, each outstanding ordinary and preferred share of Venus Concept Ltd., other than shares held by Venus Concept Ltd. as treasury stock or held by the Company or Merger Sub, were converted into the right to receive 8.6506, or Exchange Ratio, validly issued, fully paid and non-assessable shares of common stock, and each outstanding stock option and warrant issued and outstanding by Venus Concept Ltd. was assumed by Restoration Robotics, Inc. and converted into and became an option or warrant (as applicable) exercisable for shares of common stock with the number and exercise price adjusted by the Exchange Ratio.

The Merger was accounted for as a reverse acquisition with Venus Concept Ltd. as the acquiring company for accounting purposes, and Restoration Robotics, Inc. as the legal acquirer. As a result, upon consummation of the Merger, the historical financial statements of Venus Concept Ltd. became the historical financial statements of Venus Concept Inc.

On March 18, 2020, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain investors (collectively, the “Investors”) pursuant to which the Company issued and sold to the Investors an aggregate of 2,300,000 shares of common stock, par value $0.0001 per share, 660,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), which are convertible into 6,600,000 shares of common stock upon receipt of stockholder approval, and warrants (the “2020 Private Placement Warrants”) to purchase up to 6,675,000 shares of common stock with an exercise price of $3.50 per share (the “2020 Private Placement”). The 2020 Private Placement Warrants have a five-year term and are exercisable beginning 181 days after their issue date. The 2020 Private Placement was completed on March 19, 2020. On June 16, 2020 the Company’s stockholders approved the issuance of 6,600,000 shares of common stock upon the conversion of the 660,000 shares of Series A Preferred Stock issued by the Company in connection with the 2020 Private Placement and all outstanding shares of Series A Preferred Stock were converted into 6,600,000 shares of common stock. The gross proceeds from the securities sold in the 2020 Private Placement was $22,250. The costs incurred with respect to the 2020 Private Placement totaled $1,950 and were recorded in the condensed consolidated statements of stockholders’ equity. The accounting effects of the 2020 Private Placement transaction and subsequent conversion of Series A Preferred Stock are discussed in Note 13.

On June 16, 2020, the Company entered into the Equity Purchase Agreement with Lincoln Park, which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park up to $31,000 of shares of its common stock, par value $0.0001 per share, pursuant to its shelf registration statement. The purchase price of shares of common stock related to a future sale will be based on the then prevailing market prices of such shares at the time of sales as described in the Equity Purchase Agreement. The aggregate number of shares that the Company can sell to Lincoln Park under the Equity Purchase Agreement may in no case exceed7,763,411 shares (subject to adjustment) of common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Equity Purchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds $3.9755 per share (subject to adjustment) (which represents the minimum price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the Equity Purchase Agreement, such that the transactions contemplated by the Equity Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules. Also, at no time may Lincoln Park (together with its affiliates) beneficially own more than 9.99% of the Company’s issued and outstanding common stock. Concurrently with entering into the Equity Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares of common stock issued under the Equity Purchase Agreement (the “Registration Rights Agreement”).

As of June 30, 2020, the Company issued and sold to Lincoln Park 1,013,060 shares of its common stock at an average price of $3.61 per share, and 209,566 of these shares were issued to Lincoln Park as a commitment fee in connection with entering into the Equity Purchase Agreement (the “Commitment Shares”). The total value of the Commitment Shares of $620 ~~together with the issuance costs of $123~~ ~~were recorded as deferred issuance costs~~ in the condensed consolidated balance sheet. These costs will be amortized into condensed consolidated statements of stockholders’ equity proportionally based on proceeds received during the period and the expected total proceeds to be raised over the term of the ~~Equity Purchase Agreement.~~ ~~Gross proceeds from common stock issuances as of June 30, 2020 were~~ $3,576, which were then reduced by the amortization of deferred issuance costs of $183. Gross proceeds in the amount of $3,576 reduced by the value of the Commitment Shares of $620 were recorded in the condensed consolidated statements of cash flows as net cash proceeds from issuance of common stock.

On May 4, 2020, the Company entered into a share sale and purchase agreement with Med Group Consult Ltd., an unrelated third party, and transferred its entire interest (51%) in Venus Concept Central Eastern Europe Ltd. for cash consideration of Euro (“EUR”) 473 which is equivalent to $531. The Company received the payment of EUR 110 on May 4, 2020 (which is equivalent to $124), the payment of EUR 60 on June 30, 2020 (which is equivalent to $67), and the remainder is payable to the Company by December 31, 2020, in five equal monthly installments. As Venus Concept Central Eastern Europe Ltd.’s operating revenue was about 1% of the Company’s revenue and the disposal did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations for Venus Concept Central Eastern Europe Ltd. were not reported as discontinued operations under the guidance of Accounting Standards Codification (“ASC”) 205-20-45. The sale resulted in loss of approximately $385 recognized in the ~~condensed consolidated statements of operations~~.

The accompanying unaudited condensed consolidated financial statements of Venus Concept Inc. have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the ~~SEC~~Securities and Exchange Commission (the “SEC”) on March ~~30, 2020.~~29, 2021. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021. For further information, refer to the consolidated financial statements and footnotes thereto included in Item 8 of the Company’s most recent Annual Report on Form 10-K.

The preparation of these unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of ~~June 30, 2020~~March 31, 2021 and through the date of this report filing. The accounting matters assessed included, but were not limited to, the allowance for doubtful accounts and the carrying value of ~~goodwill,~~ intangible and long-lived assets. Based on the assessment performed, the Company recorded an additional allowance for doubtful accounts of $2,954 and $3,454 for the three and six months ended June 30, 2020, respectively. The Company recorded goodwill impairment of $27,450 (Note 7), which represents the entire value of goodwill, as of March 31, 2020.

Amounts reported in thousands within this report are computed based on the amounts in dollars. As a result, the sum of the components reported in thousands may not equal the total amount reported in thousands due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in dollars.

Venus Concept Ltd. previously classified the issuance of common stock and preferred stock as a credit to common stock. In accordance with U.S. GAAP, amounts issued in excess of par value are required to be accounted for in additional paid in capital (APIC). The error is a reclassification from common stock into APIC and has an overall immaterial impact on the consolidated statement of stockholders’ equity and consolidated balance sheet. Items previously reported have been reclassified to conform to U.S. GAAP and the reclassification did not have any impact on the Company’s consolidated statements of operations, consolidated statements of comprehensive loss, consolidated statements of cash flows and net loss per share calculations.

~~The following table summarizes the impact of the restatement adjustments on Venus Concept Ltd.’s previously reported condensed consolidated financial statements:~~

The accounting policies the Company follows are set forth in the Company’s audited consolidated financial statements for fiscal year ~~2019.~~ 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in Item 8 of the Company’s most recent Annual Report on Form 10-K. There have been no material changes to these accounting policies.

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 ~~or the JOBS Act.~~(the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these unaudited condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

The Company has considered the impact of ~~the novel coronavirus (COVID-19)~~COVID-19 on its condensed consolidated financial statements. COVID-19 has had a significant negative impact on the Company’s unaudited condensed consolidated financial statements as of ~~June 30, 2020~~March 31, 2021 and for the three ~~and six~~ months then ended, and management expects the pandemic to continue to have a negative impact ininto the foreseeable future, the extent of which is uncertain and largely subject to whether the severity of the pandemic worsens, or duration lengthens. These impacts could include, but may not be limited to, risks and ~~uncertainty~~uncertainties related to the ability of the Company’s sales and marketing personnel and distributors to access the Company’s customer base, disruptions to the Company’s global supply chain, reduced demand and/or suspension of operations by the Company’s subscription customers which could impact their ability to make monthly payments, or deferral of aesthetic or hair restoration procedures which would impact the Company’s revenues. Consequently, these have negatively impacted the Company’s results of operations, cash flows and its overall financial condition. In addition, the impact of COVID-19 may subject the Company to future risk of material intangible and long-lived assets impairments, increased reserves for uncollectible accounts, and adjustments for inventory and market volatility for items subject to fair value measurements.

Besides COVID-19, the Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company’s products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals. If the Company fails to adhere to the United States Food and Drug Administration’s (the “FDA”) Quality System Regulation, or regulations in countries other than the United States, the FDA or other regulators may withdraw its market clearances or take other action. The Company relies on suppliers to manufacture some of the components used in its products. The Company’s suppliers may encounter supply interruptions or problems during manufacturing due to a variety of reasons, including failure to comply with applicable regulations, including the FDA’s Quality System Regulation, making errors in manufacturing or losing access to critical services and components, any of which could delay or impede the Company’s ability to meet demand for its products.

The Company has borrowings with interest rates that are subject to fluctuations as charged by the lender. The Company does not use derivative financial instruments to mitigate the exposure to interest rate risk. The Company’s objective is to have sufficient liquidity to meet its liabilities when due. The Company monitors its cash balances and cash used in operating activities to meet its requirements. As of March 31, 2021 and December 31, 2020, the most significant financial liabilities are trade payables, accrued expenses and other current liabilities and long-term debt.

In April 2020, ~~the FASB~~Financial Accounting Standards Board (the “FASB”) issued a Staff Question-and-Answer Document (Q&A): ASC Topic 842 and ASC Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic, that focuses on the application of the lease guidance for lease concessions related solely to the effects of COVID-19. The FASB issued the guidelines to reduce the burden and complexity for companies to account for such lease concessions (e.g., rent abatements or other economic incentives) under current lease accounting rules due to COVID-19 by providing certain practical expedients that can be used. This guidance can be applied immediately. The Company ~~is currently assessing~~anticipates that the adoption of the guidance will not have a material impact ~~of applying this guidance to its lease arrangements as well as when to adopt this guidance.~~on the Company’s unaudited condensed consolidated financial statements.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASC Topic 848). This authoritative guidance provides optional relief for companies preparing for the discontinuation of interest rates such as LIBOR, which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate. This guidance can be applied for a limited time, as of the beginning of the interim period that includes March 12, 2020 or any date thereafter, through December 31, 2022. The guidance may no longer be applied after December 31, 2022. In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR, or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC Topic 848. The Company is currently assessing the impact of applying this guidance as well as when to adopt this guidance.

In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the ~~Securities and Exchange Commission~~SEC staff interpretations associated with registrants engaged in lending activities. ASC Topic 326 is effective for annual periods beginning after January 1, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact of applying this guidance on its financial instruments, such as accounts receivable.

In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas. It is effective from the first quarter of fiscal year 2022, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change. The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope of this guidance.

Basic net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock warrants and stock options are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive. The net loss attributable to common stockholders’ is adjusted for the preferred stock deemed dividend related to the beneficial conversion feature for the periods in which the preferred stock is outstanding.

The following table sets forth the computation of basic and diluted net loss and the weighted average number of shares used in computing basic and diluted net loss per share (in thousands, except per share data):

Due to the net loss, all the outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders because including them would have been antidilutive:

Financial assets and financial liabilities are initially recognized at fair value when the Company becomes a party to the contractual provision of the financial instrument. Subsequently, all financial instruments are measured at amortized cost using the effective interest method.

The financial instruments of the Company consist of cash and cash equivalents, restricted cash, accounts receivable, long-term receivables, ~~line~~lines of credit, trade payables, government assistance loans, accrued expenses and other current liabilities, earn-out liability, other long-term liabilities and long-term debt. In view of their nature, the fair value of ~~most of the~~these financial instruments approximates their carrying amounts.

The Company measures the fair value of its financial assets and liabilities using the fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company classifies its restricted cash ~~and guaranteed~~within Level 1. Guaranteed investment certificates are classified within Level 2 as it uses alternative pricing sources and models utilizing market observable inputs. Contingent earn-out consideration iswas classified within Level 3. The following tables set forth the fair value of the Company’s Level 1, Level 2 and Level 3 financial assets and liabilities within the fair value hierarchy:

	Fair Value Measurements as of December 31, 2019								Fair Value Measurements as of December 31, 2020
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Guaranteed Investment Certificates ("GIC")	$	—	$	63	$	—	$	63
Guaranteed Investment Certificates (GIC)									$	—	$	64	$	—	$	64
Restricted cash		—		83		—		83		83		—		—		83
Total assets	$	—	$	146	$	—	$	146	$	83	$	64	$	—	$	147
Liabilities
Contingent earn-out consideration		—		—		655		655		—		—		147		147
Total liabilities	$	—	$	—	$	655	$	655	$	—	$	—	$	147	$	147

The earn-out liability iswas measured using discounted cash flow techniques, with the expected cash outflows estimated based on the probability of assessment of the acquired business achieving the revenue metrics required for payment. Expected future revenues of the acquired business and the associated estimate of probability are not observable inputs. The payments due are based on point in time measurements of the metrics quarterly for two years from the acquisition date.Changes in the fair value of the earn-out liability were recognized in finance expenses in the unaudited condensed consolidated statements of operations.

The following table provides a roll forward of the aggregate fair values of the earn-out liability ~~as of~~ ~~June 30~~for the three months ended March 31, ~~2020,~~2021, for which fair value is determined using Level 3 inputs:

The Company’s products may be sold under subscription ~~contracts~~agreements with ~~control~~title passing to the customer at the end of the lease term, which is generally 36 months. These arrangements are considered to be sales-type leases, where the present value of all cash flows to be received within the arrangement is recognized upon shipment to the customer as lease revenue.

A financing receivable is a contractual right to receive money, on demand or on fixed or determinable dates, that is recognized as an asset on the Company's unaudited condensed consolidated balance sheets. The Company's financing receivables, consisting of sales-type leases, totaled ~~$55,802~~$45,904 and ~~$72,602~~$49,096 as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, and are included in accounts receivable and long-term receivables on the unaudited condensed consolidated balance sheets. The Company evaluates the credit quality of an obligor at lease inception and monitors credit quality over the term of the underlying transactions.

The Company performed an assessment of the allowance for doubtful accounts as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Based upon such assessment, the Company recorded an allowance for doubtful accounts totaling ~~$14,277~~$17,694 and ~~$10,494~~$18,490 as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Current subscription ~~contracts~~agreements are reported as part of accounts receivable. The following are the contractual commitments, net of allowance for doubtful accounts, to be received by the Company over the next 5 years:

June 30,

Total

2021

2022

2023

2024

2025

Current financing receivables, net of allowance of $5,502

$
31,459

$
31,459

$
—

$
—

$
—

$
—

Long-term financing receivables, net of allowance of $4,216

24,343

—

18,898

5,317

128

—

$
55,802

$
31,459

$
18,898

$
5,317

$
128

$
—

			March 31,
	Total		2021		2022		2023		2024		2025
Current financing receivables, net of allowance of $6,588	$	26,609	$	26,609	$	—	$	—	$	—	$	—
Long-term financing receivables, net of allowance of $4,629		19,295		—		14,380		4,837		78		—
	$	45,904	$	26,609	$	14,380	$	4,837	$	78	$	—

Accounts receivable do not bear interest and are typically not collateralized. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains an allowance for doubtful accounts. Uncollectible accounts are charged to expense when deemed uncollectible, and accounts receivable are presented net of an allowance for doubtful accounts. Accounts receivable are deemed past due in accordance with the contractual terms of the agreement. Actual losses may differ from our estimates and could be material to our consolidated financial position, results of operations and cash flows. The allowance for doubtful accounts was ~~$14,277~~$17,694 and ~~$10,494~~$18,490 as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Additions to inventory are primarily comprised of newly produced units and applicators, refurbishment cost from demonstration units and used equipment which were reacquired during the ~~six~~three months from upgraded sales. The Company expensed ~~$3,603 and $7,203~~$6,020 in cost of goods sold in the three ~~and six~~ months ended ~~June 30, 2020, respectively~~March 31, 2021 ($~~6,072 and $11,313~~3,600 in the three ~~and six~~ months ended ~~June 30, 2019, respectively)~~March 31, 2020). The balance of cost of goods sold represents the sale of applicators, parts and warranties.

The Company provides for excess and obsolete inventories when conditions indicate that the inventory cost is not recoverable due to physical deterioration, usage, obsolescence, reductions in estimated future demand and reductions in selling prices. Inventory provisions are measured as the difference between the cost of inventory and net realizable value to establish a lower cost basis for the inventories. As of ~~June 30~~March 31, 2021, ~~2020,~~ a provision for obsolescence of ~~$2,091~~$1,434 ($~~1,439~~1,208 as of December 31, ~~2019)~~2020) was taken against inventory.

Depreciation expense ~~were $400~~was $448 and ~~$276~~$377 for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. Depreciation expense were $777 and $468 for the six months ended June 30, 2020 and 2019,~~ respectively.

(1)Government remittances are receivables from the local tax authorities for refunds of sales taxes and income taxes.

The following table provides the details of the change in the Company’s warranty accrual:

As described in Note 1, in November 2019, the Company completed its business combination with Venus Concept Ltd., which included the addition of goodwill of $24,847 and amortizable intangible assets, represented by the technology ($16,900) and the brand name ($1,200). Goodwill associated with the Merger was primarily attributable to the future revenue growth opportunities associated with additional share in the hair restoration market, as well as the value associated with assembled workforce.

The carrying values of goodwill and indefinite-life intangible assets are subject to annual impairment assessment as of the last day of each fiscal year. Between annual assessments, impairment review may also be triggered by any significant events or changes in circumstances affecting the Company’s business. The global pandemic caused by the novel coronavirus (COVID-19) has significantly impacted the Company’s business during the first three months of 2020, including its sales, supply chain, manufacturing and accounts receivable collections. As a result, the Company considered the COVID-19 pandemic as a triggering event and conducted quantitative impairment assessment of its goodwill as of March 31, 2020.

The Company has one reporting unit and the reporting unit’s carrying value was compared to its estimated fair value. As at March 31, 2020, the Company estimated its fair value using a combination of income approach and market approach. The income approach is based on the present value of future cash flows, which are derived from long term financial forecasts, and requires significant assumptions including among others, a discount rate and a terminal value. The market approach is based on the observed ratios of enterprise value to revenue multiples of the Company and other comparable publicly traded companies. Based upon the results of the goodwill impairment assessment, the Company recorded an impairment charge of $27,450 as of March 31, 2020, which represented the full balance of goodwill for the reporting unit. Based on the analysis of ~~the intangible assets and long-lived assets~~ ~~performed by the management~~ ~~as at June 30, 2020,~~ ~~no further impairment was considered necessary.~~

Estimated amortization expense for the next five fiscal years and all years thereafter are as follows:

The Company ~~and its subsidiaries have~~has various operating lease agreements, which expire on various dates.

The Company recognizes rent expense on a straight-line basis over the non-cancellable lease period and records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. When leases contain escalation clauses, rent abatements and/or concessions, such as rent holidays and landlord or tenant incentives or allowances, the Company applies them in the determination of straight-line rent expense over the lease period.

Aggregate future minimum lease payments and purchase and service commitments with manufacturers and service providers as of ~~June 30, 2020~~March 31, 2021 are as follows:

The total rent expense for all operating leases for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $571 and ~~2019 was $451 and $498, respectively. The total rent expense for all operating leases for the six months ended June 30, 2020 and 2019 was $1,021 and $888,~~$570, respectively.

As of ~~June 30~~March 31, 2021, ~~2020,~~ the Company has non-cancellable purchase orders placed with its contract manufacturers in the amount of ~~$7,962.~~$6,585. In addition, as of ~~June 30~~March 31, 2021, ~~2020,~~ the Company had ~~$1,181~~$7,019 of open purchase orders that can be cancelled with 90 days’ notice, except for a portion equal to 15% of the total amount representing the purchase of “long lead items”.

On March 25, 2021, the Company entered into an endorsement agreement for the services of Venus Williams, four-time Olympic Gold Medalist, seven-time Grand Slam Champion and entrepreneur, pursuant to which Ms. Williams will act as a brand ambassador for Venus Bliss™.

Between May 23, 2018 and June 11, 2019, ~~four~~4 putative shareholder class actions complaints were filed against Restoration Robotics, Inc., certain of its former officers and directors, certain of its venture capital investors, and the underwriters of the ~~IPO.~~initial public offering (“IPO”). Two of these complaints, Wong v. Restoration Robotics, Inc., et al., No. 18CIV02609, and Li v. Restoration Robotics, Inc., et al., No. 19CIV08173 (together, the “State Actions”), were filed in the Superior Court of the State of California, County of San Mateo, and assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 ~~or the Securities Act.~~(the “Securities Act”). The other two complaints, Guerrini v. Restoration Robotics, Inc., et al., No. 5:18-cv-03712-EJD and Yzeiraj v. Restoration Robotics, Inc., et al., No. 5:18-cv-03883-BLF (together, the “Federal Actions”), were filed in the United States District Court for the Northern District of California and assert claims under Sections 11 and 15 of the Securities Act. The complaints all allege, among other things, that the Restoration Robotics’ Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with Restoration Robotics’ IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. The complaints seek unspecified monetary damages, other equitable relief and attorneys’ fees and costs.

In the State Actions, Restoration Robotics, Inc., along with the other defendants, successfully demurred to the initial Wong complaint for failure to state a claim and secured a stay of both cases based on the forum selection clause contained in its Amended and Restated Certificate of Incorporation, which designates the federal district courts as the exclusive forums for claims arising under the Securities Act. However, on December 19, 2018, the Delaware Court of Chancery in Sciabacucchi v. Salzberg held that exclusive federal forum provisions are invalid under Delaware law. Based on this ruling, the San Mateo Superior Court lifted its stay of State Actions on December 10, 2019. On January 17, 2020, Plaintiffs in the State Actions filed a consolidated amended complaint for violations of federal securities laws, alleging again that, among other things, the Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with Restoration Robotics’ IPO were inaccurate and misleading, contained untrue statements of material ~~fact,~~facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. The complaint seeks unspecified monetary damages, other equitable relief and attorneys’ fees and costs. On February 24, 2020, the Company demurred to the consolidated amended complaint for failure to state a claim. On March 18, 2020, the Delaware Supreme Court reversed the Chancery Court’s decision in Sciabacucchi v. Salzberg and held that exclusive federal forum provisions are valid under Delaware law. On March 30, 2020, the Company filed a renewed motion to dismiss based on its federal forum selection clause. A hearing on the Company’s demurrer and renewed motion to dismiss was held on June 12, 2020. ~~The~~On September 1, 2020, the court ~~has~~granted the renewed motion to dismiss based on the Company’s forum selection clause as to the Company and individual defendants, but not ~~yet issued any decision.~~as to the venture capital and underwriter defendants. On September 22, 2020, the Court entered a judgement of dismissal as to the Company and the individual defendants. On November 23, 2020, plaintiff filed a notice of appeal of the Court’s order granting the renewed motion to dismiss. That appeal is pending.

In the Federal Actions, which have been consolidated under the caption In re Restoration Robotics, Inc. Securities Litigation, Case No. 5:18-cv-03712-EJD, Lead Plaintiff Eduardo Guerrini filed his consolidated amended complaint for violations of federal securities laws on November 30, 2018. The consolidated amended complaint alleges again that, among other things, Restoration Robotics’ Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with the IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. On January 29, 2019, Restoration Robotics, Inc., along with certain of its former officers and directors, filed a motion to dismiss the consolidated amended complaint for failure to state a claim. On October 18, 2019, the District Court granted Restoration Robotics, Inc. motion to dismiss as to all but two allegedly false or misleading statements contained in the Company’s Prospectus. On December 9, 2019, the Company filed its answer to the consolidated amended complaint denying the falsity of these ~~statements, and discovery is underway.~~statements. On May 29, 2020, Lead Plaintiff filed a motion for class certification, which the Company elected not to oppose, and on July 29, 2020, the court certified a class of investors who purchased shares of the ~~Company~~Company’s common stock pursuant or traceable to the Company’s ~~initial public offering.~~IPO. On February 22, 2021, the District Court granted the parties’ joint stipulation to stay all pending deadlines on the basis that the parties had reached a settlement in principle for all claims in the Federal Actions. On April 22, 2021, Lead Plaintiff filed his unopposed motion for preliminary approval of settlement. A hearing on that motion is scheduled for May 27, 2021.

In addition to the State and Federal Actions, on July 11, 2019, a verified shareholder derivative complaint was filed in the United States District Court for the Northern District of California, captioned Mason v. Rhodes, No. 5:19-cv-03997-NC. The complaint alleges that certain of Restoration Robotics’ former officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the Securities Exchange Act of 1934 ~~or the Exchange Act,~~(the “Exchange Act”) in connection with the IPO and Restoration Robotics’ 2018 proxy statement. The complaint seeks unspecified damages, declaratory relief, other equitable relief and attorneys’ fees and costs. On August 21, 2019, the District Court granted the parties’ joint stipulation to stay the Mason action during the pendency of the Federal ~~Actions,~~Actions. On March 16, 2021, the District Court granted the parties’ further stipulation to stay the Mason action during the pendency of the Federal Action, and the case remains stayed.

