10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-38238

Venus ConceptInc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	06-1681204
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
235 Yorkland Blvd., Suite 900 Toronto, Ontario M2J 4Y8 (877) 848-8430 (Address including zip code, and telephone number including area code, of registrant’s principal executive offices) Restoration Robotics, Inc 128 Baytech Drive San Jose, CA 95134 (Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 7, 2019, the registrant had 29,667,622 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

		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 (Deficit)	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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	69
Signatures		70

i

PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VENUS CONCEPTINC.

Condensed ConsolidatedBalance Sheets

(Unaudited)

(inthousands, except for shares and per share data)

	September 30,			December 31,
	2019			2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	8,915		$	16,122
Accounts receivable, net of allowance of $2,542 and $1,772 as of September 30, 2019 and    December 31, 2018, respectively		3,663			6,569
Inventory		5,623			5,522
Prepaid expenses and other current assets		1,042			1,278
Total current assets		19,243			29,491
Property and equipment, net		1,323			1,299
Restricted cash		83			83
Other assets		100			100
TOTAL ASSETS	$	20,749		$	30,973
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	5,226		$	3,815
Accrued compensation		1,315			1,771
Other accrued liabilities		2,629			2,337
Deferred revenue		1,346			1,407
Related party convertible promissory notes (Note 8)		7,000			—
Subordinated promissory notes (Note 8)		4,500			—
Current portion of long-term debt, net of discount of $789 and $617 as of September 30, 2019    and December 31, 2018, respectively		5,878			49
Total current liabilities		27,894			9,379
Other long-term liabilities		497			594
Long-term debt, net of discount of $485 and $746 as of September 30, 2019 and    December 31, 2018		14,158			19,418
TOTAL LIABILITIES		42,549			29,391
Commitments and Contingencies (Note 6)
STOCKHOLDERS’ EQUITY (DEFICIT)
Convertible preferred stock, $0.0001 par value; 10,000,000 shares authorized, and no shares issued    and outstanding as of September 30, 2019 and December 31, 2018	—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized as of September 30, 2019 and    December 31, 2018; 2,729,801 and 2,711,801 shares issued and outstanding as of    September 30, 2019 and December 31, 2018, respectively		4			4
Additional paid-in capital		195,914			194,841
Accumulated other comprehensive income (loss)		43			(50	)
Accumulated deficit		(217,761	)		(193,213	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		(21,800	)		1,582
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	20,749		$	30,973

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

2

VENUS CONCEPTINC.

Condensed ConsolidatedStatementsof Operations

(Unaudited)

(inthousands, except for shares and per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue	$	3,307		$	4,818		$	11,632		$	15,298
Cost of revenue		2,297			2,663			6,465			8,362
Gross profit		1,010			2,155			5,167			6,936
Operating expenses:
Sales and marketing		3,952			4,398			12,688			13,147
Research and development		1,604			2,008			4,573			6,286
General and administrative		2,155			2,191			5,721			6,159
Merger related expenses		1,521			—			4,079			—
Total operating expenses		9,232			8,597			27,061			25,592
Loss from operations		(8,222	)		(6,442	)		(21,894	)		(18,656	)
Other expense, net:
Interest expense		(930	)		(631	)		(2,512	)		(1,489	)
Other income (expense), net		(55	)		12			(109	)		(567	)
Total other expense, net		(985	)		(619	)		(2,621	)		(2,056	)
Net loss before provision for income taxes		(9,207	)		(7,061	)		(24,515	)		(20,712	)
Provision for income taxes		9			8		33				32
Net loss attributable to common stockholders	$	(9,216	)	$	(7,069	)	$	(24,548	)	$	(20,744	)
Net loss per share attributable to common stockholders, basic and diluted	$	(3.38	)	$	(3.03	)	$	(9.02	)	$	(10.02	)
Weighted-average shares used in computing net loss per share attributable    to common stockholders, basic and diluted		2,728,888			2,333,820			2,722,922			2,070,322

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

3

VENUS CONCEPTINC.

Condensed ConsolidatedStatementsof ComprehensiveLoss

(Unaudited)

(inthousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net loss	$	(9,216	)	$	(7,069	)	$	(24,548	)	$	(20,744	)
Other comprehensive income (loss):
Cumulative translation adjustment		43			(9	)		93			33
Comprehensive loss	$	(9,173	)	$	(7,078	)	$	(24,455	)	$	(20,711	)

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

4

VENUS CONCEPTINC.

Condensed ConsolidatedStatements of Stockholders’ Equity (Deficit)

(Unaudited)

(inthousands, except for shares)

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Income (Loss)			Deficit			(Deficit)
Balance — June 30, 2019		2,723,801	$	4	$	195,559	$	—		$	(208,545	)	$	(12,982	)
Release of restricted stock awards		6,000		—		—		—			—			—
Stock-based compensation		—		—		355		—			—			355
Other comprehensive gain		—		—		—		43			—			43
Net loss		—		—		—		—			(9,216	)		(9,216	)
Balance — September 30, 2019		2,729,801	$	4	$	195,914	$	43		$	(217,761	)	$	(21,800	)
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Income (Loss)			Deficit			(Deficit)
Balance — December 31, 2018		2,711,801	$	4	$	194,841	$	(50	)	$	(193,213	)	$	1,582
Release of restricted stock awards		18,000		—		—		—			—			—
Stock-based compensation		—		—		1,073		—			—			1,073
Other comprehensive gain		—		—		—		93			—			93
Net loss		—		—		—		—			(24,548	)		(24,548	)
Balance — September 30, 2019		2,729,801	$	4	$	195,914	$	43		$	(217,761	)	$	(21,800	)
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Income (Loss)			Deficit			(Deficit)
Balance — June 30, 2018		1,942,513	$	3	$	178,799	$	(37	)	$	(178,162	)	$	603
Issuance of common stock pursuant to stock    options exercises of vested options		2,554		—		6		—			—			6
Stock-based compensation		—		—		167		—			—			167
Issuance of common stock in connection with    our follow-on offering, net of underwriters'    commission and offering costs of $1,635		766,667		1		15,614		—			—			15,615
Other comprehensive loss		—		—		—		(9	)		—			(9	)
Net loss		—		—		—		—			(7,069	)		(7,069	)
Balance — September 30, 2018		2,711,734	$	4	$	194,586	$	(46	)	$	(185,231	)	$	9,313
	Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Capital		Income (Loss)			Deficit			(Deficit)
Balance — December 31, 2017		1,929,352	$	3	$	177,757	$	(79	)	$	(164,487	)	$	13,194
Issuance of common stock pursuant to stock    options exercises of vested options		15,715		—		392		—			—			392
Stock-based compensation		—		—		419		—			—			419
Issuance of common stock warrants pursuant to    debt financing		—		—		404		—			—			404
Issuance of common stock in connection with    our follow-on offering, net of underwriters'    commission and offering costs of $1,635		766,667		1		15,614		—			—			15,615
Other comprehensive gain		—		—		—		33			—			33
Net loss		—		—		—		—			(20,744	)		(20,744	)
Balance — September 30, 2018		2,711,734	$	4	$	194,586	$	(46	)	$	(185,231	)	$	9,313

The accompanyingnotesare an integralpartof these condensed consolidatedfinancialstatements.

5

VENUS CONCEPTINC.

Condensed ConsolidatedStatementsof Cash Flows

(Unaudited)

(inthousands)

	Nine Months Ended
	September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(24,548	)	$	(20,744	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		524			539
Amortization of debt discounts and issuance costs		586			318
Non-cash loss on extinguishment of debt		—			178
Stock-based compensation		1,073			419
Provision for bad debt		812			839
Loss on disposal of property and equipment		—			41
Changes in operating assets and liabilities:
Accounts receivable		2,094			(3,417	)
Inventory		(321	)		(1,686	)
Prepaid expenses and other assets		234			(40	)
Accounts payable		1,437			1,956
Accrued and other liabilities		(262	)		253
Deferred revenue		(59	)		118
Net cash used in operating activities		(18,430	)		(21,226	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(353	)		(1,051	)
Net cash used in investing activities		(353	)		(1,051	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party convertible promissory notes, net		6,983			—
Proceeds from subordinated promissory notes		4,500
Proceeds from exercised stock options		—			392
Proceeds from follow-on offering, net		—			15,615
Proceeds from long-term debt, net		—			19,584
Principal payments on long-term debt		—			(13,300	)
Net cash provided by financing activities		11,483			22,291
Effect of exchange rate changes on cash, cash equivalents and restricted cash		93			33
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(7,207	)		47
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period		16,205			23,645
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	8,998		$	23,692
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period	$	1,653		$	1,240
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Purchase of property and equipment included in accounts payable	$	—		$	4
Discounts and issuance costs in connection with long-term debt	$	—		$	1,246
Issuance of warrants in connection with long-term debt	$	—		$	404
Transfer of equipment from inventory to property and equipment	$	220		$	—
Discounts in connection with amendment of long-term debt	$	480		$	—

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

6

VENUS CONCEPTINC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(inthousands, except for shares, per share data and percentages)

1. Nature of Operations

Venus Concept Inc. formerly “Restoration Robotics, Inc.” is a medical device company incorporated in the state of Delaware on November 22, 2002 and headquartered in San Jose, California. The Company develops an image-guided robotic system that enables follicular unit extraction (FUE) and implantation functionality for use in the field of hair transplantation and markets the ARTAS^® Robotic System in the United States and certain other countries. In these notes to the unaudited condensed consolidated financial statements, the “Company” and “Restoration Robotics” refers to Restoration Robotics, Inc. and its subsidiaries on a consolidated basis prior to the consummation of the Merger (as defined below).

Merger with Venus

On March 15, 2019, the Company entered into the Merger Agreement (the Merger Agreement) with Radiant Merger Sub Ltd., a company organized under the laws of Israel and a directly, wholly-owned subsidiary of the Company (Merger Sub), and Venus Concept Ltd., a company organized under the laws of Israel (Venus) to combine the companies in an all-stock transaction (the Merger). The Merger Agreement and the Merger have been approved by the Company’s board of directors and the board of directors of Venus.

The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into Venus, with Venus continuing as the surviving corporation and a direct wholly-owned subsidiary of the Company.

At the effective time of the Merger, each outstanding ordinary and preferred share of Venus, nominal value of New Israeli Shekels 0.001, other than shares held by Venus as treasury stock or held by the Company or Merger Sub, will be converted into the right to receive 8.6506 (“Exchange Ratio”) validly issued, fully paid and non-assessable shares of Common Stock (“Company Share”), and (ii) each outstanding Venus stock option and warrant will be assumed by the Company and converted into and become an option or warrant (as applicable) exercisable for Company Shares with the number and exercise price adjusted by the Exchange Ratio.

On August 14, 2019, the Company, Radiant Merger Sub Ltd. and Venus entered into the First Amendment to the Merger Agreement (the “Merger Agreement Amendment”). The Merger Agreement Amendment, among other things, adds as a condition to closing the Merger the satisfaction of the following: (i) Venus must have raised cash proceeds in one or more issuances of common equity interests or convertible bond indebtedness of Venus or the Company, in an aggregate amount of at least $20,000 (exclusive of any investment by Madryn Health Partners, LP (Venus’ lender) not later than the close of business on the closing date of the Merger and (ii) Venus and the other loan parties to the credit agreement by and among Venus, such parties and the Madryn entities, must have unrestricted cash of at least $20,000 immediately after giving effect to the transactions contemplated by the Merger Agreement.

Under the terms of the transaction, the Company and Venus shareholders will own approximately 15% and 85% of the combined company, respectively, on a fully diluted basis, without giving effect to the shares issued in the proposed equity commitment letter dated March 15, 2019, that is expected to close immediately after the merger (the Equity Commitment Letter). EW Healthcare Partners has committed to lead a $21,000 equity investment, priced at $0.4664 per share (subject to adjustment for stock splits), in the combined company’s common stock contingent on the closing of the Merger. Additional investors committed to participating in the proposed equity financing include HealthQuest Capital, Madryn Asset Management, Longitude Capital Management, Fred Moll and Aperture Venture Partners. On August 14, 2019, the Company, Venus and the investors party to the Equity Commitment Letter entered into the first amendment to the Equity Commitment Letter (the “Equity Commitment Letter Amendment”). Pursuant to the Equity Commitment Letter Amendment, the investors agreed to amend the Equity Commitment Letter to “pull forward” their maximum committed amounts such that the $21,000 committed under the Equity Commitment Letter would be invested on or prior to August 30, 2019 in Venus convertible promissory notes which will be convertible into shares of the Company’s common stock immediately following the consummation of the Merger. On August 14, 2019, the equity commitment letter investors purchased an aggregate of $6,950 in Convertible Notes and on August 21, 2019, certain of the remaining Equity Commitment Letter investors purchased an additional $14,050 of Convertible Notes.

7

In addition to the EquityCommitment Letter, Fred Moll and InterWest Partners previously funded a $5,000 convertible note to the Company, which will convert into the combined company’s common stock upon consummation of the merger at a price of $0.4664 per share (subject to adjustment for stock splits).On August 20, 2019, the Company entered into a note purchase agreement pursuant to which the Company raised $2,000 through the issuance of an unsecured subordinated convertible promissory note to Frederic Moll, M.D. as discussed in Note 8 to the condensed consolidated financial statements.

