Equity Purchase Agreement with Lincoln Park

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

? the sale, including traditional sales and subscription-based sales, of

systems, inclusive of the main console and applicators/handpieces (referred to

Service revenue includes revenue derived from our extended warranty service contracts provided to our existing customers and VeroGrafters technician services (which were discontinued in the fourth quarter of 2021).

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

Use of Non-GAAP Financial Measures

Key Factors Impacting Our Results of Operations

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

In the three and six months ended June 30, 2022, and 2021, respectively, we did not open any direct sales offices.

? Implementation of and continuously updated health and safety policies and

? Enhanced safety guidelines and access to personal protective equipment for our

? Establishment of phased roll-out of vaccine mandates for Venus Concept offices

? Accounts Receivables Collections Initiatives. We have made repayment

arrangements with the majority of our non-paying subscription customers to

collect temporarily reduced monthly payments where possible and/or deferred

amounts in expectation of full collection as business activities continue to

resume. We modified our payment arrangements with these subscription customers

such that past due amounts are scheduled to be repaid over a three to six

month period. While the repayment arrangements and improvements in collections

activities made thus far have resulted in our cash collections rate averaging

at pre-COVID-19 levels, we may not be successful in collecting all outstanding

? The 2021 Private Placement. In December 2021, we issued and sold to certain

investors 9,808,418 shares of common stock and 3,790,755 shares of convertible

preferred stock. The 2021 Private Placement was completed on December 15,

2021. The gross proceeds from the securities sold in the 2021 Private

Placement was $17.0 million. The costs incurred with respect to the 2021

Private Placement totaled $0.3 million and were recorded as a reduction of the

2021 Private Placement proceeds in the consolidated statements of

stockholders' equity in the 2021 Form 10-K. See Note 14 "Stockholders Equity"

in the notes to our condensed consolidated financial statements included

? Government Assistance Programs. In 2020, certain of our subsidiaries applied

for government assistance programs and received loans and other government

subsidies in the aggregate of $5.3 million, including $4.1 million in PPP

Loans under the PPP. The terms of these government assistance programs vary by

jurisdiction. See Note 12 "Government Assistance Programs" in the notes to our

condensed consolidated financial statements included elsewhere in this report.

In 2021, we applied for partial forgiveness of the PPP Loans with the SBA and

received partial forgiveness in the total amount of $2.8 million of original

PPP Loans as of June 30, 2022. Also in 2021, we received additional government

? December 2020 Public Offering Warrants Exercise. On December 24, 2020, we sold

in a public offering 11,250,000 shares of common stock and warrants to

purchase up to 5,625,000 shares of common stock at a combined offering price

to the public of $2.00 per share and accompanying warrants. Total net proceeds

generated by the December 2020 Public Offering was $20.5 million. In February

2021, a small number of our investors exercised an aggregate of 361,200

December 2020 Public Offering Warrants at the exercise price of $2.50 per

share. We received total proceeds from the December 2020 Public Offering

? Equity Purchase Agreement with Lincoln Park. On June 16, 2020, we entered into

the Equity Purchase Agreement with Lincoln Park, described further under Note

1 "Nature of Operations-Equity Purchase Agreement with Lincoln Park" in the

notes to the unaudited condensed consolidated financial statements included

elsewhere in this report. Under this agreement, during the six months ended

June 30, 2022, we sold approximately 0.4 million shares of our common stock

through this equity line facility yielding net cash proceeds of $0.3 million.

The Lincoln Park facility had a two-year term and expired on July 1, 2022. It

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 (3) service revenue from our extended warranty service contracts provided to existing customers and the sale of our VeroGrafters technician services. VeroGrafters services were discontinued in the fourth quarter of 2021.

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), marketing supplies and kits, various consumables and disposables, replacement applicators and handpieces, and ARTAS system training.

Cost of Goods Sold and Gross Profit

Income tax expense is recognized based on the actual taxable loss incurred during the three and six months ended June 30, 2022.

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

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