In addition to the actions described above relating to the IPO, two lawsuits purporting to challenge disclosures made in connection with our merger have also been filed. The first, captioned Bushansky v. Restoration Robotics, Inc., et al., No. 5:19-cv-06004-MMC, alleged, among other things, that defendants violated Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. The complaint alleged that the proxy statement, filed with the SEC by Restoration Robotics, Inc. on September 10, 2019 in connection with the Merger, omitted or misrepresented material information. The complaint sought, among other things, injunctive relief, unspecified damages, and attorneys’ fees and costs. On November 6, 2019, the plaintiff voluntarily dismissed the Bushansky action with prejudice as to his individual claims and without prejudice as to the claims of the putative class.

The second, a putative shareholder class action complaint captioned Pak v. Restoration Robotics, Inc., et al., No. 1:19-cv-02237, was filed in the United States District Court for the District of Delaware on December 6, 2019. The complaint alleges, among other things, that defendants violated Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. The complaint alleges that the proxy statement, filed with the SEC by Restoration Robotics, Inc. on September 10, 2019 in connection with the Merger, contained false or misleading information. The complaint seeks, among other things, compensatory and/or rescissory damages, and attorneys’ fees and costs. On February 26, 2020, the District Court appointed Joon Pak as Lead Plaintiff in the Pak action, and approved his selection of Lead Counsel. The Company believes that these lawsuits are without merit and management intends to vigorously defend against these claims. The Company filed a motion to dismiss the complaint on May 26, 2020. On July 2, 2020, plaintiff and the Company filed a stipulation of dismissal with prejudice as to the plaintiff and without prejudice as to the putative class. The Company believes that these lawsuits are without merit and management intends to vigorously defend against these claims.

The Company’s Chinese subsidiary, Venus Concept China, imports and sells registered medical devices and unregistered non-medical devices in the People’s Republic of China (“PRC”). One of its unregistered products has been the subject of inquiries from two district level branches of the ~~SAMR,~~State Administration for Market Regulation, Xuhui MSA and Huangpu MSA, as to whether the product was properly sold as a non-medical device. In January 2019, Venus Concept China applied to register a version of this non-medical device as a medical device with the National Medical Products Administration of PRC ~~or NMPA.~~(“NMPA”). On June 12, 2019, Venus Concept China was informed that Xuhui MSA had opened an administrative investigation case related to whether the device is an unregistered medical device, as a result of a complaint that Xuhui MSA received from a former distributor of Venus Concept China. Huangpu MSA notified Venus Concept China that it would be suspending its separate investigation against Venus Concept China, pending the results of the Xuhui MSA investigation. The Company and Venus Concept China have voluntarily stopped sales in China of this product. On December 11, 2019, Xuhui MSA informed Venus Concept China that a determination had been made by the Shanghai Medical Products Administration that Versa’s IPL function should be administered as a Class II medical device. Xuhui MSA also suggested that Venus Concept China consider a voluntary recall of all Versa units sold in China. In late January 2020, Venus Concept China received a copy of the Shanghai Medical Products Administration’s determination that because of the intended uses for Versa’s IPL function comprise medical treatment functions such as “treatment of benign pigmented epidermis and skin ~~lesions,”~~lesions”, Versa’s IPL function should be administered as a Class II medical device. Although the revenue generated from the product that is the subject of the investigation did not represent a material amount of the Company’s total revenues for the years ended December 31, 2018 and 2019, monetary penalties nonetheless could be material.

On March 4, 2021, Xuhui MSA ~~informed~~issued a written administrative penalty hearing notice (the “Notice”) to Venus Concept China. The Notice stated that Venus Concept China’s sale of Versa violated the relevant Chinese medical device administration regulation. As a result, Xuhui MSA proposed an administrative monetary penalty in the amount of approximately $150 or 976 Chinese Yuan (the “Penalty Amount”). On March 8, 2021, Venus Concept China ~~that its administrative investigation case has been transferred~~gave written notice to Xuhui ~~Branch of Shanghai Municipal Public Security Bureau (“~~MSA that it accepted the penalty decision proposed by Xuhui ~~PSB”) for further handling.~~MSA. On ~~May 6, 2020, the economic crime investigation department of~~March 19, 2021, Xuhui ~~PSB confirmed~~MSA issued a written administrative penalty decision to Venus Concept ~~China’s local PRC counsel that they would review and decide whether or not~~China (the “Decision”), which affirmed the administrative penalty proposed by the Notice. On March 19, 2021, the same day the Decision was issued, Venus Concept China remitted the full Penalty Amount to ~~file formally a criminal~~Xuhui MSA. Acceptance of the payment of the Penalty Amount by Xuhui MSA resulted in the conclusion of its investigation case against Venus Concept China and ~~any relevant individuals allegedly responsible for any alleged criminal offense(s). On May 29, 2020, Venus Concept China was informed~~settlement of this matter. This matter is now resolved and closed by Xuhui MSA of Xuhui PSB’s decision not to file a criminal investigation case and was shown a written Notice of non-filing of a criminal case issued by Xuhui PSB. On the same day, Xuhui MSA informed Venus Concept China that it would reopen and resume its administrative investigation case against Venus Concept China, which proceedings are currently ongoing.

~~The Company and Venus Concept China are cooperating with the relevant authorities in these matters; however, the Company cannot predict the outcome of these matters.~~MSA.

Further, the Company may from time to time continue to be involved in various legal proceedings of a character normally incident to the ordinary course of its business, which the Company does not deem to be material to ~~the Company’s~~its business and results of operations.

On December 8, 2020, the Company executed a loan and security agreement (the “MSLP Loan Agreement”), a promissory note (the “MSLP Note”), and related documents for a loan in the aggregate amount of $50,000 for which City National Bank of Florida (“CNB”) will serve as a lender pursuant to the Main Street Priority Loan Facility as established by the Board of Governors of the Federal Reserve System Section 13(3) of the Federal Reserve Act (the “MSLP Loan”). On December 9, 2020, the MSLP Loan had been funded and the transaction was closed. The MSLP Note has a term of five years and bears interest at a rate per annum equal to 30-day LIBOR plus 3%. On December 8, 2023 and December 8, 2024, the Company must make an annual payment of principal plus accrued but unpaid interest in an amount equal to fifteen percent (15%) of the outstanding principal balance of the MSLP Note (inclusive of accrued but unpaid interest). The entire outstanding principal balance of the MSLP Note together with all accrued and unpaid interest is due and payable in full on December 8, 2025. The Company may prepay the MSLP Loan at any time without incurring any prepayment penalties. The MSLP Note provides for customary events of default, including, among others, those relating to a failure to make payment, bankruptcy, breaches of representations and covenants, and the occurrence of certain events. In addition, the MSLP Loan Agreement and MSLP Note contain various covenants that limit the Company’s ability to engage in specified types of transactions. Subject to limited exceptions, these covenants limit the Company’s ability, without CNB’s consent, to, among other things, sell, lease, transfer, exclusively license or dispose of our assets, incur, create or permit to exist additional indebtedness, or liens, to make dividends and other restricted payments, and to make certain changes to its ownership structure.

As of March 31, 2021 and December 31, 2020, the Company was in compliance with all required covenants.

The scheduled payments on the outstanding borrowings as of March 31, 2021 are as follows:

On December 9, 2020, contemporaneously with the MSLP Loan Agreement (Note 9), the Company, Venus Concept USA, Inc. (“Venus USA”), Venus Concept Canada Corp., Venus Concept Ltd., and the Madryn Noteholders (as defined below), entered into a Securities Exchange Agreement (the “Exchange Agreement”) dated as of December 8, 2020, pursuant to which the Company (i) repaid $42,500 aggregate principal amount owed under that certain credit agreement originally entered into on October 11, 2016 and amended from time to time, between Venus Concept Ltd. ~~entered into a credit agreement as a guarantor with~~, Madryn Health Partners, LP ~~as administrative agent,~~ and certain of its affiliates ~~as lenders (collectively, “Madryn”), as amended~~ (the “Madryn Credit Agreement”), ~~pursuant~~and (ii) issued, to ~~which~~the Madryn ~~agreed to make certain loans to certain~~Health Partners (Cayman Master), LP and Madryn Health Partners, LP (together the “Madryn Noteholders”) secured subordinated convertible notes in the aggregate principal amount of ~~Venus Concept Ltd.’s subsidiaries~~$26,695 (the ~~“Subsidiary Obligors”~~“Notes”). The Madryn Credit Agreement was terminated effective December 9, 2020 upon the funding and closing of the MSLP Loan and the issuance of the Notes.

The Notes will accrue interest at a rate of 8.0% per annum from the date of original issuance of the Notes to the third anniversary date of the original issuance and thereafter interest will accrue at a rate 6.0% per annum. Under certain circumstances, in the case of an event of default under the Notes, the then-applicable interest rate will increase by 4.0% per annum. Interest is ~~comprised~~payable quarterly in arrears on the last business day of ~~four tranches~~each calendar quarter of ~~debt aggregating $70,000. As at June 30, 2020, and as at~~each year after the original issuance date, beginning on December 31, ~~2019,~~2020. The Notes will mature on December 9, 2025, unless earlier redeemed or converted. In connection with the ~~Subsidiary Obligors had borrowed $60,000~~Exchange Agreement, the Company also entered into, by and among the Company, Venus USA, Venus Concept Canada Corp., Venus Concept Ltd., and the Madryn Noteholders, (i) a Guaranty and Security Agreement dated as of December 9, 2020 (the “Madryn Security Agreement”), pursuant to which the Company agreed to grant Madryn a security interest, in substantially all of its assets, to secure the obligations under the ~~term A-1~~Notes and ~~A-2~~(ii) a Subordination of Debt Agreement dated as of December 9, 2020 (the “CNB Subordination Agreement”). The security interests and ~~B tranches~~liens granted to the Madryn Noteholders under the Madryn Security Agreement will terminate upon the earlier of (i) an assignment of the Notes (other than to an affiliate of the Madryn ~~Credit Agreement. Term C borrowings~~Noteholders) pursuant to the terms of ~~$10,000 were undrawn~~the Exchange Agreement and ~~are no longer available. Borrowings~~(ii) the first date on which the outstanding principal amount of the Notes is less than $10,000. Obligations under the ~~Madryn Credit Agreement~~Notes are secured by substantially all of the ~~Company’s assets and the~~ assets of the ~~Subsidiary Obligors. On~~Venus Concept Inc. and its subsidiaries party to the ~~24th payment date,~~Madryn Security Agreement. The Company’s obligations under the Notes and the security interests and liens created by the Madryn Security Agreement are subordinated to the Company’s indebtedness owing to CNB (including, but not limited, pursuant to the MSLP Loan Agreement and the CNB Loan Agreement, (Note 11)) and any security interests and liens which ~~is September 30, 2022,~~secure such indebtedness owing to CNB. The Notes have a 5-year term and the ~~aggregate~~interest rate on the convertible notes decreases to 6% on the third anniversary of the issuance. The Notes are convertible at any time into shares of the Company’s common stock, par value $0.0001 per share, calculated by dividing the outstanding principal amount of the ~~loans, together with~~Notes (and any accrued and unpaid interest ~~thereon and all other amounts due and owing~~ under the ~~loan agreement will become due and payable in full.~~

Notes) by the initial conversion price of $3.25 per share. In connection with the ~~Merger,~~Notes, the Company ~~entered into an amendment to~~recognized interest expense of $527 during the three months ended March 31, 2021. The conversion feature, providing the Madryn ~~Credit Agreement, dated as~~Noteholders with a right to receive the Company’s shares upon conversion of ~~November 7, 2019, (the “Amendment”), pursuant to which~~ the ~~Company joined as (i)~~Notes, was qualified for a ~~guarantor to~~scope exception in ASC 815-10-15 and did not require bifurcation. The Notes also contained embedded redemption features that provided multiple redemption alternatives. Certain redemption features provided the Madryn ~~Credit Agreement~~Noteholders with a right to receive cash and ~~(ii)~~ a ~~grantor to the certain security agreement, dated October 11, 2016, (as amended, restated, supplemented or otherwise modified from time to time), by~~variable number of shares upon change of control and ~~among the grantors from time to time party thereto and the administrative agent (the “U.S. Security Agreement”).~~

~~As a guarantor under the Madryn Credit Agreement, the Company is jointly and severally liable for the obligations~~an event of default (as defined in the ~~Madryn Credit Agreement) thereunder~~Notes). The Company evaluated redemption upon change of control and ~~to secure its obligations, the Company has granted the administrative agent a lien on all of its assets pursuant to the terms of the U.S. Security Agreement. In the~~an event of default under ASC 815, Derivatives and Hedging, and determined that these two redemption features required bifurcation. These embedded derivatives were accounted for as liabilities at their estimated fair value as of the ~~Madryn Credit Agreement, Madryn may accelerate~~date of issuance, and then subsequently remeasured to fair value as of each balance sheet date, with the ~~obligations and foreclose on~~related remeasurement adjustment being recognized as a component of change in fair value of derivative liabilities in the ~~collateral granted by the Company and Venus Concept Ltd. under the U.S. Security Agreement to satisfy the obligations.~~

Effective August 14, 2018, interest on the Madryn loan is 9.00%, payable quarterly. Previously, interest was payable quarterly, at the Company’s option, as follows: cash interest 9.00% during the interest only period, which was 3 years or 12 principal payments after closing, plus an additional 4.00% rate, paid in kind (“PIK”).unaudited condensed consolidated statements of operations. The Company ~~has~~determined the ~~option~~likelihood of ~~settling the PIK interest in cash or adding the owed interest~~an event of default and change of control as remote as of March 31, 2021, and December 31, 2020, therefore a nominal value was allocated to the ~~principal amount~~underlying embedded derivative liabilities as of ~~the loan.~~March 31, 2021, and December 31, 2020.

The ~~Madryn Credit Agreement contains certain covenants that require~~scheduled payments on the outstanding borrowings as of March 31, 2021 are as follows:

For the three months ended March 31, 2021, the Company ~~together~~did 0t make any principal repayments.

The Company has an agreement with ~~its subsidiaries~~CNB pursuant to ~~achieve certain minimum revenue and liquidity thresholds. The minimum revenue and liquidity covenants require that~~which CNB agreed to provide a revolving credit facility to the Company ~~and its subsidiaries, on a consolidated basis, achieve (i) minimum reported revenue targets for any four consecutive fiscal quarter period of an amount equal to~~in the ~~greater of (A) $100,000 and (B) one hundred and fifty percent (150%) of the aggregate outstanding~~maximum principal amount of ~~the loans as of the last day of such four consecutive fiscal quarter period, (ii) minimum levels of cash held in deposit accounts controlled by Madryn~~$10,000 to be ~~no less than $2,000 and (iii) minimum levels of cash held in all deposit accounts, plus availability under the CNB Credit Facility (as defined below),~~used to ~~be no less than $5,000.~~finance working capital requirements (the “CNB Loan Agreement”).

~~On April 29, 2020, the Company entered into the Twelfth Amendment to the Madryn Credit~~The CNB Loan Agreement that (i) require that interest payments for the period beginning January 1, 2020 and ending on, and including, April 29, 2020 (the “PIK Period”), be paid-in-kind, (ii) increase the interest rate from 9.00% per annum to 12.00% per annum during the PIK Period and (iii) require the Company to provide certain additional financial and other reporting information to the lenders.

~~On June 30, 2020, the Company entered into the~~ ~~Thirteenth Amendment~~ to the Madryn Credit Agreement that (i) extends the PIK Period through June 30, 2020, (ii) reduces the consolidated minimum revenue threshold requirement (a) for the four consecutive fiscal quarter period ended June 30, 2020, to at least $85,000 and (b) for the four consecutive fiscal quarter period ending September 30, 2020, to at least $75,000, (iii) requires the Company to raise at least $5,000 of cash proceeds from the issuance of equity during the period June 1, 2020 through September 30, 2020 and (iv) obligates the Company to use its best efforts to raise an additional $2,000 of cash proceeds from the issuance of equity during the period June 1, 2020 through September 30, 2020.

~~The Madryn Credit Agreement also~~ contains various covenants that limit the Company’s ability ~~and the ability of its subsidiaries~~ to engage in specified types of transactions. Subject to limited exceptions, these covenants limit the Company’s ability, without ~~Madryn’s~~CNB’s consent, to, among other ~~things:~~

~~As of June 30, 2020 and as of December 31, 2019 the Company was in compliance with all required covenants.~~

~~Pursuant~~pursuant to an escrow agreement, such cash will be released back to the Madryn ~~Credit Agreement, if all or any portion~~Noteholders on the first anniversary of the ~~loans are prepaid, then~~CNB Loan Agreement. The Company is required to maintain $3,000 in cash in a ~~prepayment premium must be paid equal to: (i) 8.00%~~deposit account maintained with CNB at all times during the term of the loans prepaid if prepaid on or prior to August 31, 2019, (ii) 6.50% if prepaid after August 31, 2019 but on or prior to August 31, 2020, (iii) 5.00% if prepaid after August 31, 2020 but on or prior to February 28, 2021, (iv) 4.00% if prepaid after February 28, 2021 but on or prior to August 31, 2021, (v) 3.00% if prepaid after August 31, 2021 but on or prior to February 28, 2022, and (vi) 2.00% if prepaid after February 28, 2022.

~~The scheduled principal payments on~~CNB Loan Agreement. In addition, the ~~outstanding borrowings as of June 30, 2020 are as follows:~~

~~The Company has an agreement with City National Bank of Florida (“CNB”) pursuant to which~~ CNB agreed to provide a revolving credit facility to certain of the Company’s subsidiaries in the maximum principal amount of $10,000 ($10,000 in 2019, starting from April 2019), to be used to finance working capital requirements (the “Credit Facility”). As of June 30, 2020, the Company had $3,861 outstanding ($7,789 as of December 31, 2019) under the Credit Facility, which bears interest at LIBOR rate plus 3.25%, which amounted to a weighted average of 4.06% (5.72% for the six months ended June 30, 2019).

~~On March 20, 2020, the Company entered into a Second Amended and Restated~~ Loan Agreement ~~as a borrower with CNB, as amended, pursuant to which CNB agreed to make~~contains certain loans and other financial accommodations to the Company, and certain of its subsidiaries. In connection with the CNB Credit Facility, the Company also entered into (i) a Second Amended and Restated Guaranty of Payment and Performance with CNB dated as of March 20, 2020, (the “CNB Guaranty”), pursuant to which the Company agreed to guaranty the obligations under the CNB Credit Facility and (ii) a Security Agreement with CNB dated as of March 20, 2020, (the “CNB Security Agreement”), pursuant to which the Company agreed to grant CNB a security interest, in substantially all of its assets, to secure the obligations under the CNB Credit Facility. Borrowings under the CNB Credit Facility are secured by substantially all of the assets of the Company and its subsidiaries and the CNB Guaranty.

~~The CNB Credit Facility requires~~covenants that require the Company to ~~maintain either~~achieve certain minimum account balances, or a minimum ~~cash balance in deposit accounts or~~debt service coverage ratio and a maximum total liability to tangible net worth ~~ratio~~ratio. If the Company fails to comply with these covenants, it will result in a default and require the Company to repay all outstanding principal amounts and any accrued interest. In connection with the CNB Loan Agreement, a ~~minimum debt service coverage ratio.~~ loan fee of $1,000 was paid in equal installments on January 25, February 25 and March 25, 2021.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company was in compliance with all required covenants. An event of default under this agreement would cause a default under the ~~Madryn Credit Agreement~~MSLP Loan (see Note 9).

~~The Company and one of its subsidiaries,~~ Venus Concept ~~USA~~ Inc. (“and Venus ~~USA”),~~USA, received funding in the total amount of $4,048 in connection with ~~two~~2 Small Business Loans under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief, and Economic Security Act, as amended from time to time (the “PPP”).

~~The Company~~Venus Concept Inc. entered the U.S. Small Business Administration Note dated as of April 21, 2020 in favor of CNB pursuant to which the Company borrowed $1,665 original principal amount, which was funded on April 29, 2020 (the “Venus Concept PPP Loan”). The Venus Concept PPP Loan bears interest at 1% per annum and matures in two years from the date of disbursement of funds under the loan. Interest and principal payments under the Venus Concept PPP Loan will be deferred for a period of six months.

The Venus Concept PPP Loan ~~contain~~contains certain covenants which, among other things, restrict the Company’s use of the proceeds of the PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or other agreements with any creditor of the Company, to the extent that a default under any loan or other agreement would materially affect the Company’s ability to repay its PPP Loan and limit the Company’s ability to make certain changes to its ownership structure.

Venus USA entered into a U.S. Small Business Administration Note dated as of April 15, 2020 in favor of CNB. Venus USA borrowed $2,383 original principal amount, which was funded on April 20, 2020 (the “Venus USA PPP Loan” and together with the Venus Concept PPP Loan, individually each a “PPP Loan” and collectively, the “PPP Loans”). The terms of the Venus USA PPP Loan are substantially similar to the terms of the Venus Concept PPP Loan.

Under certain circumstances, all or a portion of the PPP Loans may be forgiven, however, there can be no assurance that any portion of the PPP Loans will be forgiven and that the Company would not be required to repay the PPP Loans in full. The Company has applied through CNB for partial forgiveness of Venus USA PPP Loan in the amount of $1,689 and the Venus Concept PPP Loan in the amount of $1,086. The Company recorded PPP Loans within the long-term liabilities in the unaudited condensed consolidated balance sheet.

Under the ~~Madryn Credit~~CNB Loan Agreement and the MSLP Loan Agreement, each PPP Loan is permitted to be incurred by ~~the Company~~Venus Concept Inc. and Venus ~~Concept~~ USA as long as certain conditions remain ~~satisfied, including that all PPP Loans must be forgiven other than any amount which can fit under existing permitted debt baskets in the Madryn Credit Agreement.~~satisfied. If ~~the Company~~Venus Concept Inc. and/or Venus ~~Concept~~ USA defaults on the respective PPP Loan ~~or if any of the conditions to the incurrence thereof under the Madryn Credit Agreement are not satisfied~~ (i) events of default will occur under the ~~Madryn Credit~~CNB Loan Agreement and the ~~CNB Credit Facility~~MSLP Loan Agreement and (ii) ~~the Company~~Venus Concept Inc. and Venus ~~Concept~~ USA may be required to immediately repay their respective PPP Loan.

The U.S. Small Business Administration (the “SBA”) has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2,000 following the lender’s submission of the borrower’s loan forgiveness application. To the extent that the SBA’s audit determines that Venus ~~Concept~~ USA was not entitled to the loan under the PPP, the loan may not be forgiven, an event of default would occur under the ~~Madryn Credit~~CNB Loan Agreement and the MSLP Loan Agreement and Venus ~~Concept~~ USA could be subject to civil and criminal penalties.

As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~$4,048~~$4,151 outstanding under the PPP Loans ~~(None~~(4,110 as of December 31, ~~2019)~~2020).

On May 6, 2020 the Company’s subsidiary, Venus Concept UK Limited, received funding in the total amount of $61.9 (50.0 GBP) in connection with the loan under the Bounce Back Loan Scheme (“Venus Concept UK Loan”), the program established in the U.K. to help smaller businesses impacted by COVID-19. This loan bears interest at 2.5% per annum and matures in six years from the date of disbursement of funds. Interest and principal payments under the Venus Concept UK Loan will be deferred for a period of twelve months. As of June 30, 2020 the balance of the Venus Concept UK Loan was $61.9 (None as of December 31, 2019).

Certain of the Company’s subsidiaries applied for government assistance programs and received government subsidies aggregating ~~$555.~~$1,117. The terms of these government assistance programs vary by jurisdiction. The Company recorded government

subsidies received as a reduction to the associated wage costs in general and administrative expenses in the unaudited condensed consolidated statement of operations.

The Company is required to reserve and keep available out of its authorized but unissued shares of common stock a number of shares sufficient to affect the ~~conversion of all outstanding shares of convertible preferred stock, plus~~ exercise of all options granted and available for grant under the incentive plans and warrants to purchase common stock.

The Company’s common stock ~~confer~~confers upon ~~their~~its holders the following rights:

~~As noted in Note 1 above, in~~In March 2020, the Company issued and sold to certain ~~Investors an aggregate of 660,000 shares of Series A Preferred Stock.~~ ~~The terms of~~investors (collectively the ~~Series A Preferred Stock are governed by a Certificate of Designation filed by the Company with the~~ ~~Secretary of State of the State of Delaware on March 18, 2020.~~ ~~The following is a summary of the material terms of the Series A Preferred Stock:~~

Upon issuance, the effective conversion price of the Series A Preferred Stock of $1.93 per share were lower than the market price of the Company’s common stock on the date of issuance of the Series A Preferred Stock of $2.47 per share, as a result, the Company recorded the beneficial conversion feature of $3,564 in APIC. Because the Series A Preferred Stock is perpetual, it is carried at the amount recorded at inception. Subsequently, upon conversion of the Series A Preferred Stock, the beneficial conversion feature was accounted for as deemed dividend as disclosed below.

The Company evaluated the Series A Preferred Stock for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because the Series A Preferred Stock did not meet the definition of the liability instruments defined thereunder for convertible instruments. Specifically, the Series A Preferred Stock is not mandatorily redeemable and does not embody an obligation to buy back the shares outside of the Company’s control in a manner that could require the transfer of assets. Additionally, the Company determined that the Series A Preferred Stock would be recorded as permanent equity, not temporary equity, based on the guidance of ASC 480 given that the holders of equally and more subordinated equity would be entitled to also receive the same form of consideration upon the occurrence of the event that gives rise to the redemption or events of redemption that are within the control of the Company.