Issuance of Convertible Promissory Notes by Venus and Issuance of Subordinated Promissory Note by Restoration Robotics

On June 25, 2019, the Company entered into a Note Purchase Agreement (the Note Purchase Agreement) with Venus and certain investors named therein pursuant to which Venus sold $7,800 aggregate principal amount of unsecured senior subordinated convertible promissory notes (the Convertible Notes) to such investors (the Convertible Note Financing). The Convertible Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. Effective upon the closing of the Merger, all of the outstanding principal and unpaid accrued interest on the Convertible Notes will automatically be converted, in whole, into the number of shares of common stock, par value $0.0001 per share, of the Company at a conversion price of $0.4664 per share.

On August 14, 2019, pursuant to that certain Note Purchase Agreement, dated as of June 25, 2019, with Venus and certain investors named therein pursuant to which Venus sold an additional $7,200 aggregate principal amount of Convertible Notes to such investors. The Convertible Notes contain the same terms as the $7,800 aggregate principal amount of Convertible Notes that were sold pursuant to the Note Purchase Agreement on June 25, 2019 and bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Company’s stockholders approved a proposal that effective upon the closing of the Merger, all of the outstanding principal and unpaid accrued interest on the Convertible Notes will automatically be converted, in whole, into the number of shares of common stock, par value $0.0001 per share, of the Company at a conversion price of $0.4664 per share, subject to adjustment as provided in the Convertible Notes.

In connection with the Convertible Note Financing, on June 25, 2019, the Company entered into a $2,500 Unsecured Subordinated Promissory Note, which funded on July 5, 2019, with Venus Concept USA Inc., a wholly owned subsidiary of Venus. On August 14, 2019, the Company entered into another $2,500 Unsecured Subordinated Promissory Note funded in three tranches A and B of $1,000 each and tranche C of $500 with Venus Concept USA Inc., a wholly owned subsidiary of Venus, collectively (the Subordinated Notes). Tranches A and B were funded on August 27, 2019 and September 25, 2019, respectively, for a total of $2,000. The maturity date of the Subordinated Notes is November 30, 2019. The Subordinated Notes bear interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Notes, the Subordinated Notes shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable thereunder. The Subordinated Notes are unsecured and subordinate in priority to the Company’s existing obligations to Solar Capital, Ltd. under its amended loan and security agreement.

The Company (formerly named Restoration Robotics, Inc.), completed its business combination with Venus, in accordance with the terms of the Merger Agreement.

Immediately following the effective time of the Merger, the Company effected a 15-for-1 reverse stock split of the common stock (“Reverse Stock Split”) and the Company changed its corporate name from “Restoration Robotics, Inc.” to “Venus Concept Inc.”, (“Name Change”) and the business conducted by Venus became the primary business conducted by the Company. Venus is an innovative global medical technology company that develops, commercializes and delivers minimally invasive and non-invasive medical aesthetic technologies and related practice enhancement services. The Merger, the Reverse Stock Split and the Name Change were approved by the Company’s stockholders at an annual meeting of its stockholders held on October 4, 2019. A Form 8-K disclosing the full voting results was filed with the Securities and Exchange Commission (SEC) on October 7, 2019. The transaction closed on November 7, 2019.

This Quarterly Report on Form 10-Q includes only the accounts of Restoration Robotics, Inc. prior to the Merger with Venus Concept Inc. on November 7, 2019.

8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Liquidity

These condensed consolidated financial statements are prepared on a going concern basis that contemplates the realization of assets and extinguishment of liabilities in the normal course of business. The Company has incurred net operating losses and negative cash flows from operations since inception. As of September 30, 2019, and December 31, 2018, the Company has an accumulated deficit of $217,761 and $193,213 and, as of such dates, and through the date of this filing, does not have sufficient capital to fund its planned operations. Because of the Company’s recurring losses from operations and negative cash flows, the Company’s independent registered public accounting firm included an explanatory paragraph in its report on the Company’s consolidated financial statements as of, and for the year ended, December 31, 2018 that such factors raise substantial doubt about the Company’s ability to continue as a going concern. To continue its operations, the Company must achieve profitable operations and/or obtain additional financing. 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. The Company may never become profitable and even if it does attain profitable operations, it may not be able to sustain profitability or positive cash flows on a recurring basis.

The Company will need to raise further capital in the future to service its debt or fund its operations until the time it can sustain positive cash flows. 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.

The accompanying 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, and, as such, the 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.

Basis of Presentation

The condensed consolidated balance sheets as of September 30, 2019, the condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2019 and 2018, the condensed consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018 and the condensed consolidated statements of stockholders’ equity (deficit) for the three and nine months ended September 30, 2019 and 2018 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and in the opinion of management, reflect all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed consolidated financial statements included in this report. The condensed consolidated financial data disclosed in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The condensed consolidated results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. The consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report filed on Form 10-K for the year ended December 31, 2018, with the SEC on March 20, 2019, as amended.

Principles of Consolidation

The accompanying condensed consolidatedfinancialstatementsincludetheaccountsof Restoration Robotics, Inc. and its wholly owned subsidiaries, which are organized in the United States, United Kingdom, Spain, Hong Kong and South Korea prior to the merger with Venus Concept Inc. All significantintercompany accountsandtransactionshavebeeneliminatedinconsolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to revenue recognition, allowance for doubtful accounts, inventory valuation, stock-based compensation, warranty accrual and the recoverability of the Company’s net deferred tax assets and related valuation allowance. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

9

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist primarily of funds invested in readily available checking and savings accounts, investments in money market funds and short-term time deposits. The Company’s restricted cash is held in a separate money market account as collateral for credit cards.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows.

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	8,915	$	16,122
Restricted cash		83		83
Total cash, cash equivalents and restricted cash in the condensed consolidated    statements of cash flows	$	8,998	$	16,205

Segments

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 reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company does not assess the performance of individual product line on measures of profit or loss, or asset-based metrics.

Concentration of Customers

For the three and nine months ended September 30, 2019, one and no customers accounted for more than 10% of the Company’s revenue, respectively. For the three and nine months ended September 30, 2018, no customers accounted for more than 10% of the Company’s revenue. As of September 30, 2019, one customer accounted for 14% of the Company’s total accounts receivable. As of December 31, 2018, no customers accounted for more than 10% of the Company’s total accounts receivable.

JOBS Act Accounting Election

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until 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 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.

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), as amended by ASU No. 2015-14, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20, (collectively, ASU 2014-09). ASU 2014-09 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services and provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. ASU 2014-09 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures. The Company adopted the new revenue standard on January 1, 2019, using the modified retrospective transition method applied to those contracts which were not completed as of that date. See Note 3. Revenue, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional details.

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In June 2018, the FASB issued ASU No. 2018-7, Compensation – Stock Compensation (Topic 718)— Improvements to Nonemployee Share-Based Payment Accounting. This guidance supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted this standard on January 1, 2019 using the modified retrospective adoption method. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures and no cumulative-effect adjustment was recorded to accumulated deficit at January 1, 2019.

Recently Issued Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842), or ASU 2016‑02, as amended by ASU 2019-01 issued in March 2019, (collectively, ASU 2016-02), which requires lessees to record most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Under ASU 2016‑02, a lessee would recognize a lease liability for the obligation to make lease payments and a right‑to‑use asset for the right to use the underlying asset for the lease term. For public entities, this standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. As an Emerging Growth Company, this standard is effective for the Company in annual reporting periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the standard and its impact on the condensed consolidated financial statements. However, the Company does expect a material change in its consolidated assets and liabilities upon adoption of this standard.

3. REVENUE

Change in Accounting Principle

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605 Revenue Recognition (Topic 605) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has issued several amendments to the standard, including clarifications on disclosure of prior-period performance obligations and remaining performance obligations.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company adopted the standard effective January 1, 2019 using the modified retrospective method. This approach was applied to all contracts that were not completed as of January 1, 2019. The adoption of Topic 606 did not have a material impact on the Company’s historical net losses and, therefore, no adjustment was made to the opening balance of accumulated deficit at January 1, 2019. Therefore, the comparative 2018 period has not been adjusted and continues to be reported under Topic 605.

Topic 606’s core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its scope, an entity will:

• Identify the contract(s) with a customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance obligations in the contract; and

• Recognize revenue when (or as) the entity satisfies a performance obligation.

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Impact on Financial Statements

In accordance with Topic 606, the disclosure of the impact of the change in accounting principle to the unaudited condensed consolidated statements of operations and balance sheet was as follows:

	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
Condensed Consolidated Statements of Operations Data	As Reported			Change		Balance Without ASC 606 Adoption			As Reported			Change			Balance Without ASC 606 Adoption
Revenue	$	3,307		$	24	$	3,331		$	11,632		$	(121	)	$	11,511
Gross profit		1,010			24		1,034			5,167			(121	)		5,046
Total operating expenses		9,232			—		9,232			27,061			9			27,070
Loss from operations	$	(8,222	)	$	24	$	(8,198	)	$	(21,894	)	$	(130	)	$	(22,024	)
Net loss before provision for income taxes	$	(9,207	)	$	24	$	(9,183	)	$	(24,515	)	$	(130	)	$	(24,645	)
Net loss attributable to common stockholders	$	(9,216	)	$	24	$	(9,192	)	$	(24,548	)	$	(130	)	$	(24,678	)
Net loss per share attributable to    common stockholders, basic and diluted	$	(3.38	)	$	0.01	$	(3.37	)	$	(9.02	)	$	(0.04	)	$	(9.06	)
Weighted-average shares used in computing    net loss per share attributable to common    stockholders, basic and diluted		2,728,888					2,728,888			2,722,922						2,722,922

	September 30, 2019
Condensed Consolidated Balance Sheets Data	As Reported			Change			Balance Without ASC 606 Adoption
Assets
Prepaid expenses and other current assets	$	1,042		$	(121	)	$	921
Other assets	$	100		$	(9	)	$	91
Stockholders' deficit
Accumulated deficit	$	(217,761	)	$	(130	)	$	(217,891	)

Revenue Recognition

The Company generates revenue primarily through the sale and delivery of promised goods and services, which consists of the sale of ARTAS® and ARTAS® iX Systems, training on the systems, extended service contracts, consumables and marketing services. Revenue is recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. Sales prices are documented in the executed sales contract or purchase order prior to the transfer of control to the customer. Customers may enter into a separate extended service agreement (referred to as ARTAS Care) to purchase an extended warranty for products from the Company whereby the payment is due at the inception of the agreement or in monthly installment payments. Revenue for ARTAS Care is recognized ratably over the term of the agreement.

The Company also utilizes distributors to sell ARTAS^® and ARTAS^® iX Systems and related consumables in certain markets outside of the United States. The Company recognizes revenue when control of the goods or services is transferred to the distributors. Standard terms for all agreements with either end customers or distributors do not allow for right of return, refunds, payment contingent on obtaining financing or other terms that could impact the customer’s payment obligation. Payment terms for U.S. customers are generally at shipment, delivery, or within 30 days of shipment, while payment terms for customers outside of the U.S. vary between 30 and 180 days after shipment.

Performance Obligations, Determination and Allocation of Transaction Price and Method of Recognition

The Company's system sale arrangements generally contain multiple products and services. For these bundled sale arrangements, the Company accounts for individual products and services as separate performance obligations. These performance obligations include: ARTAS® or ARTAS® iX System, including related accessories and software license (considered as one performance obligation), product training, consumables (consisting of harvest or site making/implantation kits), extended service contracts and marketing services. All ARTAS® and ARTAS® iX Systems include an assurance-type standard warranty, generally for a 12-month period. ARTAS Care (extended warranty service contract) will commence at the expiration of the standard warranty period. For multiple performance obligations arrangements, the Company allocates revenue to each performance obligation based on its relative stand-alone selling price for each performance obligation, which is based on observable prices.

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ARTAS® and ARTAS® iX Systems and consumables are performance obligations that are satisfied at a point in time (upon shipment), whereas ARTAS Care, product training, and marketing services are performance obligations that are satisfied over time (e.g. straight line over the performance period or as training and marketing services are performed).

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period as follows (in thousands):

Revenue	2019 (A)		2020		2021		2022 and Thereafter		Total
System related	$	497	$	—	$	—	$	—	$	497
Procedure-based		20		—		—		—		20
Service-related fees		439		467		172		7		1,085
Total	$	956	$	467	$	172	$	7	$	1,602

(A) Represents unearned revenue for the remaining three months of the year 2019.

Shipping and Freight Costs

Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs. Additionally, sale taxes are excluded from revenue.

Practical Expedients

In connection with the Company’s adoption of Topic 606, the Company elected to use the following practical expedients (i) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (ii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less; and (iii) not to recast revenue for contracts that begin and end in the same fiscal year.

Costs to Obtain Customer Contracts

Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. Except for sales commissions that would have been amortized in one year or less, which we have elected the practical expedient discussed above, certain sales commissions related to ARTAS Care and consumables that are sold bundled with the ARTAS^® and ARTAS^® iX Systems, are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have estimated to be three years for ARTAS Care extended warranty service contracts and five years for consumables. We determined the period of benefit by taking into consideration the length of the customer contracts, the Company’s technology lifecycle, and other factors. Amortization expense is recorded in sales and marketing expense within the condensed consolidated statement of operations. As of September 30, 2019, short-term and long-term unamortized deferred compensation were $3 and $8, which are included in “Prepaid and other current assets” and “Other Assets,” respectively, on the condensed consolidated balance sheets.

Deferred Revenue (Remaining Performance Obligations)

The aggregate balance of remaining performance obligations represents contracted revenue that has not yet been recognized primarily from ARTAS Care extended warranty service contracts, product training and marketing services not yet rendered to customers.