~~Since Series A Preferred Stock was sold as a unit with~~ warrants the proceeds received were allocated to each instrument on a relative fair value basis as it is described below. All outstanding shares of Series A Preferred Stock were converted into shares of common stock on June 16, 2020, as described below.

~~As noted in Note 1 above, in March 2020, the Company issued and sold to the Investors in the 2020 Private Placement warrants~~Warrants”) to purchase up to 6,675,000 shares of common stock with an exercise price of $3.50 per share, along with the shares of common stock and preferred stock the Investors ~~purchased.~~purchased (the “2020 Private Placement”). The 2020 Private Placement Warrants have a five-year term and are exercisable beginning 181 days after their issue date. The Company evaluated the 2020 Private Placement Warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because the warrants only require settlement through the issuance of the Company’s common stock, which is not redeemable, and do not represent an obligation to issue a variable number of shares. Based on this guidance, the Company determined, for each issuance, that the 2020 Private Placement Warrants did not need to be accounted for as a liability. Accordingly, the 2020 Private Placement Warrants were classified as equity and are not subject to remeasurement at each balance sheet date. The proceeds received in the 2020 Private Placement were allocated to each instrument on a relative fair value basis.

Total net proceeds of $20,300 reduced by $3,564 of the beneficial conversion feature were allocated as follows: $8,063 to Series A Preferred Stock, $4,052 to shares of common stock and $4,621 to the 2020 Private Placement Warrants issued. Series A Preferred Stock and common stock issued in the 2020 Private Placement were recorded at par value of $0.0001 with the excess of par value recorded in APIC.

On June 16, 2020, upon the approval of the Company’s stockholders, 660,000 shares of Series A Preferred Stock were converted into 6,600,000 shares of the Company’s common stock.

As noted in Note 1 above, in December 2020, the Company issued and sold to the investors in the December 2020 Public Offering 11,250,000 shares of its common stock and warrants to purchase up to 5,625,000 shares of common stock with an exercise price of $2.50 per share. The December 2020 Public Offering Warrants have a ~~result of~~five-year term and are exercisable immediately. The Company evaluated the ~~conversion,~~December 2020 Public Offering Warrants for liability or equity classification in accordance with the provisions of ASC ~~470-20-40-1,~~480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because the ~~beneficial conversion~~ ~~feature~~warrants only require settlement through the issuance of $~~3,564~~ ~~was recorded~~the Company’s common stock, which is not redeemable, and do not represent an obligation to issue a variable number of shares. Based on this guidance, the Company determined, for each issuance, that the December 2020 Public Offering Warrants did not need to be accounted for as a ~~deemed dividend~~ ~~in APIC,~~ ~~that has been presented~~liability. Accordingly, the December 2020 Public Offering Warrants were classified as ~~a component of the net loss attributable~~equity and are not subject to ~~common stockholders~~remeasurement at each balance sheet date. The proceeds received in the ~~Company’s condensed consolidated statement~~December 2020 Public Offering were allocated to each instrument on a relative fair value basis.

Total net proceeds of ~~operations.~~$20,476 were allocated as follows: $17,828 to shares of common stock and $2,648 to the December 2020 Public Offering Warrants issued. Common stock issued in the December 2020 Public Offering were recorded at par value of $0.0001 with the excess of par value recorded in APIC. In February 2021, several investors exercised an aggregate of 361,200 December 2020 Public Offering Warrants at the exercise price of $2.50 per share. The total proceeds received by the Company from the December 2020 Public Offering Warrants exercises were $903.

In November 2010, the Company’s Board of Directors (the “Board”) adopted a share option plan (the “2010 Share Option Plan”) pursuant to which shares of the Company’s common stock are reserved for issuance upon the exercise of options to be granted to directors, officers, employees and consultants of the Company. The 2010 Share Option Plan is administered by the ~~Company’s~~ Board, which designates the options and dates of grant. Options granted vest over a period determined by the Board, originally had a contractual life of seven years, which was extended by to ten years in November 2017 and are non-assignable except by the laws of descent. The Board has the authority to prescribe, amend and rescind rules and regulations relating to the 2010 Share Option Plan, provided that any such amendment or rescindment that would adversely affect the rights of an ~~Optionee~~optionee that has received or been granted an ~~Option~~option shall not be made without the ~~Optionee’s~~optionee’s written consent. As of ~~June 30, 2020,~~March 31, 2021, the number of shares of the Company’s common stock reserved for issuance and available for grant under the 2010 Share Option Plan was ~~44,450 (44,450~~93,439 (138,275 as atof December 31, ~~2019)~~2020).

The 2019 Incentive Award Plan (the “2019 Plan”) was originally established under the name Restoration Robotics, Inc., as the 2017 Incentive Award Plan. It was adopted by the ~~Company’s~~ Board on September 12, 2017 and approved by the Company’s stockholders on September 14, 2017. The 2017 Incentive Award Plan was amended, restated, and renamed as set forth above, and was approved by the Company’s stockholders on October 4, 2019.

Under the 2019 Plan, 450,000 shares of common stock were initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, ~~or SARs,~~ performance stock awards, performance stock unit awards, restricted stock awards, restricted stock unit awards and other stock-based awards, plus the number of shares remaining available for future awards under the 2019 Plan as of the date we completed our business combination with Venus Concept Ltd. and the business of Venus Concept Ltd. became the primary business of the ~~Merger.~~Company (the “Merger”). As of ~~June 30, 2020,~~March 31, 2021, there were ~~273,977~~687,788 of shares of common stock available under the 2019 Plan ~~(698,378~~(124,347 as atof December 31, ~~2019)~~2020). The 2019 Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock reserved for issuance pursuant to awards under such plan shall be increased on the first day of each year from 2020 and ending in 2029 equal to the lesser of (A) four percent (4.00%) of the shares of stock outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by the Board.

The Company recognized stock-based compensation for its employees and non-employees in the accompanying unaudited condensed consolidated statements of operations as follows:

The fair value of each option is estimated at the date of grant using the Black-Scholes option pricing formula with the following assumptions:

Expected Term—The expected term represents management’s best estimate for the options to be exercised by option holders.

Volatility—Since the Company does not have a trading history for its common stock, the expected volatility was derived from the historical stock volatilities of comparable peer public companies within its industry that are considered to be comparable to the Company’s business over a period equivalent to the expected term of the stock-based awards.

Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the stock-based awards’ expected term.

Dividend Rate—The expected dividend is ~~zero~~0 as the Company has not paid nor does it anticipate paying any dividends on its common stock in the foreseeable ~~future.~~future.

Fair Value of Common Stock— Prior to the Merger, Venus Concept Ltd. used the price per share in its latest sale of securities as an estimate of the fair value of its ordinary shares. After the closing of the Merger, the fair value of the Company’s common stock is used to estimate the fair value of the stock-based awards at grant date.

The following table summarizes stock option activity under the Company’s stock option plans:

Number of
Shares

Weighted-
Average
Exercise
Price per
Share,
$

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

Outstanding – January 1, 2020

3,278,439

$
5.29

5.08

$
4,885

Options granted

1,705,000

4.35

$
-

Options exercised

(22,777
)

4.34

Options forfeited/cancelled

(173,367
)

23.00

Outstanding – June 30, 2020

4,787,295

$
4.33

6.32

$
2,637

Exercisable – June 30, 2020

2,808,235

$
3.75

4.12

$
2,637

Expected to vest – after June 30, 2020

1,979,060

$
5.16

9.44

$
-

	Number of Shares			Weighted- Average Exercise Price per Share, $		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding – January 1, 2021		4,433,392		$	4.59		6.20	$	247
Options granted		1,857,000			2.37				-
Options exercised		(157,304	)		2.39				157
Options forfeited/cancelled		(233,792	)		4.49				-
Outstanding - March 31, 2021		5,899,296		$	3.98		7.37	$	502
Exercisable – March 31, 2021		2,532,184		$	4.70		4.60	$	493
Expected to vest – after March 31, 2021		3,367,112		$	3.44		9.46	$	-

The following tables summarize information about ~~share~~stock options outstanding and exercisable at ~~June 30, 2020:~~March 31, 2021:

	Options Outstanding						Options Exercisable						Options Outstanding						Options Exercisable
Exercise Price Range	Number		Weighted average remaining contractual term (years)		Weighted average Exercise Price		Options exercisable		Weighted average remaining contractual term (years)		Weighted average Exercise Price		Number		Weighted average remaining contractual term (years)		Weighted average Exercise Price		Options exercisable		Weighted average remaining contractual term (years)		Weighted average Exercise Price
$0.15 - $3.64		3,157,535		5.63	$	2.74		1,948,175		3.07	$	2.19		4,405,983		7.72	$	2.81		1,498,108		4.00	$	2.86
$4.26 - $7.95		1,570,155		7.67		6.75		821,337		6.50		6.34		1,437,306		6.34		6.78		991,451		5.44		6.54
$12.45 - $26.10		36,082		7.98		18.48		16,439		7.50		19.08		34,442		7.44		18.49		21,451		7.30		18.89
$27.00 - $33.00		14,612		4.06		28.02		14,556		4.05		28.01		12,998		3.60		27.99		12,962		3.59		27.98
$36.00 - $94.65		8,911		7.23		46.29		7,728		7.13		44.87		8,567		6.30		45.74		8,212		6.26		45.31
		4,787,295		6.32	$	4.33		2,808,235		4.12	$	3.75		5,899,296		7.37	$	3.98		2,532,184		4.60	$	4.70

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock. The total intrinsic value of options exercised were ~~$46~~$157 and $nil for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~The total intrinsic value of options exercised were $46 and $31 for the six months ended June 30, 2020 and 2019, respectively.~~

The weighted-average grant date fair value of options granted was ~~$4.26~~$2.37 and ~~$5.52~~$7.515 per share for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. The weighted-average grant date fair value of options granted was $4.355 and $5.52 per share for the six months ended June 30, 2020 and 2019,~~ respectively.

The Company generated a loss and ~~incurred $633~~recognized $nil of tax ~~benefit and $44 of tax benefit~~expense for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and $589 of tax expense for the three months ended March 31, 2020, respectively. A reconciliation of income tax ~~benefit~~expense is as follows:

	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended March 31
	2020			2019			2020			2019			2021			2020
Loss before income taxes	$	(10,398	)	$	(5,417	)	$	(60,512	)	$	(9,636	)	$	(9,435	)	$	(50,114	)
Theoretical tax benefit at the statutory rate (24.1% in 2020, 24.7% in 2019)		(2,507	)		(1,141	)		(14,584	)		(2,184	)
Theoretical tax benefit at the statutory rate (21.0% in 2021, 24.1% in 2020)														(1,981	)		(12,077	)
Differences in jurisdictional tax rates		(48	)		12			(220	)		(221	)		(354	)		(172	)
Losses utilization		101			45			—			609			—			(101	)
Valuation allowance		1,936			1,480			7,298			2,546			1,984			5,362
Non-deductible expenses		(115	)		(335	)		7,462			197			334			7,577
Total income tax (benefit) expense		(633	)		61			(44	)		947
Other														17			—
Total income tax expense														—			589
Net loss	$	(9,765	)	$	(5,478	)	$	(60,468	)	$	(10,583	)	$	(9,435	)	$	(50,703	)

Income tax ~~expense~~benefit is recognized based on the actual income ~~received~~ or loss incurred during the three ~~and six~~ months ended ~~June 30, 2020. Due to the uncertainties as a result of COVID-19, management was unable to determine an annualized effective tax rate~~March 31, 2021 and calculate the income tax expense in accordance with such method. The effective tax rate differs from the statutory tax rate due to the recognition of previously unrecognized carried forward tax losses.2020, respectively.

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. The Company's CODM is its Chief Executive Officer. The Company has determined it operates in a single operating segment and has ~~one~~1 reportable segment, as the CODM reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by geography and type for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company does not assess the performance of individual product ~~line~~lines on measures of profit or loss, or asset-based metrics. Therefore, the information below is presented only for revenues by geography and type.

Revenue by geographic location, which is based on the product shipped to location, is summarized as follows:

As of ~~June 30,~~March 31, 2021, long-lived assets in the amount of $18,868 were located in the United States and $2,274 were located in foreign locations. As of December 31, 2020, long-lived assets in the amount of ~~$21,879~~$19,828 were located in the United States and ~~$2,695~~$2,576 were located in foreign locations.

Revenue by type is a key indicator for providing management with an understanding of the Company’s financial performance, which is organized into four different categories:

~~1.Lease~~1.Lease revenue - includes all system sales with typical lease terms of 36 months.

~~2.System~~2.System revenue – includes all systems sales with payment terms within 12 months.

~~3.Product~~3.Product revenue – includes skincare, hair and other consumables payable upon receipt.

~~4.Service~~4.Service revenue - includes NeoGraft® technician services, adadvertising agency services and extended warranty sales.

All amounts were recorded at the exchange amount, which is the amount established and agreed to by the related parties. The following are transactions between the Company and its related parties:

On July 1, 2016, a senior manager of the Company transferred 100.0% of his shares in Inphronics Limited to the Company, making it a wholly-owned subsidiary. At such time, an unsecured non-interest-bearing working capital loan to PT Neoasia Medical, a subsidiary of Inphronics Limited, that was previously provided by the senior manager of the Company was outstanding. As of June 30, 2020 and December 31, 2019, the outstanding amount of the loan was Indonesian rupiah (“IDR”) 6.9 billion, which is equivalent to $457 and $498, respectively. This loan is reported as part of accrued expenses and other current liabilities.

On January 1, 2018, the Company entered into a ~~new Distribution Agreement~~distribution agreement with Technicalbiomed Co., Ltd. (“TBC”), pursuant to which TBC will continue to distribute the Company’s products in Thailand. A senior ~~manager~~officer of the Company is a 30.0% shareholder of TBC. For the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, TBD did not purchase any products from the Company under this distribution agreement. For the six months ended June 30, 2020 and 2019,~~ TBC purchased products in the amount of ~~$49~~$15 and ~~$100,~~$49, respectively, under this distribution agreement. These sales are included in products and services revenue.

In ~~August 2013,~~2020, the Company made several strategic decisions to divest of underperforming direct sales offices and sold its share in several subsidiaries, including its 55.0% shareholding in Venus Concept Singapore Pte. Ltd (“Venus Singapore”). On January 1, 2021, the Company entered into a ~~license~~distribution agreement ~~for~~with Venus Singapore, pursuant to which Venus Singapore will continue to distribute the ~~rights to an invention for fractional radio frequency treatment of the skin with the developers of the technology. Pursuant to the license agreement, the developers, amongst which one is a~~Company’s products in Singapore. A senior ~~executive~~officer of the Company ~~granted to~~is a 45.0% shareholder of Venus Singapore. For the ~~Company an exclusive worldwide, perpetual, irrevocable license to develop and commercialize their inventions and any product into which it is integrated. As consideration for such license,~~three months ended March 31, 2021, Venus Singapore purchased products in the Company agreed to pay the developers 7.0% of the gross income received by the Company from sales of the Venus Viva system and the related consumables and $1.50 per Venus Versa system, up to an aggregate amount of ~~$3,000. No royalties were paid~~$65 under the distribution agreement. These sales are included in ~~the three~~products and six months ended June 30, 2020 and 2019, respectively. The Company reported the amounts under research and development expenses in the condensed consolidated financial statements. No amounts were outstanding as at June 30, 2020 and December 31, 2019.

~~Between July 1, 2020 and July 2, 2020, the Company issued and sold a total of 500,000 shares of its common stock to Lincoln Park pursuant to the~~ ~~Equity Purchase Agreement, generating aggregate proceeds of~~ ~~$1,957.~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (“Form 10-Q”) and with our audited consolidated financial statements and notes thereto in our Annual Report ~~filed~~ on Form 10-K for the year ended December 31, ~~2019~~2020 (“Form 10-K”)~~, and our Form 10-Q for the quarter ended March 31, 2020,~~ filed with the ~~Securities and Exchange Commission (the “SEC”)~~SEC and other filings we have made with the SEC. This discussion contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that reflect our plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in Part ~~II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, Part II Item 1A“Risk Factors” in our Form 10-Q for the quarter ended March 31, 2020, and Part~~ I, Item IA “Risk Factors” of our Form 10-K. ~~Actual results~~ Any statements contained in this Form 10-Q that are not historical facts may be deemed to be forward-looking statements. In some cases, you can identify these statements by words such as such as “anticipates,” “believes,” “plans,” “expects,” “projects,” “future,” “intends,” “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “guidance,” and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements are based on current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management's beliefs and assumptions and are not guarantees of future performance or developments and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Form 10-Q may turn out to be inaccurate or may differ materially from those contained in any forward-looking statements. You should carefully read Part ~~II, Item 1A, “Risk Factors”herein, Part II Item 1A“Risk Factors” in our Form 10-Q for the quarter ended March 31, 2020, and Part~~ I, Item IA, “Risk Factors” of our Form 10-K. Any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

We are an innovative global medical technology company that develops, commercializes, and delivers minimally invasive and non-invasive medical aesthetic and hair restoration technologies and related services. Our systems have been designed on a cost-effective, proprietary and flexible platforms that enable us to expand beyond the aesthetic industry’s traditional markets of dermatology and plastic surgery, and into non-traditional markets, including family and general practitioners and aesthetic medical spas. In the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, a substantial majority of our systems delivered in North America were in non-traditional markets.

~~In November 2019, we completed our business combination with Venus Concept Ltd. and the business of Venus Concept Ltd. became the primary business of the company.~~

We have had recurring net operating losses and negative cash flows from operations. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had an accumulated deficit of ~~$135.5~~$166.7 million and ~~$75.7~~$157.4 million, respectively. Until we generate revenue at a level to support our cost structure, we expect to continue to incur substantial operating losses and negative cash flows from operations. In order to continue our operations, we must achieve profitable operations and/or obtain additional equity investment or debt financing. Until we achieve profitability, we plan to fund our operations and capital expenditures with cash on hand, borrowings and issuances of capital stock. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had cash and cash equivalents of ~~$14.0~~$27.1 million and ~~$15.7~~$34.4 million, respectively. On March 19, 2020 we issued and sold securities in a private placement for gross proceeds of approximately $22.3 million. See “—2020 Private Placement” below. On June 16, 2020, we entered into a purchase agreement (the “~~Equity Purchase Agreement~~”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock. During the quarter ended June 30, 2020, we raised net cash proceeds of $3.0 million under the ~~Equity Purchase Agreement~~ ~~as described below. See~~ “—~~Equity Purchase Agreementwith Lincoln Park~~” ~~below.~~ The COVID-19 pandemic has had a significant negative impact on our business, and we expect the pandemic to continue to have a negative impact in the foreseeable future, the extent of which is uncertain and largely subject to whether the severity of the pandemic worsens, or duration lengthens. Given the COVID-19 pandemic, we may need additional capital to fund our future operations and to access the capital markets sooner than we planned. We cannot assure you that we will be successful in raising additional capital or that such capital, if available at all, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital, we may be compelled to reduce the scope of our operations and planned capital or research and development expenditures or sell certain assets, including intellectual property assets. See ‘‘—Liquidity and Capital Resources’’. for additional information.

On ~~March 18,~~December 24, 2020, we ~~entered into~~sold in a ~~securities purchase agreement with certain investors pursuant to which we agreed to sell and they agreed to purchase an aggregate of approximately 2.3 million~~public offering 11,250,000 shares of ~~our common stock, 0.7 million shares of Series A Preferred Stock, which is convertible into 6.6 million shares of our~~ common stock and ~~the 2020 Private Placement Warrants~~warrants to purchase up to ~~an aggregate of approximately 6.7 million~~5,625,000 shares of ~~our~~ common stock at a combined offering price to the public of $2.00 per share and accompanying warrants. The warrants have an exercise price of ~~$3.50~~$2.50 per share which we refer to as the 2020 Private Placement. The 2020 Private Placement Warrants have a five-year term and are exercisable beginning 181 days after their issue date. The aggregate net purchase price for the securities sold in the 2020 Private Placement was approximately $20.3 million. The transaction was completed on March 19, 2020. All outstanding shares of Series A Preferred Stock automatically converted into shares 6.6 million shares of our common stock on June 16, 2020 upon receipt of ~~stockholder approval at our annual meeting of stockholders held on June 16, 2020.~~

On June 16, 2020, we entered into the Equity Purchase Agreement with Lincoln Park, which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock ~~pursuant to our shelf registration statement~~. ~~The purchase price of shares~~ of common stock, ~~related to~~are exercisable immediately, and expire in five years from the date of issuance. Total net proceeds generated by the December 2020 Public Offering was $20.5 million. In February 2021, a ~~future sale will be based on the then prevailing market prices~~small number of ~~such shares~~investors exercised an aggregate of 361,200 December 2020 Public Offering Warrants at the ~~time~~exercise price of ~~sales as described in the Equity Purchase Agreement.~~ Concurrently with entering into the Equity Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park, pursuant to which we agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Equity Purchase Agreement (the “Registration Rights Agreement”). ~~See ‘‘—Liquidity and Capital Resources’’.~~

As of June 30, 2020, we issued and sold to Lincoln Park 1.0 million shares of our common stock, 0.2 million of these shares were issued to Lincoln Park as a commitment fee in connection with entering into the Equity Purchase Agreement (the “Commitment Shares”). The total value of the Commitment Shares of $0.6 million together with the issuance costs of $0.1 million were recorded as deferred issuance costs in the condensed consolidated balance sheet. ~~These costs will be amortized into condensed consolidated statements of stockholders’ equity proportionally based on proceeds~~$2.50 per share. We received ~~during the period and the expected~~ total proceeds ~~to be raised over~~from the ~~term~~December 2020 Public Offering Warrants exercises of ~~the~~ ~~Equity Purchase Agreement.~~ ~~The net proceeds from shares issuance as of June 30, 2020 were~~ ~~$3.0~~$0.9 million. In July 2020 we sold additional 0.5 million shares of our common stock to Lincoln Park for $1.9 million. The Equity Purchase Agreement will enhance our balance sheet and financial condition to support our future growth initiatives.

We derive revenue from the sale of products and services. Product revenue includes revenue from the following:

Service revenue includes revenue derived from our VeroGrafters™ technician services, ~~our 2two5 internal advertising agency,~~ and our extended warranty service contracts provided to our existing customers.

Systems are sold through our subscription model, or through traditional sales contracts directly and through distributors.

We generate recurring monthly revenue under our subscription-based business model and from traditional system sales. Venus Concept Ltd. commenced a subscription-based model in North America in 2011, and ~~for the six months ended June 30, 2020,~~approximately 47% and ~~2019, approximately 58% and 70%~~ 66% of ~~system~~our aesthetic revenues were derived from our subscription model ~~respectively~~. in the three months ended March 31, 2021 and 2020, respectively.We have launched our subscription model in targeted international markets in which we operate directly. We currently do not offer the ARTAS® iX System for hair restoration under the subscription model.

Our subscription model includes an up-front fee and a monthly payment schedule, typically over a period of 36 months, with approximately 40% of total contract payments collected in the first year. To ensure that each monthly ~~product~~ payment is made on time and that the customer’s system is serviced in accordance with the terms of the warranty, every product purchased under a subscription agreement requires a monthly activation code, which we provide to the customer upon receipt of the monthly payment. These recurring monthly payments provide our customers with enhanced financial transparency and predictability. If economic circumstances are appropriate, we provide customers in good standing with the opportunity to “upgrade” ~~to new agreements for the~~into our newest available or alternative Venus ~~Concept’s~~Concept technology throughout the subscription period. This structure can provide greater flexibility than traditional equipment leases secured through financing companies. We work closely with our customers ~~and physicians~~ to provide business recommendations that improve the quality of service outcomes, build patient traffic and improve financial returns for the customer’s business.

We have developed and commercialized ~~twelve~~eleven technology platforms, including our ARTAS® and NeoGraft® systems. Our medical aesthetic technology platforms have received regulatory clearance for indications such as treatment of facial wrinkles in certain skin types, temporary reduction of appearance of cellulite, non-invasive fat reduction (lipolysis) in the abdomen and flanks for certain body types and relief of minor muscle aches and ~~pains, as well as other indications, that are cleared~~pains. In addition, we have received regulatory approval for marketing of certain indications in overseas markets but not in the United States, including treatment of certain soft tissue injuries, temporary increase of skin tightening, temporary body contouring, and vaginal ~~treatments in the Israeli and other markets.~~treatments. We believe our ARTAS® and NeoGraft® systems are complementary and give us a hair restoration product offering that can serve a broad segment of the market.

In the United States, we have obtained 510(k) clearance from the FDA for our Venus Freeze® and Venus Freeze Plus™, Venus Viva® and ~~Freeze Plus systems,~~ Venus ~~Viva, Venus Viva~~Viva® MD, Venus ~~Legacy,~~Legacy® BX and Legacy® CX, Venus ~~Versa,~~Versa®, Venus ~~Velocity,~~Velocity™, Venus ~~Heal,~~Bliss™, Venus ~~Bliss,~~ ~~Venus Epileve~~Epileve™, ARTAS® and ARTAS® ~~systems. The Venus Glow and NeoGraft® systems are listed as class I devices under FDA classification system.~~iX Systems. Outside the United States, we market our technologies in over 60 countries across Europe, the Middle East, Africa, Asia-Pacific and Latin America. Because each country has its own regulatory scheme and clearance process, not every device is cleared or authorized for the same indications in each market in which a particular system is marketed.

As of ~~June 30, 2020,~~March 31, 2021, we operated directly in 2620 international markets through our 2316 direct offices in the United States, Canada, United Kingdom, Japan, South Korea, Mexico, Argentina, Colombia, Spain, France, Germany, Australia, China, Hong Kong, ~~Singapore, Indonesia, Vietnam, India,~~ Israel, ~~Italy, Russia, Kazakhstan~~ and South Africa.

Our revenues for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and June 30, 2019~~ were ~~$17.0~~$22.6 million and ~~$27.8~~$14.5 million, respectively. We had a net loss attributable to Venus Concept of ~~$13.2~~$9.3 million and ~~$5.9~~$50.2 million in the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and June 30, 2019,~~ respectively. We had an Adjusted EBITDA loss of ~~$2.7~~$5.0 million and ~~$2.5~~$13.7 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and June 30, 2019,~~ respectively.

Our revenues for the six months ended June 30, 2020 and June 30, 2019 were $31.5 million and $52.4 million, respectively. We had a net loss attributable to Venus Concept of $63.3 million and $11.2 million in the six months ended June 30, 2020 and June 30, 2019, respectively. We had an Adjusted EBITDA loss of $16.4 million and $3.7 million for the six months ended June 30, 2020 and June 30, 2019, respectively.

Adjusted EBITDA is a non-GAAP measure defined as net loss income before foreign exchange loss, financial expenses, income tax expense, depreciation and amortization, stock-based compensation and non-recurring items for a given period. Adjusted EBITDA is not a measure of our financial performance under U.S. GAAP and should not be considered an alternative to net income or any other performance measures derived in accordance with U.S. GAAP. Accordingly, you should consider Adjusted EBITDA along with other financial performance measures, including net income, and our financial results presented in accordance with U.S. GAAP. Other companies, including companies in our industry, may calculate Adjusted EBITDA differently or not at all, which reduces its usefulness as a comparative measure. We understand that although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are: Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and although depreciation and amortization are a non-cash charges, the assets being depreciated will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

We believe that Adjusted EBITDA is a useful measure for analyzing the performance of our core business because it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by changes in foreign exchange rates that impact financial assets and liabilities denominated in currencies other than the U.S. dollar, tax positions (such as the impact on periods or companies of changes in effective tax rates), the age and book depreciation of fixed assets (affecting relative depreciation expense), amortization of intangible assets, stock-based compensation expense (because it is a non-cash expense) and non-recurring items as explained below.

The following reconciliation of net loss to Adjusted EBITDA for the periods presented:

	Three Months Ended June 30						Six Months Ended June 30						Three Months Ended March 31
	2020			2019			2020			2019			2021			2020
Reconciliation of net loss to adjusted EBITDA	(in thousands)						(in thousands)
Reconciliation of net loss to Adjusted EBITDA													(in thousands)
Net loss	$	(9,765	)	$	(5,478	)	$	(60,468	)	$	(10,583	)	$	(9,435	)	$	(50,703	)
Foreign exchange loss		(1,166	)		(684	)		3,113			13			714			4,279
Finance expenses		2,371			2,152			4,625			3,807
Income tax expense (benefit)		(633	)		61			(44	)		947
Interest expense														1,138			2,108
Accretion on long-term debt and amortization of fees														747			146
Income tax expense														—			589
Depreciation and amortization		1,269			410			2,514			735			1,304			1,245
Stock-based compensation expense		539			1,044			1,056			1,419			508			517
Goodwill impairment charge		—			—			27,450			—			—			27,450
Other adjustments (1)		4,756			2,650			5,394			2,650			—			638
Adjusted EBITDA	$	(2,629	)	$	155		$	(16,360	)	$	(1,012	)	$	(5,024	)	$	(13,731	)

⁽¹⁾For the three ~~and six~~ months ended ~~June 30,~~March 31, 2020, the other adjustments are mainly represented by severance and retention payments ($0.8 million and $1.5 million, respectively), additional bad debt provision due to COVID-19 ($3.0 million and $3.5 million, respectively) as well as a loss on sale of subsidiary in Bulgaria ($0.4 million and $0.4 million, respectively). ~~For the three and six months ended June 30, 2019,~~ ~~the other adjustments are mainly represented by professional fees related to the Merger.~~payments.

Our results of operations are impacted by several factors, but we consider the following to be particularly significant to our business:

Number of systems delivered. The majority of our revenue is generated from the delivery of systems, both under traditional ~~sale~~sales contracts and ~~under~~ subscription agreements. The following table ~~set~~sets forth the number of systems we have delivered in the geographic regions indicated:

Mix between traditional sales, subscription model sales and distributor sales. We deliver systems through (1) traditional direct system sales contracts to customers, (2) our subscription model, and (3) system sales through ~~distributor~~distribution agreements. Unit deliveries under direct system sales contracts and subscription agreements have the higher per unit revenues and gross margins, while revenues and gross margins on systems sold through distributors are lower. However, distributor sales do not require significant sales and marketing support as these expenses are borne by the distributors. In addition, while traditional system sales ~~contracts~~ and subscription ~~contracts~~agreements have similar gross margins, cash collections on subscription ~~contracts~~agreements generally occur over a three-year period, with approximately 40% collected in the first year and the balance collected evenly over the remaining two years of the subscription agreement.

Investment in Sales, Marketing and Operations. In recent years, we made a strategic decision to penetrate the global market by investing in sales and marketing expenses across all geographic segments. This ~~includes reducing our reliance on distributor arrangements,~~included the opening ~~more~~of direct offices and hiring experienced sales, marketing, and operational staff. While we ~~will generate~~generated incremental product sales in these new markets, these revenues and the related margins ~~may~~did not fully offset the startup investments made in ~~the initial years.~~certain countries. We have been evaluating our profitability and growth prospects in these countries post COVID-19, and we will take steps to exit countries that have yet to produce sustainable results. In the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and June 30, 2019,~~ respectively, we did not open any direct sales offices, and are currently reevaluating our profitability and overall business model in select countries that have yet to produce sustainable results. As of June 30, 2020, we sold our share (51%) in our Bulgarian subsidiary, ~~Venus Concept Central Eastern Europe Ltd., to a third party for the cash consideration of 0.5 million Euro which is equivalent to $0.5 million. The disposal resulted in loss of $0.4 million.~~offices.

Bad Debt Expense. We maintain an allowance for doubtful accounts for estimated losses that may primarily arise from subscription customers that are unable to make the remaining required payments under their subscription ~~contracts.~~agreements. Due to COVID-19, in the first half of 2020, we ~~have~~ experienced significant reductions in the collection of accounts receivable from our subscription customers across the markets in which we operate. As a result, in addition to our regular allowance for doubtful accounts, we recorded a COVID-19 related bad debt charge of $0.5 million ~~and $3.0~~in the first quarter of 2020. In the first quarter of 2021, our collections results improved along with our customer base exhibiting a significant increase in the number of procedures performed with our products. As a result, we incurred a bad debt expense of $1.1 million in the first ~~and the second quarters~~quarter of ~~2020, respectively. The cumulative COVID-19 bad debt charge~~2021, which is in line with our pre-COVID-19 results. As of ~~$3.5~~March 31, 2021, our allowance for doubtful accounts stands at $17.7 million which represents ~~3.6%~~20% of the gross outstanding accounts receivable as of ~~June 30, 2020, respectively.~~this date.

The global pandemic caused by ~~the novel coronavirus (COVID-19) has significantly negatively affected all~~COVID-19 continued to affect many aspects of our business during the first ~~half~~three months of 2021, albeit with less severe of an impact than in the three months ended March 31, 2020, ~~including~~during which COVID-19 significantly impacted our sales, supply chain, manufacturing and accounts receivable collections.

Employee and customers’ health and safety measures. At Venus Concept, safety is our top ~~responsibility~~priority and that includes the health and wellness of our employees globally. In response to COVID-19, we instituted several operational measures to ensure the safety of our employees, which include, but are not limited to the following:

Supply chain. ~~A number~~In the first quarter of 2021, we did not experience any material supply disruptions related to COVID-19. In the ~~components~~first quarter of 2020, we ~~use to manufacture our systems are sourced from China. We had~~ experienced difficulty ~~with~~ sourcing certain component parts from China for some of our systems, including Venus Bliss, ~~in the first quarter of 2020~~ and, consequently, we were not able to manufacture the number of systems we forecasted for the first quarter ~~and part of the second quarter~~ of 2020. Our China sourcing issue was fully remedied in the second quarter of 2020; nevertheless, we experienced difficulties in meeting customers’ demand in the second quarter of 2020 as a result of sourcing disruption earlier this year. In addition, from March 16, 2020 to June 1, 2020, we were unable to access our facility in San Jose or ~~NPI Solutions, Inc.’s (“NPI”)~~ facility. As a result, we were unable to manufacture sufficient ARTAS procedure kits during this period and were limited to shipping procedure kits from existing inventory. While we currently have access to our San Jose facility and NPI’s facility has re-opened and we are able to manufacture ARTAS procedure kits, we cannot predict whether these facilities will be closed again by the Order of the Health Officer of the County of Santa Clara, or California State public health orders in response to future COVID-19 developments in the County or State.2020.

Sales markets. We are a global business, having established a commercial presence in more than 60 countries over the course of our ten-year history. ~~Approximately 30% of our 2019 sales came from the APAC and European regions which were impacted by the pandemic throughout~~The economic recovery in individual countries in the first quarter of ~~fiscal 2020. The economic recovery in these regions in the second quarter of 2020~~2021 progressed unevenly depending on the success of each ~~individual~~ country in controlling the spread and impact of ~~COVID-19. We also saw~~COVID-19, as well as the success of each country’s access to and implementation of a pronounced decline in system sales, product sales and service revenues in North America and Latin America beginning in March 2020 and continuing throughout the second quarter of fiscal 2020, primarily as a result of mandated government “shelter-in-place” requirements in these regions. WhileCOVID-19 vaccination program. Overall, our results for the ~~second~~first quarter of ~~2020~~2021 were better than we anticipated in ~~both~~ Europe, Asia Pacific, and North America wewhere vaccination programs were successful in containing the spread of COVID-19, enabling local jurisdictions to ease restrictions on our customer base. We expect that COVID-19 will continue to ~~significantly~~ negatively affect customer demand inthrough the ~~second half~~remainder of ~~the year~~2021 and while we expect further recovery in ~~some~~most markets, the impact of COVID-19 on our sales isremains unpredictable and could continue to be significant for the foreseeable future.

Accounts receivable collections. As a result of the global economic turmoil that has resulted from COVID-19, many of our customers ~~are experiencing~~experienced difficulty in making timely payments or payments at all during the pandemic under their subscription ~~agreements~~agreements. In 2020, we entered into repayment arrangements with the majority of non-paying customers, and as government lockdowns and shelter in place orders were lifted, we ~~have~~ experienced a significant ~~reduction~~improvement in collections as businesses reopened. We remain fully focused on reactivating collections with those at-risk accounts that have struggled through the ~~collection~~pandemic but show signs of ~~accounts receivable from~~viability. As of March 31, 2021, our ~~subscription customers across markets in the first half of 2020. As a result, in addition to our~~ ~~regular~~ allowance for doubtful accounts ~~we recorded a COVID-19 related bad debt charge of $0.5~~stands at $17.7 million ~~and $3.0 million in the first and the second quarter of 2020, respectively. The cumulative COVID-19 bad debt charge of $3.5 million~~which represents ~~3.6%~~20% of the gross outstanding accounts receivable as of ~~June 30, 2020, respectively.~~that date.

InWith the recent regulatory approvals and successful rollout of COVID-19 vaccines, we have experienced an improvement in our collection experience. The relative success of the second and third wave lockdown measures, combined with vaccination rollout plans has resulted in reduced restrictions in some of the markets we operate in. Our collection experience has also improved in the post year-end period, with collections in our largest subscription markets ~~we collected approximately 60%~~averaging 87% of our billings in January 2021, 92% of our billings in February 2021, 98% of our billings in March ~~2020, 30%~~2021, and approximately 92% of our billings in April 2020, 35% in May 2020 and 60% in June 2020. The improvement in collection trends in May and June of 2020 are directly correlated to business re-openings and our collection efforts. We continue to proactively manage the collection of accounts receivables and have made repayment arrangements with the majority of our non-paying subscription customers to either defer collection or to collect a reduced amount, with the expectation of full collection as business activities resume.2021. As a result of ~~implementing repayment arrangements~~the improved collections experience, our bad debt expense in the first quarter of 2021 was in line with ~~the majority of~~ our non-paying subscription customers, the majority of these customers have recommenced payments in those jurisdictions where shelter-in-place orders have been lifted and their businesses reopened. Our systems are equipped with monthly activation codes, and non-paying customers will not be provided with codes unless overdue balances are cleared, or they make a repayment arrangement with us.pre-COVID-19 experience. We will continue our pro-active ~~management~~approach to collections of ~~collections~~our accounts receivable and will revisit our allowance for doubtful accounts during the next quarter.

Mitigation efforts. We are focused on continuing to mitigate the impacts of the COVID-19 pandemic on our business to the extent possible. Our mitigation efforts include the following:

The extent to which the COVID-19 pandemic may continue to impact our business, operating results, financial condition, and liquidity in the future will depend on future developments, which we cannot predict, including the duration and severity of the pandemic, travel restrictions, business and workforce disruptions, and the effectiveness of actions taken to contain and treat the disease in each of the markets in which we operate. ~~The~~While there are clear signs of improvement, the situation surrounding COVID-19 remains fluid, and the potential for additional negative impacts on our results of operations, financial condition and liquidity increases the longer the pandemic impacts activity levels in the ~~U.S. and the other~~ countries in which we operate.

We generate revenue from (1) sales of systems through our subscription model, traditional system sales to customers and distributors, (2) other product revenues from the sale of marketing supplies and kits, consumables and our skincare and hair products and (3) service revenue from the sale of our VeroGrafters™ technician services, ~~our 2two5 internal advertising agency~~ and our extended warranty service contracts provided to existing customers.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, approximately ~~52%~~47% and ~~58%~~66%, respectively, of our system revenues were derived from ~~our~~ subscription ~~model. For the three and six months ended June 30, 2019, approximately 68% and 70%, respectively, of system revenues were derived from our subscription model~~.agreements. Our subscription model is designed to provide a low barrier to ownership of our systems and includes an up-front fee followed by monthly payments, typically over a 36-month period. The up-front fee serves as a ~~deposit.~~down payment. The significantly reduced up-front financial commitment, coupled with less onerous credit and disclosure requirements, is intended to make our subscription-based sales program more appealing and affordable to ~~physicians,~~customers, including non-traditional providers of aesthetic services such as family practice physicians, general practice physicians, and medical spas. For accounting purposes, these arrangements are considered to be sales-type finance leases, where the present value of all cash flows to be received under the subscription agreement is recognized as revenue upon shipment to the customer and achievement of the required revenue recognition criteria.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, approximately ~~42%~~45% and ~~37%~~29%, respectively, of our system revenues were derived from traditional ~~sales. For~~ ~~the three and six months ended June 30, 2019, approximately 28% and 24%, respectively, of system revenues were derived from traditional sales~~.sales. Customers generally demand higher discounts in connection with these types of sales. We recognize revenues from products sold to end customers based on the following five steps: (1) identification of the contract(s) with the customer; (2) identification of the performance obligations in the contract; (3) ~~determine~~determination of the transaction price; and (4) ~~allocate~~allocations of the transaction price to the separate performance obligations in the contract; and (5) ~~recognize~~recognition of revenue when (or as) the entity satisfies a performance obligation.

We do not ~~generally~~ grant rights of return or early termination rights to our end customers. These traditional sales are generally made through our sales team in the countries in which the team operates.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, approximately 6%8% and 5%, respectively, ~~of our system revenues were derived from distributor sales. For~~ ~~the three and six months ended June 30, 2019, approximately 4% and 6%, respectively,~~ of our system revenues were derived from distributor sales. Under the traditional distributor relationship, we do not sell directly to the end customer and, accordingly, achieve a lower overall margin on each system sold compared to our direct sales. These sales are non-refundable, non-returnable and without any rights of price protection or stock rotation. Accordingly, we consider distributors as end customers, or the sell-in method.

We generate revenue from our harvesting and site making procedures in hair restoration procedures. The harvesting procedure is an act of activating the needle mechanism of the ARTAS® System and it consists of multiple harvests (each harvested hair follicle is one harvest), which direct customers can purchase at fixed price per harvest (with a minimum of 750 harvests) or a set price per procedure, as agreed upon at the time of system purchase. We also provide one sterile and one non-sterile disposable clinical kit per procedure. On average, each procedure consists of approximately 1,500 harvests. The customer must place an online order with us for the number of procedures desired and make a payment. Upon receipt of the order and the related payment, we release an electronic key that enables the ARTAS® System to perform the number of procedures purchased. Once the procedures are exhausted (or “consumed”), the customer must purchase additional procedures. Harvesting procedures can also be purchased in bulk orders. The site making procedure uses ARTAS® System to create a recipient site (i.e., site making) in the patient’s scalp affected by androgenic alopecia ~~or AGA~~ (or male pattern baldness). The site making procedures generally include one disposable site making kit. The site making procedures are sold to customers in the same manner as the harvesting procedures.

We also generate revenue from our customer base by selling Glide (a cooling/conductive gel which is required for use with many of our systems), Venus Viva™ tips, Venus Glow Serums, marketing supplies and kits, consumables and disposables, replacement applicators and handpieces, ~~our skincare products (Venus Skin) and hair products,~~ and ARTAS® System training.

We generate ancillary revenue from our existing customers by selling additional services including VeroGrafters™ technician services for hair restoration using our NeoGraft® ~~system,~~and ARTAS® systems and extended warranty service ~~contracts, and services provided by our 2two5 internal advertising agency.~~contracts.

Cost of goods sold consists primarily of costs associated with manufacturing our different systems, including direct product costs from third-party manufacturers, warehousing and storage costs and fulfillment and supply chain costs inclusive of personnel-related costs (primarily salaries, benefits, incentive compensation and stock-based compensation). Cost of goods sold also includes the cost of upgrades, technology amortization, royalty fees, parts, supplies, and cost of product warranties.

~~Selling and Marketing~~. We currently sell our products and services using direct sales representatives in North America and in select international markets. Our sales costs primarily consist of salaries, commissions, benefits, incentive compensation and stock-based compensation. Costs also include expenses for travel and other promotional and sales-related activities.

Our marketing costs primarily consist of salaries, benefits, incentive compensation and stock-based compensation. They also include expenses for travel, trade shows, and other promotional and marketing activities, including direct and online marketing. Our marketing expenses have been increasing as we continued to scale up our direct operations across all geographic segments. However, due to business disruption and restrictions imposed by the governments in many countries in which we operate, we have experienced significant decline in our selling and marketing expenses. As the business environment improves, we expect selling and marketing expenses to increase, but at a rate slightly below our rate of revenue growth.

~~General and Administrative.~~ Our general and administrative costs primarily consist of expenses associated with our executive, accounting and finance, legal, intellectual property and human resource departments. These expenses consist of personnel-related expenses (primarily salaries, benefits, incentive compensation and stock-based compensation) and allocated facilities costs, audit fees, legal fees, consultants, travel, insurance and bad debt expense. During the normal course of operations, we may incur bad debt expense on accounts receivable balances that are deemed to be uncollectible.

~~Research and Development.~~ Our research and development costs primarily consist of personnel-related costs (primarily salaries, benefits, incentive compensation, and stock-based compensation), material costs, amortization of intangible assets, regulatory affairs, and clinical costs, and facilities costs in our Yokneam, Israel research center. Our ongoing research and development activities are primarily focused on improving and enhancing our current technologies, products, and services, and on expanding our current product offering with the introduction of new products and expanded indications.

We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses to increase in absolute dollars as we continue to invest in research, clinical studies, regulatory affairs, and development activities, but to decline as a percentage of revenue as our revenue increases over time.

Finance expenses consists of interest income, interest expense and other banking charges. Interest income consists of interest earned on our cash, cash equivalents and short-term bank deposits. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period. Interest expense consists of interest on long-term debt and other borrowings. The interest rate on our long-term debt is fixed at 12% as of June 30, 2020, and 9% as of December 31, 2019.

~~Foreign currency exchange loss (income) changes reflect foreign exchange gains or losses related to the change in value of assets and liabilities denominated in currencies other than the U.S. dollar.~~

We estimate our current and deferred tax liabilities based on current tax laws in the statutory jurisdictions in which we operate. These estimates include judgments about liabilities resulting from temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. Our most significant temporary difference results from our subscription business. In certain jurisdictions, only the payments invoiced in the current period are subject to tax, but for accounting purposes, the discounted value of the total subscription contract is reported and tax affected. This results in a deferred tax credit which is settled in the future period when the monthly installment payment is issued and settled with the customer. Since our inception, we have not recorded any tax benefits for the net operating losses we have incurred in each year or for the research and development tax credits we generated in the United States. We believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

Income tax expense is recognized based on the actual income or loss incurred during the three and six months ended June 30, 2020. Due to the uncertainties as a result of COVID-19, we were unable to determine an annualized effective tax rate and calculate the income tax expense (benefit) in accordance with such method. The effective tax rate differs from the statutory tax rate due to the recognition of previously unrecognized carried forward tax losses.

In many countries where we have direct operations, we have minority shareholders. For accounting purposes, these minority partners are referred to as non-controlling interests, and we record the non-controlling interests’ share of earnings in our subsidiaries as a separate balance within stockholders’ equity in the consolidated balance sheets and consolidated statements of stockholders’ equity.

For the three months ended March 31, 2019 and six months ended June 30, 2019, we previously classified the issuance of common stock and preferred stock as a credit to common stock. In accordance with U.S. GAAP, amounts issued in excess of par value are required to be accounted for in additional paid in capital (APIC). The error is a reclassification from common stock into APIC and has an immaterial impact on the consolidated statements of stockholders’ equity and consolidated balance sheets. Items previously reported have been reclassified to conform to U.S. GAAP and the reclassification did not have any impact on the Company’s consolidated statements of operations, consolidated statements of comprehensive loss, consolidated statements of cash flows and net loss per share calculations.

~~The following tables set forth our consolidated results of operations in U.S. dollars and as a percentage of revenues for the periods indicated:~~

Three Months
Ended June 30

Six Months
Ended June 30

2020

2019

2020

2019

Consolidated Statements of Loss:

(dollars in thousands)

(dollars in thousands)

Revenues:

Leases

$
7,465

$
16,643

$
14,278

$
32,385

Products and services

9,531

11,175

17,226

20,013

Total revenue

16,996

27,818

31,504

52,398

Cost of goods sold

5,099

7,744

10,327

14,259

Gross profit

11,897

20,074

21,177

38,139

Operating expenses:

Sales and marketing

4,545

10,250

13,156

19,782

General and administrative

14,975

11,853

29,151

20,192

Research and development

1,570

1,920

4,194

3,981

Goodwill impairment

—

—

27,450

—

Total operating expenses

21,090

24,023

73,951

43,955

Loss from operations

(9,193
)

(3,949
)

(52,774
)

(5,816
)
Other expenses:

Foreign exchange (income) loss

(1,166
)

(684
)

3,113

13

Finance expenses

2,371

2,152

4,625

3,807

Loss before income taxes

(10,398
)

(5,417
)

(60,512
)

(9,636
)
Income tax (benefit) expense

(633
)

61

(44
)

947

Net loss

$
(9,765
)

$
(5,478
)

$
(60,468
)

$
(10,583
)
Deemed dividend

(3,564
)

—

(3,564
)

—

Net loss attributable to the Company

(13,152
)

(5,910
)

(63,342
)

(11,183
)
Net (loss) income attributable to noncontrolling interest

(177
)

432

(690
)

600

As a % of revenue:

Revenues

100
%

100
%

100
%

100
%
Cost of goods sold

30.0

27.8

32.8

27.2

Gross profit

70.0

72.2

67.2

72.8

Operating expenses:

Selling and marketing

26.7

36.8

41.8

37.8

General and administrative

88.1

42.6

92.5

38.5

Research and development

9.2

6.9

13.3

7.6

Goodwill impairment

—

—

87.1

—

Total operating expenses

124.1

86.4

234.7

83.9

Loss from operations

(54.1
)

(14.2
)

(167.5
)

(11.1
)
Foreign exchange (income) loss

(6.9
)

(2.5
)

9.9

0.0

Finance expenses

14.0

7.7

14.7

7.3

Loss before income taxes

(61.2
)

(19.5
)

(192.1
)

(18.4
)

~~The following tables set forth our revenue by region and by product type for the periods indicated:~~

Total revenue decreased by $10.8 million, or 38.9%, to $17.0 million for the three months ended June 30, 2020 from $27.8 million for the three months ended June 30, 2019. The decrease in revenue was a result of decreased revenue in the United States of $2.8 million and decreased revenue in international markets of $8.0 million. The decrease in revenue in the United States and international markets was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments in most countries and markets in which we operate. In both the United States and international markets, these business closures and the resultant uncertainty negatively impacted our ability to access and sell into our customary channels. Where accessibility was possible, selling efforts were hampered by target customer concerns over economic uncertainty.