	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Balance at the beginning of the period	$	1,535		$	1,661
Additions		652			1,658
Recognition of deferred revenue		(585	)		(1,717	)
Balance at the end of the period	$	1,602		$	1,602
Less: Deferred revenue - current	$	1,346		$	1,346
Deferred revenue - non-current (A)	$	256		$	256

(A) Included in “Other long-term liabilities” on the condensed consolidated balance sheets as of September 30, 2019.

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Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

The following tables provide information about disaggregated revenue from contracts with customers into geographic regions, and the nature of the products and services:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	1,405	$	3,856	$	6,613	$	8,712
Europe and Middle East *		1,382		362		2,819		2,323
Asia Pacific		196		553		1,291		3,213
Rest of World		324		47		909		1,050
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

* No individual country is greater than 10% of revenue

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Systems	$	1,862	$	3,040	$	6,549	$	7,571
Procedure-based		935		1,280		3,640		6,150
Service-related fees		510		498		1,443		1,577
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

4. NET LOSS PER SHARE

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares 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 share equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, convertible preferred stock, preferred stock warrants and stock options are common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the common stock equivalents in the table below. The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	As of September 30,
	2019		2018
Options to purchase common stock		221,941		135,126
Restricted stock awards		6,000		—
Warrants for common stock		18,147		31,212
Total potential dilutive shares		246,088		166,338

5. FAIRVALUEMEASUREMENTS

Cash and cashequivalents,restrictedcash,accountsreceivable,accountspayable,and accruedliabilities approximatefairmarketvaluebecauseof theshort-termnatureof thoseinstruments. The Company’s Term Loan with Solar and Convertible Promissory Notes (both discussed further in Note 8) have fair values that approximate their carrying value.

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U.S. GAAP establishes a framework for measuring fair value and a fair value hierarchy based on the inputs used to measure fair value. This framework maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It applies to both items recognized and reported at fair value in the condensed consolidated financial statements and items disclosed at fair value in the notes to the condensed consolidated financial statements.

Observableinputsareinputsthatmarketparticipantswould use in pricingtheassetor liabilitybasedon marketdataobtainedfromindependentsources.Unobservableinputsreflectassumptionsthatmarket participantswould use in pricingtheassetor liabilitybasedon thebestinformationavailablein the circumstances.The hierarchyisbrokendown intothreelevelsbasedon thetransparencyof inputsas follows:

Level1 - Quoted pricesareavailablein activemarketsforidenticalassetsor liabilitiesas of thereport date.A quotedpriceforan identicalassetor liabilityin an activemarketprovidesthemostreliablefair valuemeasurementbecauseitisdirectlyobservableto themarket.

Level2 - Pricinginputsareotherthanquotedpricesin activemarkets,which areeitherdirectlyor indirectlyobservableas of thereportdate.The natureof thesesecuritiesincludesinvestmentsforwhich quotedpricesareavailablebut tradedlessfrequentlyand investmentsthatarefairvaluedusingother securities,theparametersof which can be directlyobserved.

Level3 - Securitiesthathave littleto no pricingobservabilityas of thereportdate.These securitiesare measuredusingmanagement’sbestestimateof fairvalue,where theinputsintothedeterminationof fair valuearenot observableand requiresignificantmanagementjudgmentor estimation.

A financialinstrument’slevelwithinthefairvaluehierarchyisbasedon thelowestlevelof any inputthatis significantto thefairvaluemeasurement.However, thedeterminationof what constitutes“observable” requiressignificantjudgmentby theCompany. The categorizationof a financialinstrumentwithinthe hierarchyisbasedupon thepricingtransparencyof theinstrumentand does not necessarilycorrespondto theCompany’sperceivedriskof thatinstrument.

The followingtablessummarizethelevelsof fairvaluemeasurementsof theCompany’scashequivalents:

	Fair Value Measurements as of September 30, 2019
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash Equivalents:
Money market account	$	8,048	$	—	$	—	$	8,048
Restricted cash:
Money market account		83		—		—		83
Total assets	$	8,131	$	—	$	—	$	8,131

	Fair Value Measurements as of December 31, 2018
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash Equivalents:
Money market account	$	13,968	$	—	$	—	$	13,968
Restricted cash:
Money market account		83		—		—		83
Total assets	$	14,051	$	—	$	—	$	14,051

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6. BALANCESHEETCOMPONENTS

Inventory

Inventoryconsistsof thefollowing:

	September 30,		December 31,
	2019		2018
Raw materials	$	2,417	$	2,464
Work-in-process		225		323
Finished goods		2,981		2,735
Total inventory	$	5,623	$	5,522

Propertyand Equipment,Net

Propertyand equipment,netconsistof thefollowing:

	September 30,			December 31,
	2019			2018
Equipment	$	4,028		$	3,531
Computer hardware and software		927			901
Leasehold improvements		874			874
Furniture and fixtures		483			457
Total property and equipment		6,312			5,763
Less: Accumulated depreciation and amortization		(4,989	)		(4,464	)
Total property and equipment, net	$	1,323		$	1,299

Depreciation and amortization expense were $220 and $524 for three and nine months ended September 30, 2019, respectively. Depreciation and amortization expense were $268 and $539 for the three and nine months ended September 30, 2018, respectively.

7. COMMITMENTSANDCONTINGENCIES

OperatingLeases

The Company has various operating leases including 23,000 square feet of office space and 2,500 square feet of manufacturing space in San Jose, California. The office space lease expires in April 2022. The Company’s manufacturing space lease expired in April 2019 and is now on a month-to-month lease arrangement.

Aggregate future minimum lease payments required under the Company’s operating leases as of September 30, 2019 are as follows:

Years Ending December 31,
2019 (remaining 3 months)	$	131
2020		534
2021		550
2022		188
Total future minimum lease payments	$	1,403

Total rent expense was $161 and $481 for three and nine months ended September 30, 2019, respectively. Total rent expense was $163 and $401 for the three and nine months ended September 30, 2018, respectively.

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Commitments

The Company has two master agreements and a component pricing agreement with Evolve Manufacturing Technologies, Inc. (Evolve) for the supply of the ARTAS^® System and consumable products. The terms of these master agreements are substantially similar. The master agreement for the sale of ARTAS^® Systems was effective beginning on April 1, 2016 and the master agreement for the sale of kits used with the ARTAS System was effective beginning on March 1, 2016. Both agreements are 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. Under the agreements, the Company has future purchase commitments up to $285 as of September 30, 2019.

In March 2018, the Company received U.S. FDA 510(k) clearance to expand the ARTAS^® System technology to include an implantation functionality, referred to as ARTAS^® iX. Based on manufacturing changes associated with the ARTAS^® iX System, the Company determined that certain components procured or expected to be procured by Evolve, will be in excess of expected demand or usage based on the advance notice the Company provided to Evolve under the term of the agreement mentioned above. Additionally, in the fourth quarter of 2018, the Company recorded a $188 charge related to other excess purchase commitments from another vendor based on cost reduction changes in 2019. Although the Company will be taking steps to minimize the adverse impact on the Company’s business, based on information available as of September 30, 2019, the Company’s management recorded a loss contingency accrual of $473 which is included in “Other accrued liabilities” on the condensed consolidated balance sheets as of September 30, 2019.

LicensingAgreements

In July 2006, the Company entered into a license agreement with Rassman Licensing, LLC (Rassman) for non-exclusive, royalty bearing, non-transferable, perpetual, world-wide rights for use on approved fields relating to robotically controlled hair removal and implantation procedures. In consideration for this license, the Company paid Rassman a one-time payment of $1,000. The agreement terminates on May 9, 2020. In February 2012, the Company amended its license agreement with Rassman. In exchange for a one-time $400 payment to Rassman, the Company now has a fully paid royalty-free perpetual license to a patent subject to this license agreement.

In July 2006, the Company entered into a license agreement with HSC Development, LLC for exclusive non-transferable, royalty-free worldwide rights for use in approved fields relating to a computer-controlled system in which a device is carried on a mechanized arm for extraction or implantation of a follicular unit without manual manipulation. In consideration for this license, the Company paid HSC Development, LLC a one-time payment of $25 and issued 2,500 shares of the Company’s common stock. The agreement terminates on July 27, 2024.

Legal Proceedings

From time to time the Company is involved in litigation arising out of claims in the normal course of business. Based on the information presently available, management believes that there are no claims or actions pending or threatened against the Company, the ultimate resolution of which will have a material effect on the Company’s financial position, liquidity or results of operations, although the results of litigation are inherently uncertain.

Purported Shareholder Class Action

On May 23, 2018, a putative shareholder class action complaint was filed in Superior Court of the State of California, County of San Mateo (the Superior Court), captioned Wong v. Restoration Robotics, Inc., et al., No. 18CIV02609. On June 21, 2018 and June 28, 2018, two putative class action complaints were filed in the United States District Court for the Northern District of California, captioned 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, respectively. On July 24, 2018, the U.S. Northern District Court related the Guerrini and Yzeiraj actions and reassigned the Yzeiraj action to Judge Edward J. Davila. The Wong and Guerrini complaints name the Company as defendants, and certain of its current and former executive officers and directors, certain of its venture capital investors and the underwriters in the Company’s IPO. The Yzeiraj complaint names the Company as defendants and certain of its current and former executive officers and directors. The Wong complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act. The Guerrini and Yzeiraj complaints assert claims under Sections 11 and 15 of the Securities Act. The complaints all allege, among other things, that the Company’s 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 Company’s 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 addition, on June 11, 2019, a putative shareholder class action complaint was filed in Superior Court of the State of California, County of San Mateo, captioned Li v. Restoration Robotics, Inc., et al., No. 19CIV08173. The Li complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act and is based on the same set of facts as the Wong complaint. The Li complaint seeks unspecified monetary damages, other equitable relief and attorneys’ fees and costs.

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On August 8, 2018, the Company, along with certain of its current and former executive officers and directors, filed a motion to dismiss the Wong complaint based on the forum selection clause designating the federal district courts as the exclusive forum for claims arising under the Securities Act contained in the Company’s Amended and Restated Certificate of Incorporation, and which asked the court in the alternative to stay the Wong action. Also, on August 8, 2018, the venture capital investor and underwriters’ defendants in the Wong action filed demurrers to the Wong complaint, and the Company, along with certain of its current and former executive officers and directors, joined in the venture capital investor defendants’ demurrer. A hearing on the Company’s motion to dismiss and the demurrers to the Wong complaint was held on October 24, 2018.On October 25, 2018, the Court ordered the defendants’ demurrers to the complaint sustained with leave to amend and granted an extension of time for plaintiff to serve a First Amended Complaint until further order of the Court. On January 31, 2019, the Court stayed the case and stayed any decision on the Company’s motion to dismiss on forum selection grounds pending resolution of an appeal of Sciabacucchi v. Salzberg, a case addressing similar issues in Delaware. On August 12, 2019, the Court consolidated the Wong and Li actions, and lifted the stay imposed on January 31, 2019 to allow further briefing on the Company’s motion to dismiss.A further hearing on the motion to dismiss was held on September 17, 2019.

On October 2, 2018, the U.S. Northern District Court granted a Motion for Consolidation of Related Actions, Appointment as Lead Plaintiff and Approval of Lead Counsel filed by Plaintiff Edgardo Guerrini, which consolidated the Guerrini and Yzeiraj actions under the caption In re Restoration Robotics, Inc. Securities Litigation, Case No. 5:18-cv-03712-EJD. On November 30, 2018, Lead Plaintiff Edgardo Guerrini filed a Consolidated Amended Complaint for violations of federal securities laws asserting the same claims, against the same defendants, as his original complaint but adding certain allegations in support of those claims. On January 29, 2019, the Company, along with certain of its current and former executive officers and directors, filed a motion to dismiss the Consolidated Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The venture capital defendants and underwriter defendants filed joinders to the Company’s motion to dismiss on the same day. On October 18, 2019, the District Court granted in part and denied in part the Company’s motion to dismiss.

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 current and former executive officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the Securities Exchange Act of 1934 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 related the Mason action with the federal class action, In re Restoration Robotics, Inc. Sec. Litig., and reassigned the Mason action to Judge Edward J. Davila. Also, on August 21, 2019, the District Court granted the parties’ joint stipulation to stay the Mason action during the pendency of the federal class action, In re Restoration Robotics, Inc. Sec. Litig., No. 5:18-cv-03712-EJD.

On September 24, 2019, a complaint was filed in the United States District Court for the Northern District of California, captioned Bushansky v. Restoration Robotics, Inc., et al., No. 5:19-cv-06004-MMC. The complaint alleges, among other things, that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 14d-9. The complaint alleges that the proxy statement filed with the United States Securities and Exchange Commission by Restoration Robotics on September 10, 2019 in connection with the proposed transaction whereby Restoration Robotics would merge with Venus Concept Ltd. omitted or misrepresented material information. The complaint seeks, 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 Company believes that these lawsuits are without merit and management intends to vigorously defend against these claims.

8. LONG-TERMDEBT

Issuance of Unsecured Subordinated Promissory Notes

In connection with the Convertible Note Financing, on June 25, 2019, the Company entered into a $2,500 Unsecured Subordinated Promissory Note, which funded on July 5, 2019, with Venus Concept USA Inc., a wholly owned subsidiary of Venus. On August 14, 2019, the Company entered into another $2,500 Unsecured Subordinated Promissory Note funded in three tranches A and B of $1,000 each and tranche C of $500 with Venus Concept USA Inc., a wholly owned subsidiary of Venus, collectively (the Subordinated Notes). Tranches A and B were funded on August 27, 2019 and September 25, 2019, respectively for a total of $2,000. The maturity date of the Subordinated Notes is November 30, 2019. The Subordinated Notes bear interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Notes, the Subordinated Notes shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable under thereunder. The Subordinated Notes are unsecured and subordinate in priority to the Company’s existing obligations to Solar Capital, Ltd. under its amended loan and security agreement.