We sold an aggregate of 283 systems in the three months ended June 30, 2020 compared to 649 in the three months ended June 30, 2019. The percentage of systems revenue derived from our subscription model was approximately 52% in the three months ended June 30, 2020 compared to 68% in the three months ended June 30, 2019.

Other product revenue increased by $0.2 million, or 10.2%, to $1.8 million in the three months ended June 30, 2020 from $1.6 million in the three months ended June 30, 2019. The increase was driven by sales of ARTAS procedure kits partially offset by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments.

Services revenue decreased by $0.8 million, or 44.7%, to $1.0 million in the three months ended June 30, 2020 from $1.8 million in the three months ended June 30, 2019. The decrease was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments and corresponding decline in VeroGrafters™ technician services offset by additional warranty revenue on ARTAS® systems.

~~Cost of goods sold decreased by $2.6 million, or 34.1%, to $5.1 million in the three months ended~~ ~~June 30, 2020, from $7.7 million in the three months ended~~ ~~June 30, 2019. Gross profit decreased by $8.2 million, or 40.7%, to $11.9 million in the three months ended~~ ~~June 30, 2020, as compared to $20.2 million in the three months ended~~ ~~June 30~~, 2019. The decrease in gross profit is primarily due to lower revenues due to COVID-19 related disruptions, lockdown restrictions and shelter-in-place orders imposed by federal and local governments in countries and markets we operate. Gross margin was 70.0% of revenue in the three months ended ~~June 30, 2020, compared to 72.2% of revenue in the three months ended~~ ~~June 30, 2019.~~ The decrease in gross profit percentage is primarily due to sales of ARTAS® systems in 2020, which were sold at lower margins than our other systems, and inventory fair value adjustments recognized on the business combination with Venus Concept Ltd. expensed through cost of goods sold during the three months ended June 30, 2020.

~~Selling and Marketing~~. Selling and marketing expenses decreased by 55.7% in the three months ended June 30, 2020 compared to the three months ended June 30, 2019. This decrease was attributable primarily to reduced selling commissions as a result of lower sales in the second quarter of 2020, lower salaries and other compensation expenses as a result of our restructuring program and reduced pay for some employees as a result of our efforts to reduce the impact of COVID-19. ~~Selling and marketing expenses were~~ also affected by reduced travel costs and lower marketing costs as a result of reduced business activities caused by COVID-19. As a percentage of total revenues, our selling and marketing expenses decreased by 10.1%, from 36.8% in the three months ended June 30, 2019 to 26.7% in the three months ended June 30, 2020. As the business environment improves, we expect selling and marketing expenses to increase, but at a rate slightly below our rate of revenue growth.

~~General and Administrative~~. General and administrative expenses increased by 26.3% in the three months ended June 30, 2020 compared to the three months ended June 30, 2019, reflecting costs related to increased legal, audit and regulatory expenses primarily ~~related to public company reporting obligations, an increase in bad debt expense primarily as a result of COVID-19 related lockdown restrictions and~~ ~~shelter-in-place~~ orders, and additional amortization of intangible assets recognized on the business combination with Venus Concept Ltd. As a percentage of total revenues, our general and administrative expenses increased by 45.5%, from 42.6% in the three months ended June 30, 2019, to 88.1% in the three months ended June 30, 2020, primarily due to expenses ~~related to public company reporting obligations~~ ~~and due to lower revenue in the second quarter of 2020.~~

~~Research and Development~~. Research and development expenses decreased by 18.2% in the three months ended June 30, 2020 compared to the three months ended June 30, 2019. As a percentage of total revenues, our research and development expenses increased by 2.3%, from 6.9% in the three months ended June 30, 2019, to 9.2% in the three months ended June 30, 2020. The decrease in the research and development expense is attributable to reduced discretionary spending as a result of COVID-19.

~~Foreign exchange income.~~ We had a foreign exchange gain of $1.2 million in the three months ended June 30, 2020 and foreign exchange gain of $0.7 million in the three months ended June 30, 2019. Changes in foreign exchange in the three months ended June 30, 2020 are driven mainly by ~~the effect of~~ ~~foreign exchange effect on accounts receivable balances denominated in currencies other than the US dollar. We do not currently hedge against foreign currency risk.~~

~~Finance Expenses~~. Finance expenses increased by $0.2 million, from $2.2 million in the three months ended June 30, 2019, to $2.4 million in the three month ended June 30, 2020, mostly due to increase in the annual interest rate from 9.00% to 12.00% during the PIK Period under the Madryn Credit Agreement. See ~~“—Liquidity and Capital Resources” below.~~

~~Income Taxes Benefit.~~ We had income taxes benefit of $0.6 million in the three months ended June 30, 2020 comparing to $0.1 million income tax expense in the three months ended June 30, 2019. The tax provision is driven by profitable sales and the actual effective tax rates where the sale took place. In the second quarter of 2020, we effectively reversed some tax provision that was booked in the first quarter of 2020 due to reduced profitable sales in the second quarter of 2020 as a result of COVID-19.

Total revenue decreased by $20.9 million, or 39.9%, to $31.5 million for the six months ended June 30, 2020 from $52.4 million for the six months ended June 30, 2019. The decrease in revenue was a result of decreased revenue in the United States of $6.7 million and decreased revenue in international markets of $14.2 million. The decrease in revenue in the United States was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal and state governments. The decrease in revenue in international markets is largely due to disruptions in supply chain caused by restrictions imposed by the Chinese government due to the COVID-19 pandemic in January and February of 2020 followed by lockdown restrictions and shelter-in-place orders imposed subsequently by federal and local governments in other countries and markets in which we operate. In both the United States and international markets, these business closures and the resultant uncertainty negatively impacted our ability to access and sell into our customary channels. Where accessibility was possible, selling efforts were hampered by target customer concerns over economic uncertainty.

~~We sold an aggregate of 520 systems in the~~ ~~six~~ ~~months ended June 30, 2020 compared to 1,191 in the~~ ~~six~~ months ended June 30, 2019. The percentage of systems revenue derived from our subscription model was approximately 58% in the six months ended June 30, 2020 compared to 70% in the six months ended June 30, 2019.

Other product revenue increased by $1.6 million, or 52.7%, to $4.5 million in the six months ended June 30, 2020 from $3.0 million in the six months ended June 30, 2019. The increase was driven by sales of ARTAS procedure kits partially offset by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments.

Services revenue decreased by $0.5 million, or 17.2%, to $2.5 million in the six months ended June 30, 2020 from $3.0 million in the six months ended June 30, 2019. The decrease was driven by COVID-19 related lockdown restrictions and shelter-in-place orders imposed by federal, state, and local governments and corresponding decline in VeroGrafters™ technician services offset by additional warranty revenue on ARTAS® systems.

Cost of goods sold ~~decreased by $4.0 million, or 28.0%, to $10.3 million in~~consists primarily of costs associated with manufacturing our different systems, including direct product costs from third-party manufacturers, warehousing and storage costs and fulfillment and supply chain costs inclusive of personnel-related costs (primarily salaries, benefits, incentive compensation and stock-based compensation). Cost of goods sold also includes the~~six~~ ~~months ended~~ ~~June 30, 2020, from $14.3 million in the~~ ~~six~~ ~~months ended~~ ~~June 30, 2019. Gross profit decreased by $16.9 million, or 44.4%, to $21.2 million in the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020, as compared to $38.1 million in the~~ ~~six~~ ~~months ended~~ ~~June 30~~, 2019. The decrease in gross profit is primarily due to lower revenues due to COVID-19 related disruptions, lockdown restrictions and shelter-in-place orders imposed by federal and local governments. Gross margin was 67.2% of revenue in the six months ended June 30, 2020, compared to 72.8% of revenue in the six months ended June 30, 2019. The decrease in gross profit percentage is primarily due to sales of ARTAS® systems in 2020, which were sold at lower margins than our other systems, and inventory fair value adjustments recognized on the business combination with Venus Concept Ltd. expensed through cost of ~~goods sold~~ ~~during the six months ended June 30, 2020.~~upgrades, technology amortization, royalty fees, parts, supplies, and cost of product warranties.

Selling and Marketing. ~~Selling~~ We currently sell our products and services using direct sales representatives in North America and in select international markets. Our sales costs primarily consist of salaries, commissions, benefits, incentive compensation and stock-based compensation. Costs also include expenses for travel and other promotional and sales-related activities.

Our marketing costs primarily consist of salaries, benefits, incentive compensation and stock-based compensation. They also include expenses for travel, trade shows, and other promotional and marketing ~~expenses decreased~~activities, including direct and online marketing. Due to business disruption and COVID-19 related restrictions imposed by ~~33.5%~~the governments in ~~the six months ended June 30, 2020 compared to the six months ended June 30, 2019. This decrease was attributable primarily to reduced selling commissions as a result of lower sales~~many countries in the second quarter of 2020, lower salaries and other compensation expenses as a result of our restructuring program and reduced pay for some employees as a result of our efforts to reduce the impact of COVID-19. ~~The decrease~~which we operate, we have experienced significant decline in ~~selling and marketing expenses was~~ ~~also affected by reduced travel costs and lower marketing costs as a result of reduced business activities caused by COVID-19. As a percentage of total revenues,~~ our selling and marketing ~~expenses increased by 4.0%, from 37.8% in the six months ended June 30, 2019 to 41.8% in the six months ended June 30, 2020.~~expenses. As the business environment improves, we expect selling and marketing expenses to increase, but at a rate slightly below our rate of revenue growth.

General and Administrative. Our general and administrative costs primarily consist of expenses associated with our executive, accounting and finance, legal, intellectual property, and human resource departments. These expenses consist of personnel-related expenses (primarily salaries, benefits, incentive compensation and stock-based compensation) and allocated facilities costs, audit fees, legal fees, consultants, travel, insurance, and bad debt expense. During the normal course of operations, we may incur bad debt expense on accounts receivable balances that are deemed to be uncollectible.

Research and Development.Our research and development costs primarily consist of personnel-related costs (primarily salaries, benefits, incentive compensation, and stock-based compensation), material costs, amortization of intangible assets, regulatory affairs, and clinical costs, and facilities costs in our Yokneam, Israel and San Jose, California research centers. Our ongoing research and development activities are primarily focused on improving and enhancing our current technologies, products, and services, and on expanding our current product offering with the introduction of new products and expanded indications.

Finance expenses consists of interest income, interest expense and other banking charges. Interest income consists of interest earned on our cash, cash equivalents and short-term bank deposits. We expect interest income to vary depending on our average investment balances and market interest rates during each reporting period. Interest expense consists of interest on long-term debt and other borrowings. The interest rates on our long-term debt were 3.11% for MSLP Loan and 8.0% for the Notes as of March 31, 2021 and 3.14% for MSLP Loan and 8.0% for the Notes as of December 31, 2020.

Foreign currency exchange (gain) loss changes reflect foreign exchange gains or losses related to the change in value of assets and liabilities denominated in currencies other than the U.S. dollar.

We estimate our current and deferred tax liabilities based on current tax laws in the statutory jurisdictions in which we operate. These estimates include judgments about liabilities resulting from temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. In certain jurisdictions, only the payments invoiced in the current period are subject to tax, but for accounting purposes, the discounted value of the total subscription agreements is reported and tax affected. This results in a deferred tax credit which is settled in the future period when the monthly installment payment is issued and settled with the customer. Since our inception, we have not recorded any tax benefits for the net operating losses we have incurred in each year or for the research and development tax credits we generated in the United States. We believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

Income tax expense is recognized based on the actual taxable income or loss incurred during the three months ended March 31, 2021.

The following tables set forth our consolidated results of operations in U.S. dollars and as a percentage of revenues for the periods indicated:

	Three Months Ended March 31
	2021			2020
Consolidated Statements of Loss:	(dollars in thousands)
Revenue:
Leases	$	8,537		$	6,813
Products and services		14,060			7,695
Total revenue		22,597			14,508
Cost of goods sold		7,363			5,228
Gross profit		15,234			9,280
Operating expenses:
Selling and marketing		7,854			8,611
General and administrative		12,165			14,176
Research and development		2,051			2,624
Goodwill impairment		—			27,450
Total operating expenses		22,070			52,861
Loss from operations		(6,836	)		(43,581	)
Other expenses:
Foreign exchange loss		714			4,279
Finance expenses		1,885			2,254
Loss before income taxes		(9,435	)		(50,114	)
Income tax expense		—			589
Net loss	$	(9,435	)	$	(50,703	)
Net loss attributable to the Company		(9,259	)		(50,190	)
Net (loss) income attributable to noncontrolling interest		(176	)		(513	)
Net loss	$	(9,435	)	$	(50,703	)
As a % of revenue:
Revenues		100	%		100	%
Cost of goods sold		32.6			36.0
Gross profit		67.4			64.0
Operating expenses:
Selling and marketing		34.8			59.4
General and administrative		53.8			97.7
Research and development		9.1			18.1
Goodwill impairment		—			189.2
Total operating expenses		97.7			364.4
Loss from operations		(30.3	)		(300.4	)
Foreign exchange loss		3.2			29.5
Finance expenses		8.3			15.5
Loss before income taxes		(41.8	)		(345.4	)

The following tables set forth our revenue by region and by product type for the periods indicated:

Total revenue increased by $8.1 million, or 55.8%, to $22.6 million for the three months ended March 31, 2021 from $14.5 million for the three months ended March 31, 2020. The increase in revenue was a result of increased revenue in the United States of $5.2 million and increased revenue in international markets of $2.9 million. The increase in revenue in both the United States and international markets was driven by the successful rollout of COVID-19 vaccines and the success of the second and third wave lockdown measures resulting in reduced lockdown restrictions in the major markets in which we operate. These events were successful in containing the spread of COVID-19, enabling local jurisdictions to ease restrictions on our customer base which positively impacted our ability to sell into these channels. In some jurisdictions our selling efforts in the first quarter of 2021 remained hampered by ongoing restrictions and target customer concerns in making capital outlays given the level of uncertainty, but we anticipate these concerns will be less of an obstacle as the jurisdictions secure access to an adequate supply of vaccines.

We sold an aggregate of 366 systems in the three months ended March 31, 2021 compared to 237 systems in the three months ended March 31, 2020. The percentage of systems revenue derived from our subscription model was approximately 47.0% in the three months ended March 31, 2021 compared to 66.0% in the three months ended March 31, 2020. The percentage decline is attributable to a strong performance in ARTAS® system sales which are not sold under our subscription model.

Other product revenue increased by $0.3 million, or 12.4%, to $3.1 million in the three months ended March 31, 2021from $2.7 million in the three months ended March 31, 2020. The increase was driven by stronger performance on Venus Viva™ tips and other consumables.

Services revenue decreased by $0.3 million, or 19.3%, to $1.2 million in the three months ended March 31, 2021from $1.5 million in the three months ended March 31, 2020. The decrease was driven by the suspension of operations of the 2two5 marketing services in the second half of 2020.

Cost of goods sold increased by $2.1 million, or 40.8%, to $7.4 million in the three months ended March 31, 2021, from $5.2 million in the three months ended March 31, 2020. Gross profit increased by $5.9 million, or 64.2%, to $15.2 million in the three months ended March 31, 2021, as compared to $9.3 million in the three months ended March 31, 2020. The increase in gross profit is primarily due to increase in revenue in both the United States and international markets driven by the successful rollout of COVID-19 vaccines and the success of lockdown measures positively impacting our ability to sell into these channels. Gross margin was 67.4% of revenue in the three months ended March 31, 2021, compared to 64.0% of revenue in the three months ended March 31, 2020. The increase in gross profit percentage is primarily driven by higher sales of Venus consumables, improved revenue mix post the discontinuation of our 2two5 advertising agency services and the non-recurrence of certain inventory purchase price allocation adjustments incurred in the first quarter of 2020.

Selling and Marketing. Selling and marketing expenses decreased by 8.8% in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This decrease is largely due to the cost reduction program the Company introduced in 2020 in response to the challenges presented by COVID-19. As a percentage of total revenues, our selling and marketing expenses decreased by 24.6%, from 59.4% in the three months ended March 31, 2020 to 34.8% in the three months ended March 31, 2021, driven by an improvement in revenues. As the business environment improves, we expect selling and marketing expenses to increase in absolute terms, but at a rate slightly below our rate of revenue growth.

General and Administrative. General and administrative expenses ~~increased~~decreased by ~~44.4%~~14.2% in the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 compared to the ~~six~~three months ended ~~June 30, 2019, reflecting costs related~~March 31, 2020. This decrease is largely due to ~~increased legal, audit and regulatory expenses primarily~~ ~~related~~the cost reduction program the Company introduced in 2020 in response to ~~public company reporting obligations, an increase in bad debt expense primarily as a result of COVID-19 related lockdown restrictions and~~ ~~shelter-in-place~~ ~~orders, and additional amortization of intangible assets recognized on~~ the ~~business combination with Venus Concept Ltd.~~challenges presented by COVID-19. As a percentage of total revenues, our general and administrative expenses ~~increased~~decreased by ~~54.0%~~43.9%, from ~~38.5%~~97.7% in the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, to ~~92.5%~~53.8% in the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, primarily due to lower expenses ~~related to public company reporting obligations~~resulting from reduced legal and ~~due to lower revenues~~professional fees and COVID-19 cost containment measures introduced in ~~the first half of~~ 2020.

Research and Development. Research and development expenses ~~increased~~decreased by ~~5.4%~~21.8% in the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 compared to the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The decrease is due to synergies realized across our research and development teams in both Israel and San Jose, California. As a percentage of total revenues, our research and development expenses ~~increased~~decreased by ~~5.7%~~9.0%, from ~~7.6%~~18.1% in the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, to ~~13.3%~~9.1% in the ~~six~~three months ended ~~June 30, 2020. The increase in the research and development expense is attributable to the ARTAS iX™ System research and development program we acquired through the Merger in November of 2019.~~March 31, 2021.

Goodwill impairment. We In 2020, we considered a substantial decline in our equity value and worsening macroeconomic factors due to COVID-19 as triggering events that caused analysis of potential impairment of our goodwill and other intangible assets as of March 30,31, 2020. The quantitative impairment analysis resulted in goodwill impairment of $27.5 million driven primarily by lower than expected actual sales, as well as lower projected sales and decreased profitability because of COVID-19. As a result, the entire balance of goodwill was written off as of March 30~~, 2020~~.31, 2020. The impairment loss was recognized in the first quarter of 2020. ~~Based on the impairment analysis performed no further impairment was considered necessary as of June 30, 2020.~~

Foreign exchange loss. We had a foreign exchange loss of ~~$3.1~~$0.7 million in the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and foreign exchange loss of ~~$13,000~~$4.3 million in the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. Changes in foreign exchange in the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 are driven mainly by the effect offoreign exchange ~~effect~~ on accounts receivable balances denominated in currencies other than the US ~~dollar with the larger impact for Mexico, Argentina and Columbia which currencies declined significantly more in the first six months of 2020 compared to the same period in 2019.~~dollar. We do not currently hedge against foreign currency risk.

Finance Expenses. Finance expenses ~~increased~~decreased by ~~$0.8~~$0.4 million, from ~~$3.8~~$2.3 million in the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, to ~~$4.6~~$1.9 million in the ~~six month~~three months ended ~~June 30, 2020,~~March 31, 2021, mostly due to ~~increase in the annual~~a lower average interest rate ~~from 9.00% to 12.00% during the PIK Period under the Madryn Credit Agreement.~~on our long-term debt partially offset by a higher long-term debt balance and increased amortization of deferred finance costs. See “—“—Liquidity and Capital Resources” below.

Income Taxes ~~Benefit.~~Expense. We had an income ~~taxes benefit~~tax expense of ~~$44 thousand~~$nil in the ~~six~~three months ended ~~June 30, 2019~~March 31, 2021 compared to ~~$0.9~~$0.6 million income tax expense in the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The tax provision is driven by profitable sales and the actual effective tax rates where the sale took ~~place.~~place or losses were incurred. In ~~the first half of 2020,~~2021, we had ~~a combination~~changes in timing of ~~less profitable sales~~deductible expenses and ~~an increase~~minimal taxable income, which resulted in ~~sales in lower rate~~$nil income tax ~~jurisdictions.~~expense.

We had ~~$14.0~~$27.1 million and ~~$15.7~~$34.4 million of cash and cash equivalents as of ~~June 30, 2020,~~March 31, 2021, and December 31, ~~2019,~~2020, respectively. We have funded our operations with cash generated from operating activities, through the sale of equity securities and through debt financing. We ~~completed an equity financing during the quarter that generated $22.3 million of gross proceeds. See~~ ~~“— The 2020 Private Placement” above. During the six months ended June 30, 2020, we repaid $3.9 million under our credit facility with City National Bank of Florida. We~~ had total debt obligations of approximately ~~$73.3~~$80.1 million as of ~~June 30, 2020,~~March 31, 2021, including ~~line~~the MSLP Loan of ~~credit borrowings~~$49.2 million, convertible notes of ~~$3.9~~$26.7 million including closing fees of $1.6 million, and government assistance loans of ~~$4.1~~$4.2 million, compared to total debt obligations of approximately ~~$69.0~~$79.6 million atas of December 31, ~~2019, including line of credit borrowings of $7.8 million.~~2020.

Our working capital requirements reflect the growth of our business over the last few years, in particular, the shift from a traditional sales model to a subscription model. Working capital is primarily impacted by growth in our subscription sales which also impacts accounts receivable. Our overall growth also requires higher inventory levels to meet demand and to accommodate the increased number of technology platforms offered. We had a split of subscription sales revenue to traditional sales revenue at a ratio of approximately ~~58:42~~47:53 in the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, compared to ~~70:30~~66:34 in the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. We are directing more effort to securing traditional sales in order to improve cash flow. We expect inventory to continue to increase in the short term, but at a lower rate than the rate of revenue growth.

We also require modest funding for capital expenditures. Our capital expenditures relate primarily to our research and development facilities in Yokneam, ~~Israel.~~Israel and San Jose, California. In addition, our capital investments have included improvements and expansion of our subsidiaries’ operations to support our growth.

On October 11, 2016, Venus Concept Ltd. entered into a credit agreement as a guarantor with Madryn Health Partners, LP, as administrative agent, and certain of its affiliates as lenders (collectively, “Madryn”), as amended, (the “Madryn Credit Agreement”), pursuant to which Madryn agreed to make certain loans to certain of Venus Concept Ltd.’s subsidiaries (the “Subsidiary Obligors”). The Madryn Credit Agreement is comprised of four tranches of debt aggregating $70.0 million. As of June 30,December 9, 2020, ~~and December 31, 2019, the Subsidiary Obligors had borrowed $60.0~~we issued $26.7 million under the term A-1 and A-2 and B tranches of the Madryn Credit Agreement. Term C borrowings of $10.0 million were undrawn and are no longer available. On the 24th payment date, which is September 30, 2022, the aggregate ~~outstanding~~ principal amount of the loans, together with any accrued and unpaid interest thereon and all other amounts due and owing under the loan agreement will become due and payable in full. Borrowings under the Madryn Credit Agreement are secured by substantially all of our assets and the assets of the Subsidiary Obligors.

~~In connection with the Merger, we entered into an amendment~~Notes to the Madryn Credit Agreement, dated as of November 7, 2019, (the “Amendment”), pursuant to which we joined as (i) a guarantor to the Madryn Credit Agreement and (ii) a grantor to the certain security agreement, dated October 11, 2016, (as amended, restated, supplemented or otherwise modified from time to time), by and among the grantors from time to time party thereto and the administrative agent (the “U.S. Security Agreement”).

As a guarantor under the Madryn Credit Agreement, we are jointly and severally liable for the obligations (as defined in the Madryn Credit Agreement) thereunder and to secure our obligations thereunder, we have granted the administrative agent a lien on all of our assetsNoteholders pursuant to the terms of the ~~U.S. Security~~Exchange Agreement. InThe Notes will accrue interest at a rate of 8.0% per annum from the ~~event~~date of ~~default under~~original issuance of the ~~Madryn Credit Agreement, Madryn may accelerate the obligations and foreclose on the collateral granted by us and Venus Concept Ltd. under the U.S. Security Agreement to satisfy the obligations.~~

Effective August 14, 2018, interest on the Madryn loan is 9.00%, payable quarterly. Previously, interest was payable quarterly, at Venus Concept Ltd.’s option, as follows: cash interest 9.00% during the interest only period, which was 3 years or 12 principal payments after closing, plus an additional 4.00% rate, paid in kind (“PIK”). We have the option of settling the PIK interest in cash or adding the owed interestNotes to the ~~principal amount~~third anniversary date of the ~~loan.~~

~~The Madryn Credit Agreement contains certain covenants that require us together with our subsidiaries to achieve certain minimum revenue~~original issuance and ~~liquidity thresholds. The minimum revenue and liquidity covenants require that we and our subsidiaries, on~~thereafter interest will accrue at a ~~consolidated basis, achieve (i) minimum reported revenue targets for any four consecutive fiscal quarter period~~rate of an amount equal to the greater of (A) $100.0 million and (B) one hundred and fifty percent (150%) of the aggregate outstanding amount of the loans as of the last day of such four consecutive fiscal quarter period, (ii) minimum levels of cash held in deposit accounts controlled by Madryn to be no less than $2.0 million and (iii) minimum levels of cash held in all deposit accounts, plus availability under the CNB Credit Facility (as defined below), to be no less than $5.0 million.