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Issuance of Related Party Convertible Promissory Notes

On February 28, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $5,000 through the issuance of two unsecured subordinated convertible promissory notes (the Notes) to Frederic Moll, M.D., one of the Company’s directors, and Interwest Partners IX, LP, one of the Company’s stockholders affiliated with Gil Kliman, M.D., one of the Company’s directors (together, the Investors). The Note Purchase Agreement was amended on August 20, 2019 to adjust the post-merger conversion price for per share from $0.825 to $0.4664 and to convert the Notes upon consummation of the Merger.

In addition, on August 20, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $2,000 through the issuance of one unsecured subordinated convertible promissory note to Frederic Moll, M.D. The maturity date of the Notes is August 28, 2020 (the Maturity Date). The Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Notes are unsecured and subordinate in priority to the Company’s existing obligations under the Solar Agreement.

All of the outstanding principal and unpaid accrued interest on the Notes will automatically be converted into shares of the same class and series of capital stock of the Company issued to other investors upon consummation of the Merger, into the number of fully paid and non-assessable shares of the Company’s common stock, par value $0.0001 per share, of Restoration Robotics (the “Common Stock”), calculated by dividing the outstanding principal amount of this Note (and any accrued and unpaid interest under this Note) by the Post-Merger Conversion Price then in effect. The initial Post-Merger Conversion Price is $0.4664 per share, subject to adjustment for any stock split. Upon the occurrence of certain events of default or the Maturity Date, the Notes require the Company to repay the principal amount of the Notes and any unpaid accrued interest. Issuance costs associated with the Notes were not significant and accrued interest of $259 through September 30, 2019 is reported in “Other Accrued Liabilities” on the condensed consolidated balance sheets.

Loan and Security Agreement

In May 2018, the Company entered into a Loan and Security Agreement and as subsequently amended (the Solar Agreement) with Solar Capital Ltd. (Solar) and certain other lenders thereunder (together with Solar, the Lenders), and Solar, as the Collateral Agent. The Solar Agreement consists of a four-year term loan for an aggregate principal amount of $20,000 (the Borrowings), for working capital, to fund the Company’s general business requirements and to repay indebtedness of the Company to Oxford Finance LLC (the Oxford Agreement). The Company used $10,085 of the loan proceeds to repay the outstanding principal of $8,667, a final payment fee of $1,300 plus accrued interest and prepayment fees of $118 under the Oxford Agreement. The Borrowings under the Solar Agreement bear interest through maturity at a rate equal to the U.S. Dollar LIBOR rate plus 7.95% per annum (the Interest Rate). The outstanding balance on the loan was $20,000 and accrued interest totaled $167 as of September 30, 2019. The Interest Rate was 10.1% at September 30, 2019.

Pursuant to the terms of the Solar Agreement, the Company shall make interest only payments until December 1, 2019 (the Interest Only Period). The Interest Only Period may be extended up to three additional months, if the Company achieves certain revenue and capital fundraising thresholds. Following cessation of the Interest Only Period, the Company shall make equal monthly payments on the outstanding principal balance of the Borrowings and any unpaid and accrued interest such that the Borrowings shall be fully repaid on May 1, 2022.

In addition, pursuant to the Solar Agreement, the Company issued the Lenders warrants (the Warrants) to purchase an aggregate of 161,725 shares of the Company’s common stock, $0.0001 par value per share, at an exercise price of $3.71 per share. The Warrants were immediately exercisable upon issuance, and excluding certain mergers or acquisitions, will expire on the ten-year anniversary of the date of issuance. The fair value of the Warrants issued was determined to be $404 using a Black-Scholes valuation model with the following assumptions: common stock price at issuance of $3.71 per share; exercise price of $3.71; risk-free interest rate of 2.97% based upon observed risk-free interest rates; expected volatility of 55.50% based on the Company’s implied volatility; expected term of ten years, which is the contractual life of the Warrants; and a dividend yield of 0%. The fair value of the Warrants was recorded as a debt discount within notes payable and an increase to additional paid-in capital on the Company’s condensed consolidated balance sheets. The debt discount is being amortized as interest expense over the term of the Solar Agreement, using the effective interest method.

The third-party transaction costs (not paid directly to the lenders) related to the debt of $404 are accounted for as a debt discount and classified within notes payable on the Company’s condensed consolidated balance sheets and amortized as interest expense over the term of the loan using the effective interest method.Unamortized debt discounts related to the Oxford Agreement and all fees paid directly to Solar and Oxford totaling $505 in connection with the debt financing in May 2018 were written off to “Other income (expense), net” in the condensed consolidated statements of operations.

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The obligations under the Solar Agreement are secured by a lien on substantially all the Company’s property. The Solar Agreement contains certain affirmative covenants, negative covenants and events of default, including, covenants and restrictions that among other things, require the Company and its subsidiary to satisfy certain financial covenants including covenants requiring the Company to satisfy certain revenue and liquidity thresholds, and restricts the ability of the Company and its subsidiary’s ability to, incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock. A failure to comply with these covenants could permit the Lenders under the Solar Agreement to declare the Borrowings, together with accrued but unpaid interest and certain Prepayment Fees, to be immediately due and payable. On November2, 2018, the Solar Agreement was amended to modify the compliance requirement for certain revenue and liquidity thresholds. As part of this amendment, the Company paid a fee of $50 to the Lenders and cancelled 161,725 Warrants (originally issued in May 2018, as mentioned above) and issued 161,725 new warrants of the Company’s common stock, $0.0001 par value per share, at an exercise price of $1.76 per share. All other terms of the Warrants were unchanged.

On February 13, 2019, the Company entered into a Third Amendment to the Loan and Security Agreement (the Third Amendment), which amended the Solar Agreement with the Lenders. Pursuant to the terms of the Third Amendment, the Solar Agreement was amended to modify the compliance requirement for certain liquidity thresholds to provide the Company with additional flexibility. As part of the Third Amendment, the Final Fee (as defined in the Solar Agreement) that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $130 to $960. In addition, the Solar Agreement was amended to include certain additional changes to covenants covering certain operational milestones. On June 14, 2019, the Company entered into a Fourth Amendment to the Solar Agreement, which modified the compliance requirement for certain liquidity thresholds. As part of the Fourth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $150 to $1,110, and the Solar Agreement was also amended to include a new covenant covering certain equity financing milestones. In August 2019, the Company entered into a Fifth Amendment to the Solar Agreement, which modified the compliance requirement for certain revenue thresholds and included a new covenant covering certain equity financing milestones. As part of the Fifth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $200 to $1,310. In October 2019, the Company entered into a Sixth Amendment to the Solar Agreement, which modified the drop dead date for the Merger from October 31, 2019 to November 15, 2019. As of September 30, 2019, the Company was in compliance with all covenants under the Solar Agreement, as amended.

The Company is also required to make mandatory prepayments of the Borrowings, subject to specified exceptions, upon defaulting on any payments of principal or interest on the Borrowings, the occurrence of certain specified defaults of the covenants in the Solar Agreement, the occurrence of a material adverse change in the business, operations or conditions of the Company and specified other events (each, an Event of Default). Upon the occurrence and continuation of an Event of Default, the Borrowings shall accrue at the Interest Rate plus 4.0%.

If all or any of the Borrowings are prepaid or required to be prepaid under the Solar Agreement, then the Company shall pay, in addition to such prepayment, a prepayment premium (the Prepayment Premium) equal to (i) with respect to any such prepayment paid on or prior to May 1, 2019, 3.0% of the principal amount of the Borrowings being prepaid, (ii) with respect to any prepayments paid after May 1, 2019 but on or prior to May 1, 2020, 2.0% of the principal amount of the Borrowings being prepaid and (iii) with respect to any prepayments paid after May 1, 2020 but on or prior to May 1, 2021, 1.0% of the principal amount of the Borrowings being prepaid. Notwithstanding the foregoing, if the Lenders each participate in a refinancing of the Borrowings, then the Prepayment Premium shall be 0%.

The scheduled principal payments on the outstanding borrowings as of September 30, 2019 are as follows:

	As of September 30, 2019
	Solar Debt			Related Party Convertible Promissory Notes			Unsecured Subordinated Promissory Notes			Total
2019 (remaining 3 months)	$	667		$	—		$	4,500		$	5,167
2020		8,000			7,000			—			15,000
2021		8,000			—			—			8,000
2022		4,643			—			—			4,643
2023		—			—			—			—
Total		21,310			7,000			4,500			32,810
Less: debt discount		(1,274	)		—			—			(1,274	)
Less: current portion		(5,878	)		(7,000	)		(4,500	)		(17,378	)
Non-current portion	$	14,158		$	—		$	—		$	14,158

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9. COMMON STOCK RESERVEDFOR ISSUANCE

The Company isrequiredto reserveand keep availableout of itsauthorizedbut unissuedsharesof common stocka numberof sharessufficientto affecttheconversionof alloutstanding common stock warrants, plusoptionsgrantedand availableforgrantundertheincentiveplans. Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the common stock equivalents in the table below.

	September 30,		December 31,
	2019		2018
Outstanding common stock warrants		18,147		18,147
Outstanding and issued stock options		221,941		265,962
Outstanding restricted stock units		66,667		—
Shares reserved for future option grants		101,732		29,150
Total common stock reserved for issuance		408,487		313,259

10. STOCK OPTION PLAN

2005 and 2015 Plans

The Company granted incentive stock options (ISOs) and non-statutory stock options (NSOs) pursuant to its 2005 Stock Option Plan (the 2005 Plan) until the Board of Directors approved the 2015 Stock Option Plan (the 2015 Plan), and all remaining shares available for future award under the 2005 Plan were transferred to the 2015 Plan and the 2005 Plan was terminated. The Company granted ISOs and NSOs pursuant to its 2015 Plan until the 2017 Equity Incentive Plan (the 2017 Plan) was approved by the Board of Directors and became effective on October 11, 2017. As a result of the 2017 Plan becoming effective, all remaining shares available for future award under the 2015 Plan were transferred to the 2017 Plan, the 2015 Plan was terminated, and no further grants will be made under the Company’s 2005 Plan and the 2015 Plan. Any outstanding stock awards granted under the 2005 Plan and the 2015 Plan will remain outstanding, subject to the terms of the Company’s 2005 Plan and 2015 Plan and the applicable stock award agreements, until such outstanding stock awards that are stock options are exercised or until they terminate or expire by their terms, or until such stock awards are fully settled, terminated or forfeited.

2017 Plan

The Company’s 2017 Plan provides for the grant of ISOs, NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of equity compensation to employees, directors and consultants. In addition, the Company’s 2017 Plan provides for the grant of performance cash awards to employees, directors and consultants.

The Company recognizedstock-basedcompensationforitsemployeesand non-employeesin the accompanyingconsolidatedstatementsof operationsas follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of revenue	$	11	$	6	$	31	$	14
Sales and marketing		158		31		427		77
Research and development		27		11		78		39
General and administrative		159		119		537		289
Total stock-based compensation	$	355	$	167	$	1,073	$	419

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Stock Options

The fair value of each option is estimated at the date of grant using the Black-Scholes-Merton option pricing model, based on the following assumptions:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019	2018
Expected term (years)		—		6.0	5.1	5.37 - 6.10
Risk-free interest rate		—	2.82%		2.65%	2.40 - 2.82%
Expected volatility		—	53.87%		60.00%	53.72 - 55.49%
Dividend yield		—	0%		0%	0%

The Company did not grant any options in the three months ended September 30, 2019.

Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the outstanding stock options in the table below. The following table summarizes stock option activity under the Company’s stock option plan:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise Price		Contractual		Intrinsic
	Shares			per Share		Term		Value
Outstanding — December 31, 2018		265,962		$	1.95		8.7	$	—
Options granted		2,200			0.96
Options cancelled		(46,221	)		1.68
Outstanding — September 30, 2019		221,941		$	1.99		7.4	$	—
Vested and expected to vest —    September 30, 2019		207,893		$	2.00		7.3	$	—
Exercisable — September 30, 2019		117,524		$	2.02		7.0	$	—

The weighted-average grant date fair value of options granted was $0.44 per share for nine months ended September 30, 2019.

No options were exercised for the three and nine months ended September 30, 2019. The total intrinsic value of options exercised was $92 and $413 for the three and nine months ended September 30, 2018, respectively.

Unamortized stock-based compensation was $1,607 as of September 30, 2019, which is expected to be recognized over a weighted-average period of approximately 2.48 years.

Restricted Stock Awards

The Company’s Board of Directors appointed Keith Sullivan, a current Board member of the Company, as interim Chief Commercial Officer, effective November 1, 2018, and for a period up to one year. Under the terms of the arrangement, Mr. Sullivan was granted 360,000 restricted stock awards, which shall vest in quarterly installments equal to 25% of the shares starting with the first vest date on January 15, 2019 so long as Mr. Sullivan is providing services. As of September 30, 2019, the Company had no unrecognized compensation expense. The aggregate intrinsic value of the RSAs outstanding was $58.

Restricted Stock Units

On February 27, 2019, the Company’s Board of Directors granted our Chief Financial Officer and interim Chief Commercial Officer each 500,000 restricted stock units that will vest contingent on the closing of the merger of the Company with Venus (as discussed in Note 1). During the three and nine months ended September 30, 2019, no stock-based compensation expense was recorded.

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11. INCOME TAXES

The Company generated a loss for the three and nine months ended September 30, 2019 and incurred $9 and $33 of tax expense for the three and nine months ended September 30, 2019, respectively. The Company’s effective tax rate is (0.10)% and (0.14)% for income tax for the three and nine months ended September 30, 2019, respectively and the Company expects that its effective tax rate for the full year 2019 will be (0.17)%. Based on available evidence, including cumulative losses since inception and expected future losses, the Company has determined that it is more likely than not that the Company’s U.S. federal, U.S. state and Korea deferred tax assets will not be realized and therefore a valuation allowance has been provided on these net deferred tax assets.

The Company has substantial net operating loss carry forwards available to offset future taxable income for U.S. federal and state income tax purposes. The Company’s ability to utilize its net operating losses may be limited due to changes in its ownership as defined by Section 382 of the Internal Revenue Code (the Code). Under the provisions of Sections 382 and 383 of the Code, a change of control, as defined in the Code, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes that can be used to reduce future tax liabilities.

The Company files tax returns for U.S. federal and state tax returns along with tax returns in the United Kingdom, Hong Kong, Spain and South Korea. The Company is not currently subject to any income tax examinations. Since the Company’s inception, the Company had incurred losses from its U.S. operations, which generally allows all tax years to remain open.

Beginning in first quarter of 2018, the Company is subject to new provisions of the tax law, including provisions related to Global Low Taxed Intangible Income (GILTI), Foreign Derived Intangible Income deductions (FDII), and other changes. However, due to the Company’s losses and full valuation allowance in the U.S., these were determined to have no material impact to the Estimated Annual Effective Tax Rate due to the full Valuation Allowance in the U.S.

Uncertain Tax Positions

Accounting Standards Codification 740-10 requires that the Company recognize the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. The gross amount of unrecognized tax benefits as of September 30, 2019 is approximately $1,540 and related to the reserve on R&D credits, none of which will affect the effective tax rate if recognized due to the valuation allowance. The Company does not expect any material changes in the next 12 months in unrecognized tax benefits.

The Company recognizes interest and/or penalties related to uncertain tax positions. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected in the period that such determination is made. The interest and penalties are recognized as other expense and not tax expense. The Company currently has no interest and penalties related to uncertain tax positions.

12. SUBSEQUENT EVENTS

Merger with Venus

The Company (formerly named Restoration Robotics, Inc.), completed its business combination with Venus, 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 (“Merger Agreement”), by and among the Company, Venus 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, with Venus surviving as a wholly owned subsidiary of the Company (“Merger”). The Merger became effective on November 7, 2019.

At the effective time of the Merger, each outstanding ordinary and preferred share of Venus, nominal value of New Israeli Shekels 0.001 each (a “Venus Share”), other than shares held by Venus as treasury stock or held by the Company or Merger Sub, were converted into the right to receive 8.6506 (the “Exchange Ratio”) validly issued, fully paid and non-assessable shares of Common Stock (a “Company Share”), and (ii) each outstanding Venus stock option and warrant was assumed by the Company and converted into and become an option or warrant (as applicable) exercisable for Company Shares with the number and exercise price adjusted by the Exchange Ratio. An aggregate of approximately 212.5 million shares of Common Stock was issued to the Venus shareholders in the Merger on a pre-split basis, which does not include approximately 49.6 million shares underlying outstanding options and warrants. Immediately after the effective time of the Merger, and after giving effect to the conversion of all Venus convertible notes and Restoration Robotics convertible notes and the issuance of Common Stock and Warrants in the Concurrent Financing (defined below), there were approximately 29,667,622 million shares of Common Stock outstanding.

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Immediately following the effective time of the Merger, the Company effected a 15-for-1 reverse stock split of the common stock (“Reverse Stock Split”) and the Company changed its corporate name from “Restoration Robotics, Inc.” to “Venus Concept Inc.” (“Name Change”), and the business conducted by Venus became the primary business conducted by the Company. The Merger, the Reverse Stock Split and the Name Change were approved by the Company’s stockholders at an annual meeting of its stockholders held on October 4, 2019.

The issuance of the shares of Common Stock to the former shareholders of Venus was registered with the SEC on a registration statement on Form S-4 (Reg. No. 333-232000), which was declared effective on September 10, 2019. The Merger and additional related proposals were submitted to a vote of the Company’s stockholders pursuant to a proxy statement/prospectus statement dated September 10, 2019.

The shares of Common Stock listed on the Nasdaq Global Market traded through the close of business on November 7, 2019 under the ticker symbol “HAIR” and commenced trading on the Nasdaq Global Market under the ticker symbol “VERO” on a post-Reverse Stock Split basis on November 8, 2019.This acquisition will be accounted for as a business combination, and the assets and liabilities will be recorded as of the acquisition date at their respective fair values.

On November 3, 2019, Venus Concept Inc., a Delaware corporation, (formerly known as Restoration Robotics, Inc.) and Venus Concept Ltd., a company organized under the laws of Israel, entered into a securities purchase agreement with certain investors named therein (collectively, the “Investors”) pursuant to which the Company agreed to issue and sell to the Investors in a private placement an aggregate of approximately 112,000 shares of the Company’s common stock, par value $0.0001 per share and warrants to purchase up to an aggregate of approximately 56,000 shares of the Company’s common stock at an exercise price of $6.00 per share immediately following the closing of the Merger (the Concurrent Financing).

The impact of the business combination is not reflected in our unaudited condensed consolidated financial statements as of and for the period ended September 30, 2019, or in these corresponding notes, except for recapitalization of the Company’s common stock. Through September 30, 2019, merger-related expenses associated with this transaction were $4.1 million. We are in the process of completing the allocation of fair value to the assets and liabilities and pro-forma results of operations for this business combination.

Loan and Security Agreement

On November 5, 2019, the Company entered into a Sixth Amendment to the Loan and Security Agreement (the “Sixth Amendment”), which amended its Loan and Security Agreement entered into as of May 10, 2018 (the “Loan Agreement”) with Solar Capital Ltd. (Solar) and certain other lenders (together, the “Lenders”) under the Loan Agreement.

Pursuant to the terms of the Sixth Amendment, the Loan Agreement was amended to modify the date by when the Company shall provide evidence of aggregate unrestricted net cash proceeds from a sale of stock or pursuant to equity financings or issuance of debt, and the date upon which the Company should maintain a certain level of liquidity, to the earlier of (i) November 15, 2019 or (ii) the termination of the Agreement and Plan of Merger, by and between the Company and Venus Concept Ltd., dated March 15, 2019, as amended, prior to the consummation of the merger described therein.

On November 7, 2019, in connection with the Merger, the Company paid off and terminated its obligations under its Loan Agreement with Solar and the Lenders. The payoff to Solar and the Lenders pursuant to the Loan Agreement consisted of cash and warrants to purchase up to 50,000 shares of Common Stock, post Reverse Stock Split, at an exercise price of $6.00 per share.

Reverse Stock Split

Immediately following the Merger, the Company effected a reverse stock split of 15-for-1 of its common stock. The reverse stock split was retrospectively applied to the number of shares outstanding and used to calculate loss per share in the condensed consolidated balance sheets, statements of operations, statements of stockholders’ equity (deficit) and accompanying notes.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the SEC) and other filings we have made with the SEC.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Form 10-Q and in our other SEC filings, including the Prospectus. You should review the risk factors for a more complete understanding of the risks associated with an investment in our securities. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q. Our fiscal year end is December 31, and references throughout this Quarterly Report on Form 10-Q to a given fiscal year are to the twelve months ended on that date.

Overview

We are a medical technology company developing and commercializing a robotic device, the ARTAS^® System, which assists physicians in performing many of the repetitive tasks that are a part of a follicular unit extraction, or FUE surgery, a type of hair restoration procedure. We believe the ARTAS^® System is the first and only physician assisted robotic system that can identify and dissect hair follicular units directly from the scalp, create recipient implant sites and robotically implant the hair follicles into the implant sites. In addition to the ARTAS^® System, we also offer the ARTAS Hair Studio application, an interactive three-dimensional patient consultation tool that enables a physician to create a simulated hair transplant model for use in patient consultations. We received clearance from the U.S. Food and Drug Administration, or FDA, in April 2011 to market the ARTAS^® System in the U.S., and we have sold the ARTAS^® System into 37 other countries. In March 2018, we received 510(k) clearance from the FDA to expand the ARTAS^® technology to include implantation. In the third quarter of 2018, we commercially launched the next generation ARTAS^® System, called ARTAS^® iX System, which incorporates the implantation functionality as well as other functionalities. As of September 30, 2019, the ARTAS^® System and ARTAS Hair Studio application are protected by over 80 patents in the U.S. and over 110 international patents.

Merger with Venus

On March 15, 2019, we entered into the Merger Agreement (the Merger Agreement) with Venus Concept Ltd. (Venus) to combine the companies in an all-stock transaction (the Merger). The Merger Agreement and the Merger have been approved by our board of directors and the board of directors of Venus. The transaction was approved by our stockholders and the stockholders of Venus and is expected to close on or before November 15, 2019, subject to all necessary regulatory approvals.

On August 14, 2019, the Company, Radiant Merger Sub Ltd. and Venus entered into the First Amendment to the Merger Agreement (the “Merger Agreement Amendment”). The Merger Agreement Amendment, among other things, adds as a condition to closing the Merger the satisfaction of the following: (i) Venus must have raised cash proceeds in one or more issuances of common equity interests or convertible bond indebtedness of Venus or the Company, in an aggregate amount of at least $20.0 million (exclusive of any investment by Madryn Health Partners, LP (Venus’ lender) not later than the close of business on the closing date of the Merger and (ii) Venus and the other loan parties to the credit agreement by and among Venus, such parties and the Madryn entities, must have unrestricted cash of at least $20.0 million immediately after giving effect to the transactions contemplated by the Merger Agreement.

Under the terms of the transaction, the Company and Venus shareholders will own approximately 15% and 85% of the combined company, respectively, on a fully diluted basis, without giving effect to the shares issued in the proposed equity commitment letter dated March 15, 2019 that is expected to close immediately after the merger (the Equity Commitment Letter). EW Healthcare Partners has committed to lead a $21.0 million equity investment, priced at $0.4664 per share (subject to adjustment for stock splits), in the combined company’s common stock contingent on the closing of the Merger. Additional investors committed to participating in the proposed equity financing include HealthQuest Capital, Madryn Asset Management, Longitude Capital Management, Fred Moll and Aperture Venture Partners. On August 14, 2019, the Company, Venus and the investors party to the Equity Commitment Letter dated

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as of March 15, 2019 entered into the first amendment to the Equity Commitment Letter (the “Equity Commitment Letter Amendment”). Pursuant to the Equity Commitment Letter Amendment, the investors agreed to amend the Equity Commitment Letter to “pull forward” their maximum committed amounts such that the $21.0 million committed under the Equity Commitment Letter would be invested on or prior to August 30, 2019 in Venus Concept convertible promissory notes which will be convertible into shares of the Company’s common stock immediately following the consummation of the Merger. On August 14, 2019, the equity commitment letter investors purchased an aggregate of $6.9 million in Convertible Notes and on August 21, 2019, certain of the remaining Equity Commitment Letter investors purchased an additional $14.1 million of Convertible Notes.

In addition to the equity financing, Fred Moll and InterWest Partners previously funded a $5.0 million convertible note (the Notes), which will convert into the combined company’s common stock upon the closing of the Merger at a price of $0.4664 per share (subject to adjustment for stock splits). In August 2019, Fred Moll M.D. funded an additional $2.0 million convertible note that will convert into the combined company’s common stock at the closing of the Merger at a price of $0.4664 per share (subject to adjustment for stock splits).

Immediately following the closing of the Merger, we effected a reverse stock split. We had approximately29.7 million shares outstanding after giving effect to the 1-for-15 reverse stock split and after giving effect to the conversion of all Venus convertible notes and Restoration Robotics convertible notes and the issuance of common stock and warrants in the Concurrent Financing.

On November 7, 2019, we completed our merger transaction with Venus and Merger Sub. Upon completion of the Merger, Restoration Robotics was renamed “Venus Concept, Inc.” Concurrent with closing of the Merger, the Company effected a 1-for-15 reverse stock split of the issued and outstanding shares of the Company. The shares of the combined company will trade on the Nasdaq Global Market under the trading symbol “VERO.” See the Current Report on Form 8-K we filed with the SEC on November 7, 2019 for additional information.

Issuance of Convertible Promissory Notes by Venus and Issuance of Subordinated Promissory Note by Restoration Robotics

On June 25, 2019, we entered into a Note Purchase Agreement (the Note Purchase Agreement) with Venus and certain investors named therein pursuant to which Venus sold $7.8 million aggregate principal amount of unsecured senior subordinated convertible promissory notes (the Convertible Notes) to such investors (the Convertible Note Financing). Pursuant to the Note Purchase Agreement, Venus may sell up to $10.0 million of Convertible Notes without further approval of the board of directors of Venus (the Venus Board), and up to an additional $5.0 million of Convertible Notes subject to the approval of the Venus Board. The Convertible Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. Subject to receipt of the approval of the our stockholders to the extent required under the rules of the Nasdaq Stock Market LLC, effective upon the closing of the Merger, all of the outstanding principal and unpaid accrued interest on the Convertible Notes will automatically be converted, in whole, into the number of shares of our common stock at a conversion price of $0.4664 per share.