On April 29, 2020, we entered into an amendment to the Madryn Credit Agreement that (i) requires that interest payments for the period beginning January 1, 2020 and ending on, and including, April 29, 2020 (the “PIK Period”), be paid-in-kind, (ii) increases the interest rate from 9.00%6.0% per ~~annum to 12.00% per annum during the PIK Period and (iii) requires us to provide certain additional financial and other reporting information to the lenders.~~

~~On June 30, 2020~~ ~~we entered into an amendment to the Madryn Credit Agreement that~~ (i) extends the PIK Period through June 30, 2020, (ii) reduces the consolidated minimum revenue threshold requirement (a) for the four consecutive fiscal quarter period ended June 30, 2020, to at least $85.0 million and (b) for the four consecutive fiscal quarter period ending September 30, 2020, to at least $75.0 million, (iii) requires us to raise at least $5.0 million of cash proceeds from the issuance of equity during the period June 1, 2020 through September 30, 2020 and (iv) obligates us to use our best efforts to raise an additional $2.0 million of cash proceeds from the issuance of equity during the period June 1, 2020 through September 30, 2020.

The Madryn Credit Agreement also contains various covenants that limit our ability and the ability of our subsidiaries to engage in specified types of transactions. Subject to limited exceptions, these covenants limit our ability, without Madryn’s consent, to, among other things:

~~As of June 30, 2020, and December 31, 2019, we were in compliance with all required covenants.~~

Pursuant to the terms of the Madryn Credit Agreement, if all or any portion of the loans are prepaid, then a prepayment premium must be paid equal to: (i) 8.00% of the loans prepaid if prepaid on or prior to August 31, 2019, (ii) 6.50% if prepaid after August 31, 2019 but on or prior to August 31, 2020, (iii) 5.00% if prepaid after August 31, 2020 but on or prior to February 28, 2021, (iv) 4.00% if prepaid after February 28, 2021, but on or prior to August 31, 2021, (v) 3.00% if prepaid after August 31, 2021, but on or prior to February 28, 2022, and (vi) 2.00% if prepaid after February 28, 2022.

annum. In connection with the Exchange Agreement, we also entered into (i) Madryn ~~Credit~~Security Agreement, ~~Venus Concept Ltd. issued three types~~pursuant to which we agreed to grant Madryn a security interest, in substantially all of ~~10-year warrants (“Madryn Warrants”). As of June 30, 2020, Madryn Warrants exercisable for 179,932~~our assets, to secure the obligations under the Notes and (ii) the CNB Subordination Agreement. The Notes are convertible at any time into shares of our common stock ~~were outstanding~~at an initial conversion price of $3.25 per share, subject to adjustment. For additional information regarding the Notes, Exchange Agreement, Madryn Security Agreement and CNB Subordination Agreement, see Note 10 “Madryn Long-Term Debt and Convertible Notes” to our unaudited condensed consolidated financial statements included elsewhere in this report.

On December 8, 2020, we executed the MSLP Loan Agreement, MSLP Note, and related documents for a loan in the aggregate amount of $50.0 million for which CNB will serve as a lender pursuant to the Main Street Priority Loan Facility as established by the Board of Governors of the Federal Reserve System Section 13(3) of the Federal Reserve Act. For additional information regarding this loan, see Note 9 “Main Street Term Loan” to our unaudited condensed consolidated financial statements included elsewhere in this report.

~~We have~~During 2020 we had a revolving credit facility with CNB pursuant to which CNB agreed to provide a revolving credit facility to us and certain of our subsidiaries in the maximum principal amount of $10.0 million, ~~($10.0 million as of June 30, 2019),~~ to be used to finance working capital ~~requirements (the “Credit Facility”). In April 2019, maximum principal amount under the Credit Facility was increased from $7.5 million to $10.0 million.~~requirements. As ~~of June 30, 2020, there was $3.9 million outstanding ($7.8 million as~~ of December 31, ~~2019)~~2020, a portion of the proceeds from the MSLP Loan described above was used to repay $3.2 million of outstanding borrowings under the ~~Credit Facility, which bears interest at LIBOR rate plus 3.25%, which amounted to a weighted average of 4.06% (5.9% in the six months ended June 30, 2019).~~

The Credit Facility contains various covenants that limit our ability to engage in specified types of transactions. Subject to limited exceptions, these covenants limit our ability, without CNB’s consent, to, among other things, sell, lease, transfer, exclusively license or dispose of our assets, incur, create or permit to exist additional indebtedness, or liens, to make dividends and certain other restricted payments, and to make certain changes to its management and/or ownership structure. In addition, the Credit Facility contains certain covenants that require our subsidiary obligors to achieve certain minimum account balances, or a minimum debt service coverage ratio and a maximum total liability to tangible net worth ratio. If our subsidiary obligors fail to comply with these covenants, it will result in a default and require us and our subsidiary obligors to repay allCNB Loan Agreement. There was $nil outstanding ~~principal amounts and accrued interest.~~

~~The Credit Facility is secured by substantially all of our assets and the assets of certain of our subsidiaries requires us to maintain either a minimum cash~~ balance in deposit accounts or a maximum total liability to tangible net worth ratio and a minimum debt service coverage ratio. An event of default under the Credit Facility would cause a default under the Madryn Credit Agreement as described above.

On March 20, 2020, we entered into a Second Amended and Restated Loan Agreement as a borrower with CNB, as amended, pursuant to which CNB agreed to make certain loans and other financial accommodations to us. In connection with the CNB Credit Facility, we also entered into (i) a Second Amended and Restated Guaranty of Payment and Performance with CNB dated as of March ~~20, 2020, (the “CNB Guaranty”), pursuant to which we agreed to guaranty the obligations under~~31, 2021 and December 31, 2020. For additional information on the CNB Loan Agreement, see Note 11 “Credit Facility ~~and (ii) a Security Agreement with CNB dated as of March 20, 2020, (the “CNB Security Agreement”), pursuant~~” to ~~which we agreed to grant CNB a security interest,~~our unaudited condensed consolidated financial statements included elsewhere in ~~substantially all of its assets, to secure the obligations under the CNB Credit Facility. Borrowings under the CNB Credit Facility are secured by substantially all our assets and the CNB Guaranty.~~

In the event of a default, if we and our subsidiary obligors are unable to repay all outstanding amounts, CNB may foreclose on the collateral granted to it to collateralize the indebtedness, which includes the enforcement of the CNB Guaranty, which will significantly affect our ability to operate its business.this report.

As of ~~June 30, 2020,~~March 31, 2021 and December 31, ~~2019,~~2020, we were in compliance with all required covenants.

On June 16, 2020, we entered into ~~the Equity~~a purchase agreement (the “Equity Purchase ~~Agreement~~Agreement”) with Lincoln Park, Capital Fund LLC (“Lincoln Park”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock pursuant to our shelf registration statement. The purchase price of shares of common stock related to a future sale will be based on the then prevailing market prices of such shares at the time of sales as described in the Equity Purchase Agreement. The aggregate number of shares that we can sell to Lincoln Park under the Equity Purchase Agreement may in no case exceed 7.8 million shares (subject to adjustment) of common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Equity Purchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds $3.9755 per share (subject to adjustment) (which represents the minimum price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the Equity Purchase Agreement, such that the transactions contemplated by the Equity Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules). Also, at no time may Lincoln Park (together with its affiliates) beneficially own more than 9.99% of our issued and outstanding common stock. Concurrently with entering into the Equity Purchase Agreement, we also entered into a Registration Rights Agreement with Lincoln Park (as defined above).

~~As of June 30, 2020, we~~No shares were issued and sold to Lincoln Park 1.0 million shares of our common stock, 0.2 million of which were issued to Lincoln Park as a commitment fee in connection with entering into the Equity Purchase Agreement (the “Commitment Shares”). The total value of the Commitment Shares of $0.6 million together with issuance costs of $0.1 million were recorded as deferred issuance costs in the condensed consolidated balance sheet. These costs will be amortized into condensed consolidated statements of stockholders’ equity proportionally based on proceeds received during the period and the expected total proceeds to be raised over the term of the Equity Purchase Agreement. The net cash proceeds from shares issuance as of June 30, 2020 were $3.0 million. In July 2020, we sold additional 0.5 million shares of our common stock to Lincoln Park for $1.9 million.three months ended March 31, 2021.

Sales of shares of our common stock to Lincoln Park under the Equity Purchase Agreement will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of our common stock and our determination as to the appropriate sources of funding for our operations. The proceeds we receive under the Equity Purchase Agreement will depend on the frequency and prices at which we sell shares to Lincoln Park. We expect that any proceeds we receive from such sales will be used for working capital and general corporate purposes.

In April 2020, ~~we and our wholly-owned subsidiary,~~ Venus Concept ~~USA~~ Inc., ~~a Delaware corporation (“~~and Venus ~~USA”),~~USA, received funding in the total amount of $4.1 million, in connection with two “Small Business Loans” under the federal Paycheck Protection Program provided in Section 7(a) of the Small Business Act of 1953, as amended by the Coronavirus Aid, Relief, and Economic Security Act, as amended from time to time (the “PPP”).PPP.

~~Pursuant~~We borrowed $1,665 pursuant to the terms of the U.S. Small Business Administration Note dated as of April 21, 2020, by us and in favor of CNB, we borrowed $1.7 million of original principal amount, which was funded on April 29, 2020 (the “Venus Concept PPP Loan”). The Venus Concept PPP Loan bears interest at 1% per annum and matures in two years from the date of disbursement of funds under the loan. Interest and principal payments under the Venus Concept PPP Loan will be deferred for a period of six months. Under certain circumstances, all or a portion of the Venus Concept PPP Loan may be forgiven, however, there can be no assurance that any portion of the Venus Concept PPP Loan will be forgiven and that we would not be required to repay the Venus Concept PPP Loan in full.

The Venus Concept PPP Loan contain certain covenants which, among other things, restrict our use of the proceeds of the PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or other agreements with any our creditor, to the extent that a default under any loan or other agreement would materially affect our ability to repay its PPP Loan and limit our ability to make certain changes to our ownership structure.

Loan. Venus USA also ~~entered into a U.S. Small Business Administration Note dated as of April 15, 2020 in favor of CNB~~borrowed $2,383 pursuant to ~~which~~the Venus USA ~~borrowed $2.4 million of original principal amount, which was funded on April 20, 2020 (the “Venus USA~~ PPP ~~Loan” and together with the Venus Concept PPP Loan, individually each a “PPP Loan” and collectively, the “PPP Loans”).~~Loan. The terms of the Venus USA PPP Loan are substantially similar to the terms of the Venus Concept PPP Loan.In 2021, we have applied through CNB, for partial forgiveness of both PPP Loans with the SBA. The total amount of $2.8 million of original PPP Loans have been filed for forgiveness with the SBA. We are currently awaiting confirmation from the SBA accepting the forgiveness.

Under the Madryn Credit Agreement each PPP Loan is permitted to be incurred by us and Venus Concept USA as long as certain conditions remain satisfied, including that all PPP Loans must be forgiven other than any amount which can fit under existing permitted debt baskets in the Madryn Credit Agreement. If we and/or Venus ~~Concept~~ USA defaults on ~~the~~our or its respective PPP Loan ~~or if any of the conditions to the incurrence thereof under the Madryn Credit Agreement are not satisfied~~ (i) events of default will occur under the ~~Madryn Credit~~CNB Loan Agreement and the ~~CNB Credit Facility~~MSLP Loan Agreement, and (ii) we ~~and~~and/or Venus ~~Concept~~ USA may be required to immediately repay their respective PPP Loan.

Also, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2.0 million following the lender’s submission of the borrower’s loan forgiveness application. To the extent that the SBA’s audit determines that Venus ~~Concept~~ USA was not entitled to the ~~loan under the~~Venus USA PPP Loan, the loan may not be forgiven, an event of default would occur under the ~~Madryn Credit~~CNB Loan Agreement and the MSLP Loan Agreement and Venus ~~Concept~~ USA could be subject to civil and criminal penalties.

Our subsidiary, Venus Concept UK Limited, received funding in the total amount of $0.1 million (50.0 GBP) in connection with the loan under the Bounce Back Loan Scheme (“Venus Concept UK Loan”), the program established in the U.K. to help smaller businesses impacted by COVID-19. This loan bears interest at 2.5% per annum and matures in six years from the date of disbursement of funds which is May 10, 2020. Interest and principal payments under the Venus Concept UK Loan will be deferred for a period of twelve months. As of ~~June 30, 2020 the balance of the Venus Concept UK Loan was $0.1 million.~~

~~Certain~~March 31, 2021, certain subsidiaries also received funding in the total amount of ~~$0.6~~$1.1 million in connection with various governmental programs to support businesses impacted by COVID-19. The terms of these government assistance programs vary by jurisdiction. These government subsidies were recorded as a reduction to the associated wage costs recorded in general and administrative expenses in the unaudited condensed consolidated statement of operations.

For additional information on our utilization of government assistance programs, see Note 12 “Government Assistance Programs” in the notes to our unaudited condensed consolidated financial statements included elsewhere in this report.

As of ~~June 30, 2020,~~March 31, 2021, we had capital resources consisting of cash and cash equivalents of approximately ~~$14.0~~$27.1 million. We have financed our operations principally through the issuance and sale of our common stock and preferred stock, debt financing, and payments from customers.

We believe that the net proceeds from the 2020 Private Placement, net proceeds from the December 2020 Public Offering, the proceeds from issuance of our common stock to Lincoln Park, the proceeds from the government assistance programs, the proceeds from the MSLP Loan, together with our existing cash and cash equivalents, and the anticipated savings from our Merger-related cost savings initiatives and our new restructuring program, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 ~~months, the~~months. The COVID-19 pandemic has had a significant negative impact on our business. While our business ~~and~~ is showing strong growth, we expect the pandemic to continue to have a negative impact in the foreseeable future, the extent of which is uncertain and largely subject to the continued beneficial impact of local vaccination efforts, and whether the severity of the pandemic worsens ~~or duration lengthens~~.in select jurisdictions. Given the uncertainties of the COVID-19 pandemic, we may need additional capital to fund our future operations and to access the capital markets sooner than we planned. We cannot assure you that we will be successful in raising additional capital or that such capital, if available at all, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital, we may be compelled to reduce the scope of our operations and planned capital or research and development expenditures or sell certain assets, including intellectual property assets.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:

We are restricted by covenants in the ~~Madryn Credit Agreement,~~MSLP Loan, the CNB ~~Credit Facility,~~Loan Agreement, the PPP Loans, the Madryn Security Agreement and ~~the Venus Concept UK Loan.~~other government assistance programs. These covenants restrict, among other things, our ability to incur additional indebtedness, which may limit our ability to obtain additional debt financing. In addition, the Madryn Credit Agreement contains certain minimum liquidity and minimum revenue covenants, which, if we fail to maintain or achieve, will result in a default under the agreement and the requirement for us to repay all outstanding principal amounts and accrued interest repay all amounts outstanding. In the event that the COVID-19 pandemic and the economic disruptions it has caused continue for an extended period of ~~time,~~time; we cannot assure you that we will remain in compliance with the financial covenants contained in our credit facilities. We also cannot assure you that our lenders would provide relief or that we could secure alternative financing on favorable terms if at all. Our failure to comply with the covenants contained in our credit facilities, including financial covenants, could result in an event of default, which could materially and adversely affect our results of operations and financial condition.

We based our projections on the amount of time through which our financial resources will be adequate to support our operations on assumptions that may prove to be incorrect, and we may use all our available capital resources sooner than we expect. Our future funding requirements will depend on many factors, including, but not limited to:

In order to grow our business and increase revenues, we will need to introduce and commercialize new products, grow our sales and marketing force, implement new software systems, as well as identify and penetrate new markets. Such endeavors have in the past increased, and may continue in the future, to increase our expenses, including sales and marketing, and research and development. We will have to continue to increase our revenues while effectively managing our expenses in order to achieve profitability and to sustain it. Our failure to control expenses could make it difficult to achieve profitability or to sustain profitability in the future. Moreover, we cannot be sure that our expenditures will result in the successful development and introduction of new products in a cost-effective and timely manner or that any such new products will achieve market acceptance and generate revenues for our business.

For the ~~six~~three months ended ~~June 30,~~March 31, 2021, cash used in operating activities consisted of a net loss of $9.4 million and an investment in net operating assets of $2.2 million, partially offset by non-cash operating expenses of $3.4 million. The investment in net operating assets was primary attributable to a decrease in inventories of $0.5 million, increase in other current assets of $0.1 million, decrease in accrued expenses and other current liabilities of $3.6 million, decrease in unearned interest income of $0.2 million, decrease in accounts payable of $0.2 million and decrease in other non-current liabilities of $0.1 million. This was partially offset by a decrease in accounts receivable of $2.4 million, primarily due to the decrease in subscription sales, and decrease in prepaid expenses of $0.1 million. The non-cash operating expenses consisted mainly of a provision for bad debts of $1.1 million, depreciation and amortization of $1.3 million, finance expenses and accretion of $0.5 million, stock-based compensation expense of $0.5 million, provision for inventory obsolescence of $0.3 million and deferred tax recovery of $0.3 million.

For the three months ended March 31, 2020, cash used in operating activities consisted of a net loss of ~~$60.5~~$50.7 million ~~and~~partially offset by an investment in net operating assets of ~~$4.8~~$1.7 million ~~partially offset by~~and non-cash operating expenses of ~~$40.5~~$33.6 million. The investment in net operating assets was primary attributable to ~~an increase~~a decrease in inventories of ~~$1.0 million, increase in other current assets of $2.5~~$0.5 million, decrease in accrued expenses and other current liabilities of ~~$5.4~~$7.0 million, decrease in unearned interest income of ~~$1.4~~$1.0 million, decrease in accounts payable of ~~$0.4~~$0.2 million and decrease in other non-current liabilities of ~~$0.5~~$0.3 million. This was partially offset by a decrease in accounts receivable of ~~$6.2~~$10.2 million, primarily due to the decrease in subscription sales, and decrease in ~~prepaid expenses by $0.1 million and a decrease in severance pay funds~~other current assets of ~~$0.1~~$0.4 million. The non-cash operating expenses consisted mainly of goodwill impairment charge of $27.5 million, a provision for bad debts of ~~$5.4~~$1.5 million, depreciation and amortization of ~~$2.5~~$1.2 million, stock-based compensation expense of ~~$1.1~~$0.5 million, provision for inventory obsolescence of ~~$0.5 million, loss on sale of subsidiary of $0.4~~$0.3 million, deferred tax ~~benefit~~expense of ~~$1.2~~$0.3 million, a change in the fair value of the earn-out liability for the purchase of NeoGraft of $0.2 million and finance expenses of ~~$4.1 million.~~

~~In the six months ended June 30, 2019,~~ cash used in operating activities consisted of a net loss of $10.6 million and an investment in net operating assets of $6.7 million, partially offset by non-cash operating expenses of $5.9 million. The investment in net operating assets was primary attributable to an increase in accounts receivable of $13.4 million, primarily due to the increase in subscription sales, an increase in inventories of $0.4 million, an increase in other current assets of $0.4 million, an increase in prepaid expenses of $0.1 million as well as decrease in other long-term liabilities of $0.4 million. This was partially offset by an increase in the trade payables of $6.0 million and accrued expenses and other current liabilities of $2.0 million. The non-cash operating expenses consisted mainly of a provision for bad debts of $2.0 million, depreciation and amortization of $0.7 million, stock-based compensation expense of $1.4 million, deferred tax expense of $0.6 million, a change in the fair value of the earn-out liability for the purchase of NeoGraft of $0.6 million, and a provision for inventory obsolescence of $0.4 million.

In the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, cash used in investing activities consisted of $0.1 million for the purchase of property and ~~equipment and $0.2 million of the proceeds from sale of subsidiary, net of $0.1 million of cash relinquished.~~equipment.

In the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, cash used in investing activities consisted of ~~$0.3~~$0.1 million for the purchase of property and equipment.

In the ~~six~~three months ended ~~June 30,~~March 31, 2021, cash from financing activities consisted primarily of proceeds from exercise of 2020 December Public Offering Warrants of $0.9 million, proceeds from exercise of options of $0.2 million, and payment of the NeoGraft earn-out liability of $0.1 million.

In the three months ended March 31, 2020, cash from financing activities consisted primarily of net proceeds from ~~issuance~~the drawdown on the Madryn Credit Agreement of ~~shares of common stock to Lincoln Park Shares of $3.0~~$0.4 million, net proceeds from 2020 Private Placement of $20.3 million, ~~and proceeds from government assistance loans of $4.1 million~~ partially offset by ~~repayment of $3.9 million under the~~ ~~Credit Facility,~~ payment of dividends from subsidiary to non-controlling interest of $0.2 million and payment of the NeoGraft earn-out liability of ~~$0.2~~$0.1 million.

~~In the six months ended June 30, 2019,~~ cash from financing activities consisted primarily of net proceeds from the drawdown on the Madryn loan agreement of $9.7 million, net proceeds from issuance of unsecured senior subordinated convertible promissory notes of $7.5 million, and proceeds from the drawdown on the CNB credit facility of $2.5 million~~, offset by the $0.3 million of cash for installment payments and $0.1 million of earn-out liability payments related to the NeoGraft acquisition which occurred in 2018.~~

Our premises and those of our subsidiaries are leased under various operating lease agreements, which expire on various dates.

As of ~~June 30, 2020,~~March 31, 2021, we had non-cancellable purchase orders placed with our contract manufacturers in the amount of ~~$8.0~~$6.6 million. In addition, as of ~~June 30, 2020,~~March 31, 2021, we had ~~$1.2~~$7.0 million of open purchase orders that can be cancelled with 90 days’ notice, except for a portion equal to 15% of the total amount representing the purchase of “long lead items”.

The following table summarizes our contractual obligations as of ~~June 30, 2020,~~March 31, 2021, which represent material expected or contractually committed future obligations.

On March 25, 2021, we entered into an endorsement agreement for the services of Venus Williams, four-time Olympic Gold Medalist, seven-time Grand Slam Champion and entrepreneur, pursuant to which Ms. Williams will act as a brand ambassador for Venus Bliss™.

For an additional description of our commitments see Note 8, “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

We do not currently engage in off-balance sheet financing arrangements. In addition, we do not have any interest in entities referred to as variable interest entities, which includes special purpose entities and other structure finance entities.

Our unaudited condensed consolidated financial statements are prepared in accordance with U.S GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in Note 2 to our Annual Report filed on Form 10-K for the year ended December 31, ~~2019.~~2020. We believe that the assumptions and estimates associated with stock-based compensation, goodwill impairment, allowance for doubtful accounts, revenue recognition, accrual for severance and income taxes have the most significant impact on our unaudited condensed consolidated financial statements, and therefore, consider these to be our critical accounting policies and estimates.

We generate revenue from (1) sales of systems through our subscription model, traditional system sales to customers and distributors, (2) other product revenues from the sale of ~~ARTAS~~ARTAS® procedure kits, marketing supplies and kits, consumables and Venus Concept’s skincare and hair products and (3) service revenue from the sale of our VeroGrafters™ technician services, ~~our 2two5 internal advertising agency~~ and our extended warranty service contracts provided to existing customers.

~~The Company recognizes~~We recognize revenues on other products and services in accordance with ASC 606. Revenue is recognized based on the following five steps: (1) identification of the contract(s) with the customer; (2) identification of the performance obligations in the contract; (3) determine the transaction price; and (4) allocate the transaction price to the separate performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

Long-term receivables relate to our subscription ~~contract~~agreements revenue or contracts which stipulate payment terms which exceed one year. They are comprised of the unpaid principal balance, net of the allowance for doubtful accounts. These receivables have been discounted based on the implicit interest rate in the subscription lease which ranged between 8% to 9% for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~and June 30, 2019,~~ respectively. Unearned interest revenue represents the interest only portion of the respective subscription payments and will be recognized in income over the respective payment term as it is earned.

The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts and the aging of the related invoices and represents our best estimate of probable credit losses in ~~its~~our existing trade accounts receivable. We regularly review the allowance by considering factors such as historical experience, credit quality, the age of the account receivable balances, and current economic conditions that may affect a customer’s ability to pay.