On August 14, 2019, pursuant to that certain Note Purchase Agreement, dated as of June 25, 2019, with Venus and certain investors named therein pursuant to which Venus sold an additional $7.2 million aggregate principal amount of Convertible Notes to such investors. The Convertible Notes contain the same terms as the $7.8 million aggregate principal amount of Convertible Notes that were sold pursuant to the Note Purchase Agreement on June 25, 2019 and bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Company’s stockholders approved a proposal that effective upon the closing of the Merger, all of the outstanding principal and unpaid accrued interest on the Convertible Notes will automatically be converted, in whole, into the number of shares of common stock, par value $0.0001 per share, of the Company at a conversion price of $0.4664 per share, subject to adjustment as provided in the Convertible Notes.

In connection with the Convertible Note Financing, on June 25, 2019 we also entered into a $2.5 million Unsecured Subordinated Promissory Note, which funded on July 5, 2019, with Venus Concept USA Inc., a wholly owned subsidiary of Venus. In addition, on August 14, 2019, we entered into a $2.5 million Unsecured Subordinated Promissory Note funded in three tranches A and B of $1.0 million each and tranche C of $0.5 million with Venus Concept USA Inc., a wholly owned subsidiary of Venus, collectively (the Subordinated Notes). Tranche A and B were funded on August 27, 2019 and September 25, 2019, respectively, for a total of $2.0 million with tranche C unfunded as of September 30, 2019. The maturity date of the Subordinated Notes is November 30, 2019. The Subordinated Notes bear interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Notes, the Subordinated Notes shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable under thereunder. The Subordinated Notes are unsecured and subordinate in priority to our existing obligations to Solar Capital, Ltd. under its amended loan and security agreement. On November 7, 2019, the outstanding principal amount of the Convertible Notes and any accrued and unpaid interest was converted into shares of common stock.

We have funded our operations to date primarily from the issuance and sale of our common stock in our IPO and subsequent public follow-on offering, private placements of our equity securities and, to a lesser extent, through debt financings, exercises of our

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common stock warrants and payments from our customers. As of September 30, 2019, we had cash and cash equivalents of $8.9 million, which does not include the proceeds from the Subordinated Notes of $0.5 million.

On November 7, 2019, the Convertible Notes were converted into shares of our common stock immediately following the completion of the Merger.

Securities Purchase Agreement

On November 3, 2019, Venus Concept Inc., a Delaware corporation, (formerly known as Restoration Robotics, Inc.) and Venus Concept Ltd., a company organized under the laws of Israel, entered into a securities purchase agreement with certain investors named therein (collectively, the “Investors”) pursuant to which the Company agreed to issue and sell to the Investors in a private placement an aggregate of approximately 112.0 million shares of the Company’s common stock, par value $0.0001 per share and warrants to purchase up to an aggregate of approximately 56.0 million shares of the Company’s common stock at an exercise price of $6.00 per share immediately following the closing of the Merger (the Concurrent Financing).

Loan and Security Agreement

On November 7, 2019, we paid off and terminated our obligations under our Loan Agreement with Solar and the Lenders under the Loan Agreement. The payoff to Solar and the Lenders pursuant to the Loan Agreement consisted of cash and warrants to purchase up to 50,000 shares of Common Stock, post Reverse Stock Split, at an exercise price of $6.00 per share.

Factors Affecting our Results of Operations

We believe there are several important factors that have impacted, and that we expect will impact, our results of operations.

Adoption of the ARTAS^® System

The growth of our business depends on our ability to gain broader acceptance of the ARTAS^® System and, in particular, the latest iteration of our ARTAS System, ARTAS^® iX, as well as the ARTAS procedure by successfully marketing and distributing the ARTAS^® System and the ARTAS procedure. If we are unable to successfully commercialize our ARTAS^® System and the ARTAS procedure, we may not be able to generate sufficient revenue to achieve or sustain profitability. In the near term, we expect we will continue to operate at a loss, and we anticipate we will finance our operations principally through offerings of our capital stock and by incurring debt. If we are unable to raise adequate additional capital, we will be unable to maintain our commercialization efforts and our revenue could decline.

Significant Investment in our Sales and Marketing

We have made certain strategic changes to and investments in our U.S. sales and global marketing organizations, which included terminating certain personnel and hiring new personnel and realigning our reporting and leadership structure in the sales organization. For example, throughout 2018 we were increasing the size of our U.S. sales force by hiring sales professionals with experience selling capital equipment and equipment to physicians in the aesthetic market. In addition, we were investing significantly in our sales and marketing efforts related to the launch of the ARTAS^® iX System. Strategically, we have been focused on our branding and have consolidated our regional marketing teams to standardize our messaging and focus of our marketing spending with an aim to be more efficient and cost-effective. As a result, we have seen a reduction in and improved efficiency of our marketing spending.

We anticipate as we continue to advance the commercialization of the ARTAS^® iX System, our sales and marketing expenses will continue to increase.

Revenue Composition and Trends

The followingtablereflectsrevenue by category:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Systems	$	1,862	$	3,040	$	6,549	$	7,571
Procedure-based		935		1,280		3,640		6,150
Service-related fees		510		498		1,443		1,577
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

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We derive our revenue from the sale and service of ARTAS^®and ARTAS^® iX Systems and procedure-based fees.

• Revenue from systems for the three and nine months ended September 30, 2019 decreased as compared to the same periods in 2018 due to a decrease in the number of ARTAS^® Systems sold. We anticipate U.S. and Europe revenue from systems sold going forward to be primarily from ARTAS iX Systems, while revenue from systems sold outside of these two regions to be primarily from the existing ARTAS Systems until the time, if and when, we receive regulatory approval for the ARTAS^® iX System.

• Revenue from procedure-based fees for the three and nine months end September 30, 2019, decreased as compared to the same periods in 2018. Revenue from procedure-based fees for the three and nine months ended September 30, 2019, decreased at least in part due to the timing of purchases, kits purchased by customers and when these procedure kits are consumed, resulting in fewer procedures performed. Additionally, the trend of the procedure utilization in the third quarter of 2019 was significantly lower than past periods which may have attributed to the fewer procedures purchased by customers.

• Service-related fees did not change significantly for the three and nine months ended September 30, 2019 as compared to the same period in 2018.

Historically, the majority of our revenue and our revenue growth has been generated through system sales. While we would expect our procedure-based fees to increase as our installed base of ARTAS^® and ARTAS^® iX Systems grow worldwide, the total number of procedures has not followed the increase in our installed base of systems sold. For example, our procedure-based revenue decreased for the three and nine months ended September 30, 2019, as compared to the same periods in 2018, whereas our installed base has grown from 2018 to 2019. While procedure-based revenue has decreased, from a year-to-date perspective, more than our revenue from system sales on a combined basis, during the aforementioned periods, we believe that revenue from procedure-based fees may not grow proportionally as compared to the increase in our installed base and that it could vary from quarter-to-quarter due to a number of factors, including:

• physician uptake causing a slow ramp-up to utilizing the ARTAS^® or ARTAS^® iX Systems, which is particularly evident with physicians who are new to hair restoration procedures or physicians who do not operate a solely hair restoration focused practice who are commonly the profile we are targeting;

• capacity limitations with the current installed base of ARTAS^® or ARTAS^® iX Systems, which can result in procedure-based fees not growing as quickly as system sales, as high performing practitioners are limited in the number of procedures that can be performed in any given period;

• limited or no utilization of the ARTAS^® or ARTAS^® iX Systems after purchase because of a change in physician preference or practice; and

• the concentration of ARTAS procedures being performed on a limited number of ARTAS^® and ARTAS^® iX Systems leading to volatility between periods if particular high-volume practitioners perform a smaller number of procedures in a given period.

In order to increase the number of procedures performed per ARTAS^® or ARTAS^® iX System, and in turn increase revenue from procedure-based fees, we have, in connection with the leadership and sales and marketing changes, initiated programs to assist certain physicians in marketing efforts, patient education and practice optimization to increase utilization of the ARTAS^® and ARTAS^® iX Systems. If these efforts are successful, we anticipate that the growth in procedure-based fees will increase and that quarterly fluctuations in the number of total procedures performed will be reduced.

Revenue from Markets Outside the U.S.

Since launching the ARTAS^® System in 2011, we have obtained clearance to sell our products in over 60 countries. In June 2012, we obtained our CE mark to sell our product into the European Economic Area, or EEA. We have sold into 37 countries and sell directly into the U.S., Korea, Hong Kong, Singapore, Spain, Poland, Benelux, Scandinavia, Portugal, the Netherlands and through distributors in the other countries. We obtained clearance to sell in China in September 2016. However, we have not obtained any regulatory approvals or clearances outside of the U.S. and Europe for our implantation functionality.

Revenue from markets outside of the U.S accounted for 43% of our total revenue in the first nine months of 2019, compared to 43% from the same period in 2018. Although we will continue to invest resources outside of the U.S., we anticipate that the strategic shift in our sales strategy towards the U.S. market will impact the revenue mix between the U.S. and non-U.S. markets. In particular, in connection with our newly launched ARTAS^® iX System, which is only cleared for sale in the U.S., our marketing efforts are highly focused on the U.S.

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Internationally, both the ARTAS^®and ARTAS^® iX System unit sales and procedure-based fees decreased in the first ninemonths of 2019 relative to the first ninemonths of 2018. We believe the decline in system sales in the Asia Pacific region was due in part to potential customers delaying their purchase until the ARTAS^® iX System is approved or cleared for use in their region.

While we believe our ARTAS^® iX System, which incorporates a robotic implantation functionality, could have a positive effect on system sales in the U.S. and Europe, as the robotic implantation functionality is approved in the U.S. and the Company received the CE Mark approval for Europe in August 2019. We believe that potential non-U.S. customers of the ARTAS^® iX System may increase purchases of ARTAS^® systems since the implantation functionality is available in their market.

We expect our operating expenses to increase because of increased sales and marketing activity to promote penetration in markets outside the U.S. where we already sell the ARTAS^® System and geographic expansion into new markets.

Factors Affecting Comparability

We anticipate that our quarterly results of operations may fluctuate for the foreseeable future due to several factors, including the performance of our direct sales force and international distributors, the launch of our implantation functionality and the ARTAS^® iX System, and unanticipated interruptions and expenses related to our operations and the proposed merger with Venus. In addition, due to the long lead time to finalize ARTAS^® and ARTAS^® iX-Systems unit sales with our physician customers, and the significant impact each unit sale has on a period’s revenue due to the price of each unit, our quarterly revenue may not be comparable from one period to another.

Furthermore, our industry is characterized by seasonally lower demand during the third calendar quarter of the year, when both physicians and prospective patients take summer vacations. A detailed discussion of these and other factors that impact our business is provided in the “Risk Factors” section in this Quarterly Report on Form 10-Q.

Results of Operations

Three and Nine Months Ended September 30, 2019 and 2018:

	Three Months Ended												Nine Months Ended
	September 30,						Change						September 30,						Change
	2019			2018			$			%			2019			2018			$			%
	(dollars in thousands)
Revenue	$	3,307		$	4,818		$	(1,511	)		(31	)%	$	11,632		$	15,298		$	(3,666	)		(24	)%
Cost of revenue		2,297			2,663			(366	)		(14	)		6,465			8,362			(1,897	)		(23	)
Gross profit		1,010			2,155			(1,145	)		(53	)		5,167			6,936			(1,769	)		(26	)
Gross margin		31	%		45	%								44	%		45	%
Operating expenses:
Sales and marketing		3,952			4,398			(446	)		(10	)		12,688			13,147			(459	)		(3	)
Research and development		1,604			2,008			(404	)		(20	)		4,573			6,286			(1,713	)		(27	)
General and administrative		2,155			2,191			(36	)		(2	)		5,721			6,159			(438	)		(7	)
Merger related expenses		1,521			—			1,521			100			4,079			—			4,079			100
Total operating expenses		9,232			8,597			635			7			27,061			25,592			1,469			6
Loss from operations		(8,222	)		(6,442	)		(1,780	)		28			(21,894	)		(18,656	)		(3,238	)		17
Other expense, net:
Interest expense		(930	)		(631	)		(299	)		47			(2,512	)		(1,489	)		(1,023	)		69
Other income (expense), net		(55	)		12			(67	)		(558	)		(109	)		(567	)		458			(81	)
Total other expense, net		(985	)		(619	)		(366	)		59			(2,621	)		(2,056	)		(565	)		27
Net loss before provision for    income taxes		(9,207	)		(7,061	)		(2,146	)		30			(24,515	)		(20,712	)		(3,803	)		18
Provision for income taxes		9			8			1			13			33			32			1			3
Net loss	$	(9,216	)	$	(7,069	)	$	(2,147	)		30	%	$	(24,548	)	$	(20,744	)	$	(3,804	)		18	%

Revenue. Revenue decreased 31% and 24% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The change in revenue was primarily due to lower sales volume of our system and procedure sales for the three and nine months ended September 30, 2019, as compared to the same period in 2018. We sold seven systems in the three months ended September 30, 2019, as compared to 11 systems in the same period in 2018. We believe that lower system sales were the result of headcount transition and or customers holding off purchases due to the merger. Procedures-based fees also declined in the three months ended September 30, 2019, as compared to the same period in 2018 due to the timing of ARTAS procedures being purchased

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in prior periods by customers (and consumed them in the current period) which resulted in fewer procedures purchased in the third quarter of 2019.Additionally, the trend of the procedure utilization in the second quarter of 2019 was significantly lower than past periods which may have attributed to the fewer procedures purchased by customers.

Gross Margin. Gross margin typically fluctuates with product mix, selling prices, material costs and revenue level. Gross margin for the three months ended September 30, 2019 decreased by fourteen percentage points compared to the same period in 2018, while gross margin for the nine months ended September 30, 2019 decreased by one percentage point compared to the same period in 2018. Lower gross margin for the first nine months of 2019 was primarily driven by inventory reserve associated with certain excess materials, while gross margin was significantly down in third quarter of 2019 due to lower average selling price, higher overhead absorption and inventory reserve associated with certain excess materials.

Sales and Marketing. Sales and marketing expenses decreased 10% and 3%, for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease was primarily due to lower variable compensation in connection with fewer system sales in the third quarter of 2019.

Research and Development. Research and development expense decreased 20% and 27%, for each of the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease was primarily due to lower outside services and consulting costs associated with the development of the ARTAS^® iX System, which was commercially launched in July 2018.

General and Administrative. General and administrative expenses decreased 2% and 7%, for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease was primarily the result of reduced professional service costs, consisting of accounting, consulting, legal and other professional fees incurred in connection with our first year as a public company in 2018.

Merger related expenses. Merger expenses increased 100%, for each of the three and nine months ended September 30, 2019, due to the merger transaction between us and Venus as further described in the overview section of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Interest expense. Interest expense increased 47% and 69% for the three and nine months ended September 30, 2019, respectively, compared to the same periods in 2018. The increase in interest expense between the three-month periods was related to a higher average principal balance of our outstanding long-term-debt obligations as we refinanced our debt obligations with Solar in May 2018, which had a higher outstanding balance than the loan with our previous lender as well as additional lending from our related party convertible notes and unsecured subordinated promissory notes.

Other expense, Net. Other expense, net decrease was primarily due to (i) unamortized debt issuance and debt discounts written off by us and (ii) fees paid directly to Oxford and Solar in connection with the extinguishment of the Oxford loan and the entry into the new Solar loan in May 2018 as mentioned above.

Provision for income tax. Our effective tax rate is (0.10%) and (0.14%) for income tax for the three and nine months ended September 30, 2019, and we expect that our effective tax rate for the full year 2019 will be (0.17%). Based on available evidence, including cumulative losses since inception and expected future losses, we have determined that it is more likely than not that our U.S. federal, U.S. state and Korea deferred tax assets will not be realized and therefore a valuation allowance has been provided on the U.S. federal, U.S. state and Korea net deferred tax assets.

In general, if we experience a greater than 50% aggregate change in ownership over a three-year period, utilization of our pre-change net operating loss, or NOL, and credit carryforwards are subject to an annual limitation under Sections 382 and 383 of the U.S. Internal Revenue Code, or the Code. Generally, U.S. states maintain similar laws or regulations as Sections 382 and 383 of the Code. The annual limitation generally is determined by multiplying the value of our stock at the time of such ownership change (subject to certain adjustments) by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL or tax credit carryforwards before utilization.

We file tax returns for U.S. federal and state taxes along with tax returns in the United Kingdom, Hong Kong, Spain and South Korea. We are not currently subject to any income tax examinations. Since our inception, we have incurred losses from our U.S. operations, which generally allows all tax years to remain open.

We recognize the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. We do not expect any material changes in the next 12 months in unrecognized tax benefits.

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We recognize interest and/or penalties related to uncertain tax positions. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected in the period that such determination is made. The interest and penalties are recognized as other expense and not tax expense. We currently have no interest and penalties related to uncertain tax positions.

Liquidity and Capital Resources

To date, we have incurred significant net losses and negative cash flows from operations. Our net loss was $9.2 million and $7.1 million for each of the three months ended September 30, 2019 and 2018, respectively, and $24.5 million and $20.7 million for each of the nine months ended September 30, 2019 and 2018, respectively. As of September 30, 2019, we had an accumulated deficit of $217.7 million. As of September 30, 2019, and December 31, 2018, we had cash and cash equivalents of $8.9 million and $16.1 million, respectively. As of the filing date of this Quarterly Report, we believe our current cash and cash equivalents will not be sufficient to fund our operations for the next twelve months. These factors raise substantial doubt about our ability to continue as a going concern.

Debt Obligations

On May 10, 2018, we entered into a Loan and Security Agreement, as amended (the Solar Agreement) with Solar Capital Ltd. (Solar) and certain other lenders thereunder (together with Solar, the Lenders). Pursuant to the terms of the Solar Agreement, we borrowed $20.0 million with an interest rate at U.S. Dollar LIBOR plus 7.95% per annum (the Borrowings). All amounts borrowed under the Solar Agreement are secured by liens over all personal property of the Company. Monthly payments on any amounts drawn shall consist of the interest only payments for the first 18 months, followed by payments of principal and accrued interest monthly thereafter until the four-year anniversary of the date of the Solar Agreement. In connection with the Solar Agreement, we granted the Lenders warrants to purchase an aggregate of 161,725 shares of our common stock exercisable at a price of $3.71 per share. On November 2, 2018, the Solar Agreement was amended to modify the compliance requirement for certain revenue and liquidity threshold. As part of this amendment, we paid a fee of $50,000 to the Lenders and cancelled 161,725 Warrants (originally issued in May 2018, as mentioned above) and issued 161,725 new warrants of the Company’s common stock, $0.0001 par value per share, at an exercise price of $1.76 per share. All other terms of the Warrants were unchanged. On February 13, 2019, the Solar Agreement was amended to modify the compliance requirement for certain liquidity thresholds. As part of this amendment, the Final Fee (as defined in the Solar Agreement) that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased $130,000 to $960,000. In addition, the Solar Agreement was amended to include new covenants covering certain operational milestones. On June 14, 2019, the Solar Agreement was further amended to modify the compliance requirement for certain liquidity thresholds. As part of this amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $150,000 to $1,110,000, and the Solar Agreement was amended to include a new covenant covering certain equity financing milestones. In August 2019, we entered into a Fifth Amendment to the Solar Agreement, which modified the compliance requirement for certain revenue thresholds and included a new covenant covering certain equity financing milestones. As part of the Fifth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $200,000 to $1,310,000. On November 5, 2019, we entered into a Sixth Amendment to the Solar Agreement, which was amended to modify the date by when the Company shall provide evidence of aggregate unrestricted net cash proceeds from a sale of stock or pursuant to equity financings or issuance of debt, and the date upon which the Company should maintain a certain level of liquidity, to the earlier of (i) November 15, 2019 or (ii) the termination of the Agreement and Plan of Merger, by and between the Company and Venus Concept Ltd., dated March 15, 2019, as amended, prior to the consummation of the merger. As of September 30, 2019, we were in compliance with all required covenants under the Solar Agreement, as amended.

On February 28, 2019, we raised $5.0 million through the issuance of Notes to Frederic Moll, M.D., one of our directors, and Interwest Partners IX, LP, one of our stockholders affiliated with Gil Kliman, M.D., one of our directors. The maturity date of the Notes is August 28, 2020. The Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Notes are unsecured and subordinate in priority to our existing obligations under the Solar Agreement.

On July 5, 2019, we raised $2.5 million through the issuance of the Subordinated Note to Venus Concept USA Inc., a wholly owned subsidiary of Venus, which was executed on June 25, 2019. The Subordinated Note bears interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Note, the Subordinated Note shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable under thereunder. The Subordinated Note is unsecured and subordinate in priority to our existing obligations to Solar Capital, Ltd. under its amended loan and security agreement.

On August 14, 2019, we raised $2.5 million through the issuance of the Subordinated Note to Venus Concept USA Inc., a wholly owned subsidiary of Venus, which was funded in three tranches A, B and C of $1.0 million, $1.0 million and $0.5 million,

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respectively. Tranches A and B were funded on August 27, 2019 and September 25, 2019, respectively, for a total of $2.0 million. Tranche C for $0.5 million was unfunded as of September 30, 2019. The Subordinated Note bears interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Note, the Subordinated Note shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable under thereunder. The Subordinated Note is unsecured and subordinate in priority to our existing obligations to Solar Capital, Ltd. under its amended loan and security agreement.

On August 20, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $2.0 million through the issuance of one unsecured subordinated convertible promissory note to Frederic Moll, M.D., one of our directors. The maturity date of the Note is August 28, 2020. The Note bears interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Note is unsecured and subordinate in priority to our existing obligations under the Solar Agreement.

On November 7, 2019, the outstanding principal amount of the Notes and any accrued and unpaid interest was converted into shares of common stock immediately following the closing of the Merger. On November 7, 2019, we paid off and terminated our obligations under our Loan Agreement with Solar and the Lenders under the Loan Agreement. The payoff to Solar and the Lenders pursuant to the Loan Agreement consisted of cash and warrants to purchase up to 50,000 shares of Common Stock, post Reverse Stock Split, at an exercise price of $6.00 per share.

Capital Resources

We have financed our operations principally through the issuance and sale of our common stock in our IPO, private placements of our capital stock, and to a lesser extent, secured and unsecured debt financing, convertible note issuances and payments from customers. We believe that our existing cash and cash equivalents and cash expected to be generated from sales of our products will not be sufficient to fund our planned operations through the next 12 months. However, we will need additional capital to fund our future operations and we intend to obtain such capital through the sale of additional shares of capital stock or related securities. To the extent that we raise additional capital through future equity financings, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. Further, there can be no assurance that we will be able to raise additional funds on favorable terms, or at all. Our failure to raise additional capital would have a negative impact on our financial condition and our ability to execute our business plan.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with the ongoing commercialization of the ARTAS^® System, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

• the revenue we generate from our operations;

• the scope and timingof our investmentin our commercialinfrastructureand sales-force;

• the costsof commercializationactivitiesincludingproductsales,marketing,manufacturingand distribution;

• the degreeand rateof marketacceptanceof the ARTAS^®Systemand the ARTASprocedure;

• the costsof filing,prosecuting,defendingand enforcingany patentclaimsand otherintellectual propertyrights;

• our need to implementadditionalinfrastructureand internalsystems;

• the researchand developmentactivitiesweintendto undertakein orderto expand the approved indicationsof use for the ARTAS^®System;

• the emergenceof competingtechnologiesor otheradversemarketdevelopments;

• any productliabilityor otherlawsuitsrelatedto our products;

• the expensesneeded to attractand retainskilledpersonnel;

• the costsassociatedwith being a publiccompany;and

• the costsassociatedwith maintainingsubsidiariesin foreignjurisdictions.

We cannot assure that we will ever be profitable or generate positive cash flow from operating activities.

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Cash flows

The following table summarizes our cash flows for the periods indicated:

	Nine Months Ended
	September 30,
	2019			2018
	(dollars in thousands)
Cash used in operating activities	$	(18,430	)	$	(21,226	)
Cash used in investing activities		(353	)		(1,051	)
Cash provided by financing activities		11,483			22,291
Effect of exchange rate changes on cash, cash equivalents and    restricted cash		93			33
Net increase (decrease) in cash, cash equivalents and restricted    cash	$	(7,207	)	$	47

Cash Flows from Operating Activities

For the nine months ended September 30, 2019, cash used in operating activities of $18.4 million was attributable to a net loss of $24.5 million, partially offset by $3.0 million in non-cash charges and an increase from operating assets and liabilities of $3.1 million. The non-cash charges consisted primarily of stock-based compensation of $1.1 million, depreciation and amortization of $0.5 million, amortization of debt discounts and issuance costs of $0.6 million and provision for bad debt of $0.8 million. The net change in operating assets and liabilities was primarily attributable to an increase in accounts payable and accrued other liabilities of $1.2 million and a decrease in accounts receivable of $2.1 million due to the timing of collections from customers in the third quarter of 2019, which was offset by an increase in inventory of $0.3 million primarily due to an increase in raw materials for ARTAS^® iX System.

For the nine months ended September 30, 2018, cash used in operating activities of $21.2 million was attributable to a net loss of $20.7 million and a decrease from operating assets and liabilities of $2.8 million, which was partially offset by $2.3 million in non-cash charges. The non-cash charges consisted primarily of provision for bad debt of $0.8 million, depreciation and amortization of $0.5 million, amortization of debt issuance costs of $0.3 million, stock-based compensation of $0.4 million and loss on extinguishment of debt of $0.2 million. The net change in operating assets and liabilities was primarily attributable to an increase in accounts payable and accrued other liabilities of $2.2 million, which was offset by an increase in accounts receivable of $3.4 million due to the timing of collections from customers in the third quarter of 2018 as well as an increase in inventory of $1.7 million due to inventory build of ARTAS^® systems in 2018.

Cash Flows from Investing Activities

For the nine months ended September 30, 2019 and 2018, cash used in investing activities related to purchases of property and equipment.

Cash Flows from Financing Activities

For the nine months ended September 30, 2019, cash provided by financing activities was $11.5 million, consisting of net proceeds from our Related Party Convertible Promissory Notes of $7.0 million and Unsecured Subordinated Promissory Notes of $4.5 million.

For the nine months ended September 30, 2018, cash provided by financing activities was $22.3 million, consisting of net proceeds from our Solar loan of $19.6 million, net proceeds from our follow-on offering of $15.6 million and $0.4 million of stock option exercises, which was offset by $13.3 million for the retirement of our Oxford loan.