We generally offer warranties for all our systems against defects for up to three years. The warranty period begins upon shipment and we record a liability for accrued warranty costs at the time of sale of a system, which consists of the remaining warranty on systems sold based on historical warranty costs and management’s estimates. We periodically assess the adequacy of our recorded warranty liabilities and adjust the amounts thereof as necessary. We exercise judgment in estimating expected system warranty costs. If actual system failure rates, freight, material, technical support and labor costs differ from our estimates, we will be required to revise our estimated warranty liability. To date, our warranty reserve has been sufficient to satisfy warranty claims paid.

We account for stock-based compensation costs in accordance with the accounting standards for stock-based compensation, which require that all stock-based payments to employees be recognized in the unaudited condensed consolidated statements of operations based on their fair values.

The fair value of stock options on the grant date is estimated using the Black-Scholes option-pricing model using the single-option approach. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, including the option's expected term and the price volatility of the underlying stock, to determine the fair value of award. We recognize the expense associated with options using a single-award approach over the requisite service period.

We believe that the U.S. dollar is the currency in the primary economic environment in which we operate. The U.S. dollar is the most significant currency in which our revenues are generated, and our costs are incurred. In addition, our debt and equity financings are generally based in U.S. dollars. Therefore, our functional currency, and that of our subsidiaries, is the U.S. dollar.

Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Non-dollar transactions and balances are re-measured into U.S. dollars in accordance with the principles set forth in ASC 830-10 “Foreign Currency Translation”. All exchange gains and losses from re-measurement of monetary balance sheet items resulting from transactions in non-U.S. dollar currencies are recorded as foreign exchange loss (income) in the unaudited condensed consolidated statement of operations as they arise.

We are an emerging growth company, as defined in ~~the Jumpstart Our Business Startups Act of 2012, or~~ the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

See Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.

As a smaller reporting company, we are not required to provide disclosure for this Item.

As of ~~June 30, 2020,~~March 31, 2021, our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act, ~~of 1934, as amended (the “Exchange Act”),~~ to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s (the “SEC”)~~SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ~~not~~ effective as of ~~June 30, 2020, because of the material weakness in internal control over financial reporting described below.~~March 31, 2021.

We have performed an evaluation of the effectiveness of our internal control over financial reporting, based on criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control-Integrated Framework. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our internal controls over financial reporting were ~~not~~ effective as of ~~June 30, 2020,~~ ~~because of~~ ~~a material weakness in internal controls over financial reporting, associated with the lease accounting process automation which was identified during the audit of our fiscal year ended December~~March 31, ~~2018, as described below.~~2021.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of these limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become ineffective because of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate.

In connection with our preparation and the audit of our consolidated financial statements as of and for the years ended December 31, 2018 and 2017, we identified a material weakness related to lack of centralized procedures or a technology solution that would ensure appropriate lessor accounting processes and enable the accurate and timely preparation of financial statements. As of June 30, 2020, we have not yet implemented centralized procedures or a technology solution that would ensure appropriate lessor accounting processes and enable the accurate and timely preparation of consolidated financial statements. We plan to establish adequate centralized procedures related to lease accounting processes in the second half of 2020, which could involve either hiring additional personnel or implementing a technology solution. As a result, we concluded that the material weakness ~~associated with~~ ~~lease accounting process existed as of June 30, 2020, as noted above.~~

~~Our plans for remediating the material weakness related to~~ ~~lease accounting process automation~~ would constitute a change in our internal control over financial reporting prospectively, when such controls are effectively implemented. Other than the continuation of the implementation of measures described above, thereThere were no material changes in our internal control over financial reporting during the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal ~~control~~controls over financial reporting.

This Quarterly Report on Form 10-Q does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for “emerging growth companies.”

Between May 23, 2018 and June 11, 2019, four putative shareholder class actions complaints were filed against us, certain of our former officers and directors, certain of our venture capital investors, and the underwriters of our IPO. Two of these complaints, Wong v. Restoration Robotics, Inc., et al., No. 18CIV02609, and Li v. Restoration Robotics, Inc., et al., No. 19CIV08173 (together, the “State Actions”), were filed in the Superior Court of the State of California, County of San Mateo, and assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act. The other two complaints, Guerrini v. Restoration Robotics, Inc., et al., No. 5:18-cv-03712-EJD and Yzeiraj v. Restoration Robotics, Inc., et al., No. 5:18-cv-03883-BLF (together, the “Federal Actions”), were filed in the United States District Court for the Northern District of California, and assert claims under Sections 11 and 15 of the Securities Act. The complaints all allege, among other things, that our Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with our IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. The complaints seek unspecified monetary damages, other equitable relief and attorneys’ fees and costs.

In the State Actions, we, along with the other defendants, successfully demurred to the initial Wong complaint for failure to state a claim, and secured a stay of both cases based on the forum selection clause contained in our Amended and Restated Certificate of Incorporation, which designates the federal district courts as the exclusive forums for claims arising under the Securities Act. However, on December 19, 2018, the Delaware Court of Chancery in Sciabacucchi v. Salzberg held that exclusive federal forum provisions are invalid under Delaware law. Under this ruling, the San Mateo Superior Court lifted its stay of State Actions on December 10, 2019. On January 17, 2020, Plaintiffs in the State Actions filed a consolidated amended complaint for violations of federal securities laws, alleging again that, among other things, our Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with our IPO were inaccurate and misleading, contained untrue statements of material fact, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. The complaint seeks unspecified monetary damages, other equitable relief and attorneys’ fees and costs. On February 24, 2020, we demurred to the consolidated amended complaint for failure to state a claim. On March 18, 2020, the Delaware Supreme Court reversed the Chancery Court’s decision in Sciabacucchi v. Salzberg and held that exclusive federal forum provisions are valid under Delaware law. On March 30, 2020, the Company filed a renewed motion to dismiss based on its federal forum selection clause. A hearing on our demurrer and renewed motion to dismiss was held on June 12, 2020. The court has not yet issued any decision.

In the Federal Actions, which have been consolidated under the caption In re Restoration Robotics, Inc. Securities Litigation, Case No. 5:18-cv-03712-EJD, Lead Plaintiff Eduardo Guerrini filed his consolidated amended complaint for violations of federal securities laws on November 30, 2018. The consolidated amended complaint alleges again that, among other things, our Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with our IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. On January 29, 2019, we, along with certain of our former officers and directors, filed a motion to dismiss the consolidated amended complaint for failure to state a claim. On October 18, 2019, the District Court granted our motion to dismiss as to all but two allegedly false or misleading statements contained in our Prospectus. On December 9, 2019, we filed our answer to the consolidated amended complaint denying the falsity of these statements, and discovery is underway. On May 29, 2020, Lead Plaintiff filed a motion for class certification, which we elected not to oppose, and on July 29, 2020, the court certified a class of investors who purchased shares our common stock pursuant or traceable to our initial public offering.

In addition to the State and Federal Actions, on July 11, 2019, a verified shareholder derivative complaint was filed in the United States District Court for the Northern District of California, captioned Mason v. Rhodes, No. 5:19-cv-03997-NC. The complaint alleges that certain of our former officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the Securities Exchange Act of 1934, or the Exchange Act, in connection with our IPO and our 2018 proxy statement. The complaint seeks unspecified damages, declaratory relief, other equitable relief and attorneys’ fees and costs. On August 21, 2019, the District Court granted the parties’ joint stipulation to stay the Mason action during the pendency of the Federal Actions, and the case remains stayed.

In addition to the actions described above relating to our IPO, two lawsuits purporting to challenge disclosures made in connection with our merger have also been filed. The first, captioned Bushansky v. Restoration Robotics, Inc., et al., No. 5:19-cv-06004-MMC, alleged, among other things, that defendants violated Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. The complaint alleged that the proxy statement filed with the SEC by Restoration Robotics on September 10, 2019 in connection with the Merger omitted or misrepresented material information. The complaint sought, among other things, injunctive relief, unspecified damages, and attorneys’ fees and costs. On November 6, 2019, the plaintiff voluntarily dismissed the Bushansky action with prejudice as to his individual claims and without prejudice as to the claims of the putative class.

The second, a putative shareholder class action complaint captioned Pak v. Restoration Robotics, Inc., et al., No. 1:19-cv-02237, was filed in the United States District Court for the District of Delaware on December 6, 2019. The complaint alleges, among other things, that defendants violated Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. The complaint alleges that the proxy statement filed with the SEC by Restoration Robotics on September 10, 2019 in connection with the Merger contained false or misleading information. The complaint seeks, among other things, compensatory and/or rescissory damages, and attorneys’ fees and costs. On February 26, 2020, the District Court appointed Joon Pak as Lead Plaintiff in the Pak action, and approved his selection of Lead Counsel. We filed a motion to dismiss the complaint on May 26, 2020. On July 2, 2020, plaintiff and we filed a stipulation of dismissal with prejudice as to the plaintiff and without prejudice as to the putative class.

Our Chinese subsidiary, or Venus Concept China, imports and sells registered medical devices and unregistered non-medical devices in the PRC. One of its unregistered products has been the subject of inquiries from two district level branches of the SAMR, Xuhui MSA and Huangpu MSA, as to whether the product was properly sold as a non-medical device. In January 2019, Venus Concept China had applied to register a version of this non-medical device as a medical device with the National Medical Products Administration of PRC, or NMPA. On June 12, 2019, Venus Concept China was informed that Xuhui MSA had opened an administrative investigation case related to whether the device is an unregistered medical device, as a result of a complaint that Xuhui MSA received from a former distributor of Venus Concept China. Huangpu MSA notified Venus Concept China that it would be suspending its separate investigation against Venus Concept China, pending the results of the Xuhui MSA investigation. We and Venus Concept China have voluntarily stopped sales in China of this product. On December 11, 2019, Xuhui MSA informed Venus Concept China that a determination had been made by the Shanghai Medical Products Administration that Versa’s IPL function should be administered as a Class II medical device. Xuhui MSA also suggested that Venus Concept China consider a voluntary recall of all Versa units sold in China. In late January 2020, Venus Concept China received a copy of the Shanghai Medical Products Administration’s determination that because of the intended uses for Versa’s IPL function comprise medical treatment functions such as “treatment of benign pigmented epidermis and skin lesions,” Versa’s IPL function should be administered as a Class II medical device. Although the revenue generated from the product that is the subject of the investigation did not represent a material amount of our total revenues for the years ended December 31, 2018 and 2019, monetary penalties nonetheless could be material.

In April 2020, Venus Concept China received a determination from NMPA on its application for registering Versa’s IPL function as a medical device. NMPA has approved the registration of one applicator HR 650 for hair removal as a Class II medical device out of the four IPL applicators for which Venus Concept China had originally applied. The date of registration is April 15, 2020. Venus Concept China also submitted an explanation letter and a draft Corrective & Preventive Action Report plan to Xuhui MSA during a meeting with the local authority on April 23, 2020. However, on April 29, 2020, Xuhui MSA informed Venus Concept China that its administrative investigation case has been transferred to Xuhui Branch of Shanghai Municipal Public Security Bureau (“Xuhui PSB”) for further handling. On May 6, 2020, the economic crime investigation department of Xuhui PSB confirmed to Venus Concept China’s local PRC counsel that they would review and decide whether or not to file formally a criminal investigation case against Venus Concept China and any relevant individuals allegedly responsible for any alleged criminal offense(s). On May 29, 2020, Venus Concept China was informed by Xuhui MSA of Xuhui PSB’s decision not to file a criminal investigation case and was shown a written Notice of non-filing of a criminal case issued by Xuhui PSB. On the same day, Xuhui MSA informed Venus Concept China that it would reopen and resume its administrative investigation case against Venus Concept China, which proceedings are currently ongoing.

~~We and Venus Concept China are cooperating with the relevant authorities in these matters; however, we cannot predict the outcome of these matters.~~

~~Further, we may from time to time continue to be involved in various legal proceedings of a character normally incident to~~ the ordinary course of our ~~business, which~~operations, we ~~do not deem~~become involved in ordinary routine litigation incidental to ~~be material~~the business. Material proceedings are described under Note 8, “Commitments and Contingencies” to ~~our business and results of operations.~~the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Our operations and financial results are subject to various risk and uncertainties, including those described below and the risk factors described under ~~Part II Item 1A,“Risk Factors” in our Form 10-Q for the quarter ended March 31, 2020 and~~ Part I, Item 1A. “Risk Factors” in our latest Form 10-K, any of which could adversely affect our business, results of operations, financial condition and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. You should carefully consider the risk described below and the other information in this Quarterly Report on Form 10-Q, our unaudited condensed consolidated financial statements, and the related notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, include ~~herewith,~~herein, and the risk factors previously disclosed in~~Part II Item 1A,“Risk Factors” in our Form 10-Q for the quarter ended March 31, 2020 and~~ Part I, Item 1A. “Risk Factors” in our Form ~~10-K.~~10-K for the year ended December 31, 2020.

Our subscription-based model exposes us to the credit risk of our customers over the life of the subscription agreement. In the event that our customers fail to make the monthly payments under their subscription agreements, our financial results may be adversely affected.

For ~~six~~the three months ended ~~June 30,~~March 31, 2021 and 2020, approximately 47% and ~~2019, approximately 58% and 70% respectively, and for the years ended December 31, 2019 and 2018, approximately 67% and 75%~~66%, respectively, of our system revenues were derived from our subscription-based model. Although the ARTAS® System ~~will~~is not be available under our subscription-based model, we expect ~~that~~ our subscription-based business model to continue to represent the majority of our revenue for the foreseeable future. We collect an up-front fee, combined with a monthly payment schedule typically over a period of 36 months, with approximately 40% of total contract ~~payments~~value collected in the first year. For accounting purposes, these arrangements are considered to be sales-type finance leases, where the present value of all cash flows to be received under the subscription agreement is recognized as revenue upon shipment of the system to the customer. As part of our sales and marketing effort, we do not generally require our customers to undergo a formal credit check ~~or register a lien or security interest under the Uniform Commercial Code or similar legislation,~~ as is typically required with a third-party equipment ~~leasing~~lease financing. Instead, to ensure that each monthly ~~product payment~~installment is made on time and that the customer’s systems are serviced in accordance with the terms of the warranty, every ~~product~~system requires a monthly activation code, which we provide to the customer upon receiving each monthly ~~payment.~~installment. If a customer does not timely pay a monthly installment, the customer will not receive an activation code and will be unable to use the ~~system for any procedures. This~~system. Because this process does not protect us from the economic impact of a customer’s failure to make its monthly payments, we do maintain a purchase money security interest over the devices sold and therefore enjoy priority as ~~an unsecured~~a secured creditor, ~~we are subject~~entitling us to ~~a greater risk~~certain rights of recovery of the device in the event of a customer ~~default.~~default or bankruptcy. We cannot provide any assurance that the financial position of customers purchasing products and services under a subscription agreement will not change adversely before we receive all of the monthly installment payments due under the contract. As a result of the global economic turmoil that has resulted from COVID-19, many of our customers ~~are experiencing~~experienced difficulty in making timely payments, or payments at all, during this pandemic under their subscription agreements which ~~has~~had resulted in higher than anticipated bad debt expense over the course of the 2020 fiscal year. InDespite the improvement we have seen in our ~~largest subscription markets~~collection experience due to the recent regulatory approvals and successful rollout of COVID-19 vaccines, we ~~collected approximately 60% of our billings in March 2020, 30% of our billings in April 2020, 35% in May 2020 and 60% in June 2020. We~~ cannot assure you that our customers will resume payments under their agreements or that we will not experience customer defaults even after local economies reopen for business. In the event that there is a default by any of the customers to whom we have sold systems under the subscription-based model, we may recognize bad debt expenses in our general and administrative expenses. If this bad debt expense is material, it could negatively affect our results of operations and operating cash flows.

Our recurring losses from operations and negative ~~operating~~ cash flows raise substantial doubt about our ability to continue as a going concern.

We have had recurring net operating losses and negative cash flows from operations, and until we generate revenue at a level to support our cost structure, we expect to continue to incur substantial operating losses and net cash outflows. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had an accumulated deficit of ~~$135.5~~$166.7 million and ~~$75.7~~$157.4 million, respectively. Our recurring losses from operations and negative ~~operating~~ cash flows raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to continue operations for the foreseeable future or realize assets and discharge liabilities in the ordinary course of operations. In order to continue our operations, we must achieve profitable operations and/or obtain additional equity or debt financing. However, given the COVID-19 pandemic, we cannot anticipate the extent to which the current economic turmoil and financial market conditions, will continue to adversely impact our business and our ability to raise additional capital to fund our future operations and to access the capital markets sooner than we planned. There can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital, we may be compelled to reduce the scope of our operations and planned capital or research and development expenditures or sell certain assets, including intellectual property assets. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees. Our unaudited condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

~~Business~~ If we default on our loans secured under the Coronavirus Aid, Relief and Economic Security (CARES) Act, we may default on our CNB Loan Agreement and/or ~~economic disruptions or global health concerns have had an adverse effect our business, operating results or financial condition.~~MSLP Loan.

~~Global business~~We and one of our subsidiaries received an aggregate of $4.1 million in funding in connection with the PPP Loans. For additional details of the PPP Loans, see Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report. The Company has applied through CNB for partial forgiveness of Venus USA PPP Loan in the amount of $1.7 million and the Venus Concept PPP Loan in the amount of $1.1 million.

The PPP Loans contain certain covenants which, among other things, restrict our use of the proceeds of the respective PPP Loan to the payment of payroll costs, interest on mortgage obligations, rent obligations and utility expenses, require compliance with all other loans or ~~economic disruptions could adversely~~other agreements with any creditor of us or Venus USA, to the extent that a default under any loan or other agreement would materially affect our ~~business. In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China,~~or Venus USA’s ability to repay its respective PPP Loan and has since spread globally. To date, this global pandemic has resulted in extended shutdowns of businesses in North and South America, Europe and Asia Pacific and gradual re-openings of economies. Global health concerns, such as the coronavirus pandemic, could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. We cannot presently predict the scope and ultimate severity or duration of the coronavirus pandemic and related business and economic disruptions, but the coronavirus pandemic and the resulting economic and commercial shutdowns to date have materially and negatively impactedlimit our ability to ~~conduct business in the manner planned. Disruptions~~make certain changes to our ~~business include restrictions~~ownership structure.

If we and/or Venus USA defaults on our or its respective PPP Loan (i) events of default will occur under the ~~ability of our sales~~CNB Loan Agreement and ~~marketing personnel~~MSLP Loan, and ~~distributors to travel and sell our systems, disruptions of our global supply chain, disruptions in manufacturing, reduced demand~~(ii) we and/or ~~suspension of operations by our customers which~~Venus USA may be required to immediately repay their respective PPP Loan.

Also, the SBA has ~~impacted their ability to make monthly subscription payments, and~~decided, in consultation with the ~~deferral of aesthetic or hair restoration procedures. Our customers’ patients are also affected by the economic impact~~Department of the ~~COVID-19 pandemic. Elective aesthetic procedures are less~~Treasury, that it will request additional information from the borrower on all loans in excess of a priority than other items for those patients that have lost their jobs, are furloughed, have reduced work hours or have to allocate their cash to other priorities. We expect COVID-19 will continue to negatively affect customer demand throughout$2.0 million following the ~~second half~~lender’s submission of the ~~year. While we expect continued recovery in many markets in~~borrower’s loan forgiveness application. To the ~~second half~~extent that the SBA’s review of the ~~year, recoveries have been gradual and the impact of COVID-19 on our sales could still be significant, especially if there is a resurgence~~additional information determines that Venus USA’s self-certification of the ~~virus in major markets. We do~~PPP loan was not ~~yet know~~appropriate, the ~~full extent~~loan may not be forgiven, an event of default would occur under the ~~impact of COVID-19 on our business, financial condition~~CNB Loan Agreement and ~~results of operations. The extent~~MSLP Loan and Venus USA could be subject to ~~which the COVID-19 pandemic may impact our business, operating results, financial condition, or liquidity in the future will depend on future developments which are evolving~~civil and highly uncertain including the duration of the outbreak, the severity of resurgences of the virus, travel restrictions, business and workforce disruptions, the timing of and extent of reopening the economic regions in which we do business and the effectiveness of actions taken to contain and treat the disease. The outbreak of contagious diseases or the fear of such an outbreak could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect the demand for our systems. Any of these events could negatively impact our business, operating results or financial condition.criminal penalties.

We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization and other operations or efforts.

Since our inception, we have invested a significant portion of our efforts and financial resources in research and development and sales and marketing activities. Research and development, clinical trials, product engineering, ongoing product upgrades and other enhancements and seeking regulatory clearances and approvals to market future products will require substantial funds to complete. As of ~~June 30, 2020,~~March 31, 2021, we had capital resources consisting of cash and cash equivalents of approximately ~~$14.0~~$27.1 million. We believe that we will continue to expend substantial resources for the foreseeable future in connection with the ongoing commercializing of our systems, increasing our sales and marketing efforts, and continuing research and development and product enhancements activities.

We believe that the net proceeds from ~~the~~our December 2020 Public Offering, our 2020 Private Placement, the proceeds from sales of our common stock to Lincoln Park and the proceeds from the PPP Loans ~~the Venus Concept UK Loan~~ and other government assistance programs, together with our existing cash and cash equivalents, ~~and~~ the ~~anticipated~~ savings from our Merger-related cost savings initiatives and our new restructuring program, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 ~~months, the~~months. The impact of COVID-19 on our business has been significant and we cannot predict the extent to which COVID-19 will continue to adversely impact our business. Also, under the terms of our amended Madryn Agreement, we are required to raise at least $5.0 million of cash proceeds from the issuance of equity during the period June 1, 2020 through September 30, 2020 and are obligated to use our best efforts to raise an additional $2.0 million of cash proceeds from the issuance of equity during the period June 1, 2020 through September 30, 2020. As of August 13, 2020, we have raised $4.9 million toward the satisfaction of this obligation. As a result, we need to raise additional equity financing prior to September 30, 2020 to satisfy the Madryn obligation. Also, we may need to raise additional capital through public or private equity or debt financings or other sources, such as strategic collaborations sooner than expected or otherwise implement additional cost-saving initiatives. The COVID-19 pandemic and the economic turmoil it has caused has negatively affected the global financial markets which may make it difficult to access the public markets. Any such financing may result in dilution to stockholders, the issuance of securities that may have rights, preferences, or privileges senior to those of holders of our common stock, the imposition of more burdensome debt covenants and repayment obligations, the licensing of rights to our technology or other restrictions that may affect our business. In addition, we may seek additional capital if favorable market conditions exist or given other strategic considerations even if we believe we have sufficient capital to fund our current or future operating plans.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to:

We are restricted by covenants in the Madryn Credit Agreement, the CNB Credit Facility, the PPP Loans and the Venus Concept UK Loan. These covenants restrict, among other things, our ability to incur additional indebtedness, which may limit our ability to obtain additional debt financing. In addition, the Madryn Credit Agreement contains certain minimum liquidity and minimum revenue covenants, which, if we fail to maintain or achieve, will result in a default under the agreement and the requirement for us to repay all outstanding principal amounts and accrued interest repay all amounts outstanding. In the event that the COVID-19 pandemic and the economic disruptions it has caused continue for an extended period of time, we cannot assure that we will remain in compliance with the financial covenants in our credit facilities. We also cannot assure you that our lenders would provide relief or that we could secure alternative financing on favorable terms if at all. Our failure to comply with the covenants contained in our credit facilities, including financial covenants, could result in an event of default, which could materially and adversely affect our results of operations and financial condition.

The sale of our common stock under the Equity Purchase Agreement may cause substantial dilution to our existing stockholders, and such sales, or the anticipation of such sales, may cause the price of our common stock to decline.

In June 2020, we entered into a purchase agreement with Lincoln Park Capital Fund, LLC, pursuant to which Lincoln Park is obligated to purchase up to $31.0 million in shares of our common stock, at our sole discretion, subject to the terms and conditions and limitations set forth in the agreement. The purchase price for the shares we may sell under Equity Purchase Agreement will vary based the market price of our common stock at the time we initiate a sale. Although we have the right to control whether we sell any shares, if at all, under this agreement, and we generally have the right to control the timing and amount of any such sales, we are subject to certain restrictions, including those that limit the number of shares we may sell. For example, the aggregate number of shares that we can sell to Lincoln Park under the Equity Purchase Agreement may in no case exceed 7.8 million shares (subject to adjustment) of common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to the execution of the Equity Purchase Agreement) (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds $3.9755 per share (subject to adjustment) (which represents the minimum price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the Equity Purchase Agreement, such that the transactions contemplated by the Equity Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules). Accordingly, we may not be able to utilize our Equity Purchase Agreement to raise additional capital when, or in the amounts, we desire. However, to the extent we do sell shares of our common stock under these agreements, such sales may result in substantial dilution to our existing stockholders, and such sales, or the anticipation of such sales, may cause the trading price of our common stock to decline.

We are the subject of purported class action lawsuits, and additional litigation may be brought against us in the future.

Between May 23, 2018 and June 11, 2019, four putative shareholder class actions complaints were filed against us, certain of our former officers and directors, certain of our venture capital investors, and the underwriters of our IPO. Two of these complaints, Wong v. Restoration Robotics, Inc., et al., No. 18CIV02609, and Li v. Restoration Robotics, Inc., et al., No. 19CIV08173 (together, the “State Actions”), were filed in the Superior Court of the State of California, County of San Mateo, and assert claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act. The other two complaints, Guerrini v. Restoration Robotics, Inc., et al., No. 5:18-cv-03712-EJD and Yzeiraj v. Restoration Robotics, Inc., et al., No. 5:18-cv-03883-BLF (together, the “Federal Actions”), were filed in the United States District Court for the Northern District of California and assert claims under Sections 11 and 15 of the Securities Act. The complaints all allege, among other things, that our Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with our IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. The complaints seek unspecified monetary damages, other equitable relief and attorneys’ fees and costs.

In the State Actions, we, along with the other defendants, successfully demurred to the initial Wong complaint for failure to state a claim, and secured a stay of both cases based on the forum selection clause contained in our Amended and Restated Certificate of Incorporation, which designates the federal district courts as the exclusive forums for claims arising under the Securities Act. However, on December 19, 2018, the Delaware Court of Chancery in Sciabacucchi v. Salzberg held that exclusive federal forum provisions are invalid under Delaware law. Based on this ruling, the San Mateo Superior Court lifted its stay of State Actions on December 10, 2019. On January 17, 2020, Plaintiffs in the State Actions filed a consolidated amended complaint for violations of federal securities laws, alleging again that, among other things, our Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with our IPO were inaccurate and misleading, contained untrue statements of material fact, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. The complaint seeks unspecified monetary damages, other equitable relief and attorneys’ fees and costs. On February 24, 2020, we demurred to the consolidated amended complaint for failure to state a claim. On March 18, 2020, the Delaware Supreme Court reversed the Chancery Court’s decision in Sciabacucchi v. Salzberg and held that exclusive federal forum provisions are valid under Delaware law. On March 30, 2020, the Company filed a renewed motion to dismiss based on its federal forum selection clause. A hearing on our demurrer and renewed motion to dismiss was held on June 12, 2020. The court has not yet issued any decision.

In the Federal Actions, which have been consolidated under the caption In re Restoration Robotics, Inc. Securities Litigation, Case No. 5:18-cv-03712-EJD, Lead Plaintiff Eduardo Guerrini filed his consolidated amended complaint for violations of federal securities laws on November 30, 2018. The consolidated amended complaint alleges again that, among other things, our Registration Statement filed with the SEC on September 1, 2017 and the Prospectus filed with the SEC on October 13, 2017 in connection with our IPO were inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and omitted to state material facts required to be stated therein. On January 29, 2019, we, along with certain of our former officers and directors, filed a motion to dismiss the consolidated amended complaint for failure to state a claim. On October 18, 2019, the District Court granted our motion to dismiss as to all but two allegedly false or misleading statements contained in our Prospectus. On December 9, 2019, we filed our answer to the consolidated amended complaint denying the falsity of these statements, and discovery is underway. On May 29, 2020, Lead Plaintiff filed a motion for class certification, which we elected not to oppose, and on July 29, 2020, the court certified a class of investors who purchased shares of our common stock pursuant or traceable to our initial public offering.

In addition to the State and Federal Actions, on July 11, 2019, a verified shareholder derivative complaint was filed in the United States District Court for the Northern District of California, captioned Mason v. Rhodes, No. 5:19-cv-03997-NC. The complaint alleges that certain of our former officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the ~~Securities Exchange Act of 1934, or the~~ Exchange Act, in connection with our IPO and our 2018 proxy statement. The complaint seeks unspecified damages, declaratory relief, other equitable relief and attorneys’ fees and costs. On August 21, 2019, the District Court granted the parties’ joint stipulation to stay the Mason action during the pendency of the Federal ~~Actions,~~Actions. On December 15, 2020, the District Court granted the parties’ further stipulation to stay the Mason action during the pendency of the Federal Action, and the case remains stayed.

In addition to the actions described above relating to our IPO, two lawsuits purporting to challenge disclosures made in connection with our merger have also been filed. The first, captioned Bushansky v. Restoration Robotics, Inc., et al., No. 5:19-cv-06004-MMC, alleged, among other things, that defendants violated Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. The complaint alleged that the proxy statement filed with the SEC by Restoration Robotics, Inc. on September 10, 2019 in connection with the Merger omitted or misrepresented material information. The complaint sought, among other things, injunctive relief, unspecified damages, and attorneys’ fees and costs. On November 6, 2019, the plaintiff voluntarily dismissed the Bushansky action with prejudice as to his individual claims and without prejudice as to the claims of the putative class.

The second, a putative shareholder class action complaint captioned Pak v. Restoration Robotics, Inc., et al., No. 1:19-cv-02237, was filed in the United States District Court for the District of Delaware on December 6, 2019. The complaint alleges, among other things, that defendants violated Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9. The complaint alleges that the proxy statement filed with the SEC by Restoration Robotics, Inc. on September 10, 2019 in connection with the Merger contained false or misleading information. The complaint seeks, among other things, compensatory and/or rescissory damages, and attorneys’ fees and costs. On February 26, 2020, the District Court appointed Joon Pak as Lead Plaintiff in the Pak action, and approved his selection of Lead Counsel. We filed a motion to dismiss the complaint on May 26, 2020. On July 2, 2020, plaintiff and we filed a stipulation of dismissal with prejudice as to the plaintiff and without prejudice as to the putative class.

While we believe these claims to be without merit, we cannot assure you that additional claims alleging the same or similar facts will not be filed. Any litigation could result in substantial costs and a diversion of management’s attention and resources.For additional details of the legal proceedings currently affecting the Company, please see Note 8 “Commitments and Contingencies” to our unaudited condensed consolidated financial statements included elsewhere in this report.

One of our subsidiaries is the subject of an administrative law investigation by the People’s Republic of China, or the PRC, State Administration for Market Regulation, or SAMR, regarding the potential misclassification of one product as a non-medical device. If this subsidiary is determined to have sold the Versa platform under an improper classification, the subsidiary could face material administrative penalties, including loss of future sales, corrective actions, disgorgement of profits and fines.

Our Chinese subsidiary, Venus Concept China, imports and sells registered medical devices and unregistered non-medical devices in the PRC. One of its unregistered products has been the subject of inquiries from two district level branches of the SAMR, Xuhui MSA and Huangpu MSA, as to whether the product was properly sold as a non-medical device. In January 2019, Venus Concept China had applied to register a version of this non-medical device as a medical device with the National Medical Products Administration of PRC, or NMPA. On June 12, 2019, Venus Concept China was informed that Xuhui MSA had opened an administrative investigation case related to whether the device is an unregistered medical device, as a result of a complaint that Xuhui MSA received from a former distributor of Venus Concept China. Huangpu MSA notified Venus Concept China that it would be suspending its separate investigation against Venus Concept China, pending the results of the Xuhui MSA investigation. We and Venus Concept China have voluntarily stopped sales in China of this product. On December 11, 2019, Xuhui MSA informed Venus Concept China that a determination had been made by the Shanghai Medical Products Administration that Versa’s IPL function should be administered as a Class II medical device. Xuhui MSA also suggested that Venus Concept China consider a voluntary recall of all Versa units sold in China. In late January 2020, Venus Concept China received a copy of the Shanghai Medical Products Administration’s determination that because of the intended uses for Versa’s IPL function comprise medical treatment functions such as “treatment of benign pigmented epidermis and skin lesions,” Versa’s IPL function should be administered as a Class II medical device. Although the revenue generated from the product that is the subject of the investigation did not represent a material amount of our total revenues for the years ended December 31, 2018 and 2019, monetary penalties nonetheless could be material.

In April 2020, Venus Concept China received a determination from NMPA on its application for registering Versa’s IPL function as a medical device. NMPA has approved the registration of one applicator HR 650 for hair removal as a Class II medical device out of the four IPL applicators for which Venus Concept China had originally applied. The date of registration is April 15, 2020. Venus Concept China also submitted an explanation letter and a draft Corrective & Preventive Action Report plan to Xuhui MSA during a meeting with the local authority on April 23, 2020. However, on April 29, 2020, Xuhui MSA informed Venus Concept China that its administrative investigation case had been transferred to Xuhui Branch of Shanghai Municipal Public Security Bureau (“Xuhui PSB”) for further handling. On May 6, 2020, the economic crime investigation department of Xuhui PSB confirmed to Venus Concept China’s local PRC counsel that they would review and decide whether or not to file formally a criminal investigation case against Venus Concept China and any relevant individuals allegedly responsible for any alleged criminal offense(s). On May 29, 2020, Venus Concept China was informed by Xuhui MSA of Xuhui PSB’s decision not to file a criminal investigation case against Venus Concept China and was shown a written Notice of non-filing of a criminal case issued by Xuhui PSB. On the same day, Xuhui MSA informed Venus Concept China that it would reopen and resume its administrative investigation case against Venus Concept China, which proceedings are currently ongoing.

In addition to the product that is the subject of an administrative investigation, Venus Concept China also sells two other products in the PRC, which are not registered as medical devices with the NMPA. Venus Concept China may not be able to convince the relevant SAMR authorities that the product that is the subject of an administrative investigation was properly classified, or that any of its other products that might be the subject of future government investigations, is properly classified. If any of the products sold by us as unregistered products is ultimately determined to be a medical device, the registration process with the NMPA could be extensive and time-consuming, potentially resulting in Venus Concept China’s inability to sell such products in the PRC for several years. Venus Concept China’s prior sales of those products could also subject it to material administrative penalties if it is determined that the products were sold in the absence of necessary registrations with NMPA. These administrative penalties could include limitations on future sales, corrective actions, including product recalls, disgorgement of profits and fines, the future imposition of which could materially adversely affect our business, operations, financial condition and reputation in the market.

We rely on a single third-party manufacturer for the manufacturing of the reusable procedure kits, disposable procedure kits and spare procedures kits used with the ARTAS® System and the ARTAS® iX System.

NPI Solutions, Inc., or NPI, produces reusable procedure kits, disposable procedure kits and spare kits used with the ARTAS® System and ARTAS® iX System. If the operations of NPI are interrupted or if it is unable or unwilling to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to fulfill new customer kit orders required for use with the existing ARTAS® System and ARTAS® iX System. Any change to another contract manufacturer would likely entail significant delay, require us to devote substantial time and resources, and could involve a period in which our products could not be produced in a timely or consistently high-quality manner, any of which could harm our reputation and results of operations.

We have a manufacturing agreement for consumables with NPI for the supply of consumable products, including reusable procedure kits, disposable procedure kits and spare procedure kits used with the ARTAS® System and ARTAS® iX System, pursuant to both of which we make purchases on a purchase order basis. The agreement is effective for an initial term of two years and will continue to automatically renew for additional twelve-month periods, subject to either party’s right to terminate the agreement upon 180 days advance notice during the initial term if our quarterly forecasted demand falls below 75% of our historical forecasted demand for the same period in the previous year or upon 120 days’ advance notice after the initial term.

~~In addition, our reliance on NPI involves a number of other risks, including, among other things, that:~~

If any of these risks materialize, it could significantly increase our costs, our ability to generate net sales would be impaired, market acceptance of our products could be adversely affected, and customers may instead purchase or use our competitors’ products, which could have a materially adverse effect on our business, financial condition and results of operations.

Furthermore, if we are required to change the manufacturing of our various procedure kits, we will be required to verify that the new manufacturer maintains facilities, procedures and operations that comply with our quality and applicable regulatory requirements, which could further impede our ability to manufacture the procedure kits in a timely manner. Transitioning to a new supplier could be time-consuming and expensive, may result in interruptions in our operations and product delivery. The occurrence of these events could harm our ability to meet the demand for our products in a timely or cost-effective manner.

We cannot assure you that we will be able to secure alternative equipment and materials and utilize such equipment and materials without experiencing interruptions in our workflow. If we should encounter delays or difficulties in securing, reconfiguring or revalidating the equipment and components we require for the ARTAS® System and ARTAS® iX System, including the related consumables, our reputation, business, financial condition and results of operations could be negatively affected.

Pursuant to the Order of the Health Officer of the County of Santa Clara directing all individuals to shelter-in-place, which was issued on March 16, 2020, in response to impact of COVID-19 pandemic (as updated, the “Order”), we were unable to access our facility in San Jose or NPI’s facility until June 1, 2020. As a result, we were unable to manufacture sufficient ARTAS procedure kits during this period and were limited to shipping procedure kits from existing inventory. While we currently have access to our San Jose facility and NPI’s facility has re-opened and we are able to manufacture ARTAS procedure kits, we cannot predict whether these facilities will be closed again by the Order of the Health Officer of the County of Santa Clara, or California State public health orders in response to the future COVID-19 developments in the County or State.

There were no unregistered securities issued and sold during the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021.

*The certification attached as Exhibit 32.1 and Exhibit 32.2 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Venus Concept Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		VERO		The Nasdaq Global Market

		Page
Part I.	Financial Information	2
Item 1.	Condensed Consolidated Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed ConsolidatedStatementsof ComprehensiveLoss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2926
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5043
Item 4.	Controls and Procedures	5043
PART II.	Other Information	5244
Item 1.	Legal Proceedings	5244
Item 1A.	Risk Factors	5444
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6047
Item 3.	Defaults Upon Senior Securities	6047
Item 4.	Mine Safety Disclosures	6047
Item 5.	Other Information	6047
Item 6.	Exhibits	6148
Signatures		6249

	As previously reported		Adjustment			As restated
	$		$			$
Consolidated balance sheet and consolidated statement of stockholders' equity
January 1, 2019
Common Stock		57,101		(57,096	)		5
Additional paid in capital		10,399		57,096			67,495

March 31, 2019
Common Stock		57,108		(57,103	)		5
Additional paid in capital		10,774		57,103			67,877

June 30, 2019
Common Stock		57,108		(57,103	)		5
Additional paid in capital		11,818		57,103			68,921

	June 30, 2020		June 30, 2019		March 31, 2021		March 31, 2020
Options to purchase common stock		2,808,235		3,269,926		2,532,184		2,730,791
Preferred stock		-		9,216,413		-		660,000
Warrants for common stock		10,665,067		179,932		15,928,867		10,665,067
Total potential dilutive shares		13,473,302		12,666,271		18,461,051		14,055,858

Beginning balance	$	950
Balance as of January 1, 2020				$	655
Payments		(828	)		(799	)
Change in value		533			291
December 31, 2019		655
Balance as of December 31, 2020					147
Payments		(77	)		(147	)
Change in value		179			-
March 31, 2020		757
Payments		(79	)
Change in value		65
June 30, 2020	$	743
Balance as of March 31, 2021				$	-

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

	Series A		Series B		Series C		Series C-1		Series D		Common Stock				Additional Paid-		Accumulated			Non- controlling		Total Stockholders’
	Preferred Shares		Preferred Shares		Preferred Shares		Preferred Shares		Preferred Shares		Shares		Amount		in-Capital		Deficit			Interest		Equity
Balance — January 1, 2019 (as restated, Note 2)		1,264,565		2,632,109		4,615,567		56,983		647,189		4,772,956	$	5	$	67,495	$	(35,067	)	$	4,022	$	36,455
Net loss - the Company		—		—		—		—		—		—		—		—		(5,273	)		—		(5,273	)
Net income - non-controlling interest		—		—		—		—		—		—		—		—		—			168		168
Options exercised		—		—		—		—		—		3,506		—		7		—			—		7
Stock-based compensation		—		—		—		—		—		—		—		375		—			—		375
Balance — March 31, 2019 (as restated, Note 2)		1,264,565		2,632,109		4,615,567		56,983		647,189		4,776,462	$	5	$	67,877	$	(40,340	)	$	4,190	$	31,732
Net loss - the Company		—		—		—		—		—		—		—		—		(5,910	)		—		(5,910	)
Net income - non-controlling interest		—		—		—		—		—		—		—		—		—			432		432
Stock-based compensation		—		—		—		—		—		—		—		1,044		—			—		1,044
Balance — June 30, 2019 (as restated, Note 2)		1,264,565		2,632,109		4,615,567		56,983		647,189		4,776,462	$	5	$	68,921	$	(46,250	)	$	4,622	$	27,298

	Fair Value Measurements as of June 30, 2020								Fair Value Measurements as of March 31, 2021
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Guaranteed Investment Certificates (GIC)									$	—	$	65	$	—	$	65
Restricted cash	$	—	$	83	$	—	$	83		83		—		—		83
Total assets	$	—	$	83	$	—	$	83	$	83	$	65	$	—	$	148
Liabilities
Contingent earn-out consideration		—		—		743		743
Total liabilities	$	—	$	—	$	743	$	743


	June 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Gross accounts receivable	$	96,159		$	105,127		$	88,060		$	92,402
Unearned income		(4,183	)		(5,623	)		(3,478	)		(3,728	)
Allowance for doubtful accounts		(14,277	)		(10,494	)		(17,694	)		(18,490	)
	$	77,699		$	89,010		$	66,888		$	70,184
Reported as:
Current trade receivables	$	57,539		$	58,977		$	51,070		$	52,764
Current unearned interest income		(2,937	)		(3,942	)		(2,444	)		(1,950	)
Long-term trade receivables		24,343			35,656			19,296			21,148
Long-term unearned interest income		(1,246	)		(1,681	)		(1,034	)		(1,778	)
	$	77,699		$	89,010		$	66,888		$	70,184

			June 30,
	Total		2021		2022		2023		2024		2025
Current financing receivables, net of allowance of $5,502	$	31,459	$	31,459	$	—	$	—	$	—	$	—
Long-term financing receivables, net of allowance of $4,216		24,343		—		18,898		5,317		128		—
	$	55,802	$	31,459	$	18,898	$	5,317	$	128	$	—

Balance as of January 1, 2019	$	4,408
Balance as of January 1, 2020				$	10,494
Write-offs		(3,905	)		(6,536	)
Provision		9,991			15,212
Balance as of December 31, 2019		10,494
Sale of subsidiaries					(680	)
Balance as of December 31, 2020					18,490
Write-offs		(1,152	)		(1,902	)
Provision		1,547			1,106
Balance as of March 31, 2020		10,889
Write-offs		(481	)
Provision		3,869
Balance as of June 30, 2020	$	14,277
Balance as of March 31, 2021					17,694

	Useful Lives (in years)	June 30, 2020			December 31, 2019			Useful Lives (in years)	March 31, 2021			December 31, 2020
Lab equipment tooling and molds	4 - 10	$	7,986		$	7,872		4 - 10	$	8,075		$	8,053
Office furniture and equipment	6 - 10		1,679			1,710		6 - 10		1,716			1,760
Leasehold improvements	up to 10		1,711			1,950		up to 10		1,791			1,838
Computers and software	3		1,797			1,811		3		1,813			1,815
Vehicles	5 - 7		16			16		5 - 7		19			12
Total property and equipment			13,189			13,359				13,414			13,478
Less: Accumulated depreciation			(9,218	)		(8,711	)			(10,282	)		(9,939	)
Total property and equipment, net		$	3,971		$	4,648			$	3,132		$	3,539

	June 30, 2020			December 31, 2019
Balance as of the beginning of the year	$	1,977		$	1,336
Warranties assumed through business combination		-			273
Warranties issued during the year		359			1,038
Warranty costs incurred during the year		(677	)		(670	)
Balance at the end of the year	$	1,659		$	1,977
Current		1,160			1,254
Long-term		499			723
Total	$	1,659		$	1,977

	March 31, 2021			December 31, 2020
Balance as of the beginning of the period	$	1,639		$	1,977
Warranties issued during the period		295			761
Warranty costs incurred during the period		(241	)		(1,099	)
Balance at the end of the period	$	1,693		$	1,639
Current		1,222			1,106
Long-term		471			533
Total	$	1,693		$	1,639

	At June 30, 2020							At March 31, 2021
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Customer relationships	$	1,400	$	(196	)	$	1,204	$	1,400	$	(265	)	$	1,135
Brand		2,500		(408	)		2,092		2,500		(604	)		1,896
Technology		16,900		(1,878	)		15,022		16,900		(3,980	)		12,920
Supplier agreement		3,000		(716	)		2,284		3,000		(941	)		2,059
Total intangible assets and goodwill	$	23,800	$	(3,198	)	$	20,602
Total intangible assets								$	23,800	$	(5,790	)	$	18,010

	At December 31, 2019							At December 31, 2020
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Goodwill	$	27,450	$	—		$	27,450
Customer relationships		1,400		(149	)		1,251	$	1,400	$	(242	)	$	1,158
Brand		2,500		(276	)		2,224		2,500		(540	)		1,960
Technology		16,900		(469	)		16,431		16,900		(3,286	)		13,614
Supplier agreement		3,000		(568	)		2,432		3,000		(867	)		2,133
Total intangible assets and goodwill	$	51,250	$	(1,462	)	$	49,788
Total intangible assets								$	23,800	$	(4,935	)	$	18,865


July 1, 2020 to December 31, 2020	$	1,737
2021		3,473
April 1, 2021 to December 31, 2021			$	2,618
2022		3,473		3,473
2023		3,473		3,473
2024		3,473		3,473
2025				3,004
Thereafter		4,973		1,969
Total	$	20,602	$	18,010

	Office Lease		Purchase Commitments		Total		Office Lease		Purchase and Service Commitments		Total
July 1, 2020 to December 31, 2020	$	1,162	$	7,962	$	9,124
2021		1,881		—		1,881
2022		953		—		953
April 1, 2021 to March 31, 2022							$	1,145	$	8,287	$	9,432
2023		515		—		515		718		—		718
2024		212		—		212		333		—		333
2025								210		—		210
2026								210		—		210
Thereafter		1,198		—		1,198		1,024		—		1,024
Total	$	5,921	$	7,962	$	13,883	$	3,640	$	8,287	$	11,927

	As of March 31, 2021
2021	$	-
2022		1,604
2023		9,339
2024		7,942
2025		38,416
Total	$	57,301

	As of March 31, 2021
2021	$	1,609
2022		2,136
2023		2,102
2024		1,606
2025		28,196
Total	$	35,649

	As of June 30, 2020
2020		-
2021		-
2022		66,574
Total		66,574
Less: debt discounts and issuance costs		(1,210	)
Less: current portion		-
Non-current portion	$	65,364

	Three Months Ended June 30,
	2020				2019				Change
(in thousands, except percentages)	$		% of Total		$		% of Total		$			%
Revenues:
Subscription—Systems	$	7,465		43.9	$	16,643		59.8	$	(9,178	)		(55.1	)
Products—Systems		6,757		39.8		7,769		27.9		(1,012	)		(13.0	)
Products other		1,787		10.5		1,622		5.9		165			10.2
Services		987		5.8		1,784		6.4		(797	)		(44.7	)
Total	$	16,996		100.0	$	27,818		100.0	$	(10,822	)		(38.9	)

	Six Months Ended June 30,
	2020				2019				Change
(in thousands, except percentages)	$		% of Total		$		% of Total		$			%
Revenues:
Subscription—Systems	$	14,278		45.3	$	32,385		61.8	$	(18,107	)		(55.9	)
Products—Systems		10,255		32.6		14,084		26.9		(3,829	)		(27.2	)
Products other		4,504		14.3		2,950		5.6		1,554			52.7
Services		2,467		7.8		2,979		5.7		(512	)		(17.2	)
Total	$	31,504		100.0	$	52,398		100.0	$	(20,894	)		(39.9	)

	Three Months Ended March 31,
	2021				2020				Change
(in thousands, except percentages)	$		% of Total		$		% of Total		$			%
Revenues:
Subscription—Systems	$	8,537		37.8	$	6,813		47.0	$	1,724			25.3
Products—Systems		9,810		43.4		3,498		24.1		6,312			180.4
Products—Other		3,055		13.5		2,717		18.7		338			12.4
Services		1,195		5.3		1,480		10.2		(285	)		(19.3	)
Total	$	22,597		100.0	$	14,508		100.0	$	8,089			55.8

	Payments Due by Period										Payments Due by Period
	Less than 1 Year		1 to 3 Years		3 to 5 Years		More than 5 Years		Total		Less than 1 Year		2 to 3 Years		4 to 5 Years		More than 5 Years		Total
	(dollars in thousands)										(dollars in thousands)
Debt obligations, including interest	$	5,992	$	74,076	$	—	$	—	$	80,068	$	2,531	$	14,998	$	75,421	$	-	$	92,950
Operating leases		2,102		2,152		519		1,148		5,921		1,478		773		419		970		3,640
Purchase commitments		7,962		—		—		—		7,962
Purchase and service commitments												8,287		-		-		-		8,287
Total contractual obligations	$	16,056	$	76,228	$	519	$	1,148	$	93,951	$	12,296	$	15,771	$	75,840	$	970	$	104,877

	Venus Concept Inc.

Date: ~~August 13, 2020~~May 17, 2021	By:	/s/ Domenic Serafino
		Domenic Serafino
		Chief Executive Officer

Date: ~~August 13, 2020~~May 17, 2021	By:	/s/ Domenic Della Penna
		Domenic Della Penna
		Chief Financial Officer