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Contractual Obligations and Other Commitments

The following table summarizes our contractual obligations as of September 30, 2019, which represent material expected or contractually committed future obligations.

	Payments Due by Period
	Less than						More than
	1 Year		1 to 3 Years		3 to 5 Years		5 Years		Total
	(dollars in thousands)
Debt obligations, including interest (1)	$	16,866	$	13,739	$	—	$	—	$	30,605
Operating leases		131		1,084		188		—		1,403
Total contractual obligations	$	16,997	$	14,823	$	188	$	—	$	32,008

(1) Represents our loan with Solar as well as our Related Party Convertible Promissory Notes and Unsecured Subordinated Promissory Notes and our anticipated repayment schedule for the loans. Pursuant to our loan agreement with Solar, the loan will mature in May 2022. The loan with Solar accrues interest at prime plus 7.95% per annum. The outstanding principal balance on the Solar loan was $21.3 million as of September 30, 2019, which includes a final payment of $1.3 million to Solar on the maturity of the loan. The Related Party Convertible Promissory Notes accrue interest at 8.0% per annum. The outstanding principal balance plus accrued interest matures on August 28, 2020, unless converted into common stock of the Company prior to maturity. The Unsecured Subordinated Promissory Notes accrue interest at 8% per annum. The outstanding principal balance plus accrued interest matures on November 30, 2019.

In addition to the contractual obligations listed in the table above, in March 2018, we received U.S. FDA 510(k) clearance to expand the ARTAS^® System technology to include an implantation functionality. Based on manufacturing changes associated with the ARTAS^® System, we determined that certain components procured or expected to be procured by Evolve Manufacturing Technologies, Inc., our single third-party manufacturer, who assemble the ARTAS^® Systems, will be in excess of expected demand or usage. Additionally, in the fourth quarter of 2018, the Company recorded a charge related to other excess purchase commitments from another vendor based on cost reduction changes in 2019. As a result, we recorded a loss contingency accrual of $0.5 million and included in “Other accrued liabilities” on the condensed consolidated balance sheets as of September 30, 2019.

Off-Balance Sheet Arrangements

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.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2018 Annual Report on Form 10-K for the year ended December 31, 2018, in the Notes to the Consolidated Financial Statements (Note 1) and the Critical Accounting Policies and Estimates section in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Except for the change in our revenue accounting policy, as discussed in Note 2, there have been no changes in these significant accounting policies during the nine months ended September 30, 2019.

JOBS Act Accounting Election

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 after the enactment of the JOBS Act until 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 financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Recent Accounting Pronouncements

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

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We areexposedto marketrisksin theordinarycourseof our business.These risksprimarilyrelateto interestrate and currencyexchangeratefluctuations.

InterestRate Risk

Our cashand cashequivalentsareheldin cashdepositsand moneymarketfunds.Due to theshort-termnatureof theseinstruments,we do not believethatwe have any materialexposureto changesin thefairvalueof our investmentportfoliobecause of changesin interestrates.Declinesin interestrates,however, would reduceour futureinterestincome.

We areexposedto interestrateriskrelatedto our debtobligationswhich aresubjectto variableinterestrates.As of September 30, 2019, a 100-basispointincreasein interestrateson our debtsubjectto variableinterestrate fluctuationswould increaseour interestexpense$0.2 millionannually.

Foreign Currency Risk

Our salescontractsareprimarilydenominatedin U.S.dollarsand, therefore,substantiallyallof our revenueis not subjectto foreigncurrencyrisk.However, a strengtheningof theU.S.Dollarcouldincreasetherealcostof our productsto our customersoutsideof theU.S.,which couldadverselyaffectour financialconditionand operatingresults.In addition,a portionof our operatingexpensesareincurredoutsidetheU.S.and are denominatedin foreigncurrenciesand aresubjectto fluctuationsdue to changesin foreigncurrencyexchange rates,particularlychangesin theBritishPound Sterling,Euro, Hong Kong Dollar,and South Korean Won. Additionally,fluctuationsin foreigncurrencyexchangeratesmaycauseus to recognizetransactiongainsand lossesin our statementof operations.A 10% increaseor decreasein currentexchangerateswould not have a materialeffecton our financialresults.To date,foreigncurrencytransactiongainsand losseshave not been materialto our consolidatedfinancialstatements,and we have not engagedin any foreigncurrencyhedging transactions.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures.

Our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated 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, or the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in 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.

Changes in internal control over financial reporting.

Our Chief Executive Officer and Chief Financial Officer did not identify any changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control.

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On May 23, 2018, a putative shareholder class action complaint was filed in Superior Court of the State of California, County of San Mateo (the “Superior Court”), captioned Wong v. Restoration Robotics, Inc., et al., No. 18CIV02609. On June 21, 2018 and June 28, 2018, two putative class action complaints were filed in the United States District Court for the Northern District of California, captioned 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, respectively. On July 24, 2018, the U.S. Northern District Court related the Guerrini and Yzeiraj actions and reassigned the Yzeiraj action to Judge Edward J. Davila. The Wong and Guerrini complaints name us as defendants, and certain of our current and former executive officers and directors, certain of our venture capital investors and the underwriters in our IPO. The Yzeiraj complaint names us as defendants and certain of our current and former executive officers and directors. The Wong complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act. The Guerrini and Yzeiraj complaints 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 addition, on June 11, 2019, a putative shareholder class action complaint was filed in Superior Court of the State of California, County of San Mateo, captioned Li v. Restoration Robotics, Inc., et al., No. 19CIV08173. The Li complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act and is based on the same set of facts as the Wong complaint. The Li complaint seeks unspecified monetary damages, other equitable relief and attorneys’ fees and costs.

On August 8, 2018, we, along with certain of our current and former executive officers and directors, filed a motion to dismiss the Wong complaint based on the forum selection clause designating the federal district courts as the exclusive forum for claims arising under the Securities Act contained in our Amended and Restated Certificate of Incorporation, and which asked the court in the alternative to stay the Wong action. Also, on August 8, 2018, the venture capital investor and underwriters’ defendants in the Wong action filed demurrers to the Wong complaint, and we, along with certain of our current and former executive officers and directors, joined in the venture capital investor defendants’ demurrer. A hearing on our motion to dismiss and the demurrers to the Wong complaint was held on October 24, 2018. On October 25, 2018, the Court ordered the defendants’ demurrers to the complaint sustained with leave to amend and granted an extension of time for plaintiff to serve a First Amended Complaint until further order of the Court. On January 31, 2019, the Court stayed the case and stayed any decision on the Company’s motion to dismiss on forum selection grounds pending resolution of an appeal of Sciabacucchi v. Salzberg, a case addressing similar issues in Delaware. On August 12, 2019, the Court consolidated the Wong and Li actions, and lifted the stay imposed on January 31, 2019 to allow further briefing on the Company’s motion to dismiss. A further hearing on the motion to dismiss was held on September 17, 2019.

On October 2, 2018, the U.S. Northern District Court granted a Motion for Consolidation of Related Actions, Appointment as Lead Plaintiff and Approval of Lead Counsel filed by Plaintiff Edgardo Guerrini, which consolidated the Guerrini and Yzeiraj actions under the caption In re Restoration Robotics, Inc. Securities Litigation, Case No. 5:18-cv-03712-EJD. On November 30, 2018, Lead Plaintiff Edgardo Guerrini filed a Consolidated Amended Complaint for violations of federal securities laws asserting the same claims, against the same defendants, as his original complaint but adding certain allegations in support of those claims. On January 29, 2019, the Company, along with certain of its current and former executive officers and directors, filed a motion to dismiss the Consolidated Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The venture capital defendants and underwriter defendants filed joinders to the Company’s motion to dismiss on the same day. On October 18, 2019, the District Court granted in part and denied in part our motion to dismiss.

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 current and former executive officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the Securities Exchange Act of 1934 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 related the Mason action with the federal class action, In re Restoration Robotics, Inc. Sec. Litig., and reassigned the Mason action to Judge Edward J. Davila. Also, on August 21, 2019, the District Court granted the parties’ joint stipulation to stay the Mason action during the pendency of the federal class action, In re Restoration Robotics, Inc. Sec. Litig., No. 5:18-cv-03712-EJD.

On September 24, 2019, a complaint was filed in the United States District Court for the Northern District of California, captioned Bushansky v. Restoration Robotics, Inc., et al., No. 5:19-cv-06004-MMC. The complaint alleges, among other things, that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 14d-9. The complaint alleges that the proxy statement filed with the United States Securities and Exchange Commission by Restoration Robotics on September 10, 2019 in connection with the proposed transaction whereby Restoration Robotics would merge with Venus Concept Ltd. omitted or misrepresented material information. The complaint seeks, 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.

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We believe that these lawsuits are without merit and we intend to vigorously defend against these claims.

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 we do not deem to be material to our business and results of operations.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risk and uncertainties, including thosedescribedbelow, any of which couldadverselyaffectour business,resultsof operations,financialconditionand prospects.In such an event,themarketpriceof our commonstockcoulddecline,and you may loseallor partof your investment.Additionalrisksand uncertaintiesnot presentlyknown to us or thatwe currentlydeem immaterialmay alsoimpairour businessoperations. You should carefully consider the risk described below and the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to the Merger and Our Business

On November 7, 2019, we completed our merger transaction with Venus and Merger Sub. See the Current Report on Form 8-K that we filed with the SEC on November 7, 2019 for additional information. The risk factors set forth below relate to our business immediately following the consummation of the Merger.

For additional information and a summary of the material risk associated with the Merger, the combined companies and Venus Concepts’ business, please see the “Risk Factors” section contained in our Registration Statement on Form S-4, as amended, filed with the SEC on September 9, 2019.

Risks Relatedto Our Business

We have limitedcommercialhistoryand we have incurredsignificantlossessinceour inception.We anticipate thatwe willcontinueto incur lossesforthe foreseeablefuture,which, togetherwith our limitedoperating history,makesitdifficultto assessour futureviability.

We have a limited commercial history and have focused primarily on research and development, product design and engineering, establishing supply and manufacturing relationships, seeking regulatory clearances and approvals to market the ARTAS® and ARTAS® iX System, and selling and marketing. We have incurred losses in each year since our inception in 2002. Our net losses were approximately $24.5 million for the nine months ended September 30, 2019 and $28.7 million for the year ended December 31, 2018. As of September 30, 2019, we had an accumulated deficit of $217.7 million. We will continue to incur significant expenses for the foreseeable future as we expand our sales and marketing, research and development, and clinical and regulatory activities. We may never generate enough revenue to achieve or sustain profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability. Furthermore, because of our limited operating history and because the market for aesthetic products is rapidly evolving, we have limited insight into the trends or competitive products that may emerge and affect our business. Before investing, you should consider an investment in our common stock considering the risks, uncertainties, and difficulties frequently encountered by early-stage medical technology companies in rapidly evolving markets such as ours. We may not be able to successfully address any or all of these risks, and the failure to adequately do so could cause our business, results of operations, and financial condition to suffer.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.

Our operatingexpensesmayfluctuatesignificantlyin thefuturebecause of a varietyof factors,manyof which areoutsideof our control.These factorsinclude:

• thecostof growing our ongoing commercializationand salesand marketingactivities;

• thecostsof manufacturingand maintainingenoughinventoriesof our productsto meetanticipated demand and inventory write-offs related to obsolete products or components;

• thecostsof enhancingtheexistingfunctionalityand developmentof new functionalitiesforthe ARTAS^®and ARTAS^® iX System;

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• thecostsof preparing,filing,prosecuting,defending,and enforcingpatentclaimsand otherpatent relatedcosts,includinglitigationcostsand theresultsof such litigation;

• the variability of ARTAS procedures being performed between periods if particular high-volume practitioners perform a smaller number of procedures in each period as a result of the concentration of procedures performed by certain practitioners;

• any productliabilityor otherlawsuitsand thecostsassociatedwith defending themor theresultsof such lawsuits;

• thecostsassociatedwith conductingbusinessand maintainingsubsidiariesin foreignjurisdictions;

• customers in jurisdictions where the ARTAS^® iX System is not approved delaying their purchase, and not purchasing an ARTAS^® System, until the ARTAS^® iX System is approved or cleared for use in their market;

• thecoststo attractand retainpersonnelwith theskillsrequiredforeffectiveoperations;and

• thecostsassociatedwith beinga publiccompany.

Our budgetedexpenselevelsarebasedin parton our expectationsconcerningfuturerevenuefromARTAS^® Systemssales,servicingand procedure-based fees.We maybe unableto reduceour expendituresin a timely mannerto compensateforany unexpectedshortfallsin revenue.Accordingly,a significantshortfallin market acceptanceor demandfortheARTAS^®Systemsand procedurescouldhave an immediateand materialadverse impacton our businessand financialcondition.

Itisdifficultto forecastour futureperformanceand our financialresultsmayfluctuateunpredictably.

Our limitedcommercialhistoryand therapidevolutionof themarketsformedicaltechnologiesand aesthetic productsmakeitdifficultforus to predictour futureperformance.Several factors,manyof which are outsideof our control,maycontributeto fluctuationsin our financialresults,such as:

• physiciandemandfortheARTAS^®and ARTAS^® iX Systemsand procedureusagemayvaryfromquarterto quarter;

• customers in jurisdictions where the ARTAS^® iX System is not approved delaying their purchase, and not purchasing an ARTAS^® System, until the ARTAS^® iX System is approved or cleared for use in their market;

• theinabilityof physiciansto obtainthenecessaryfinancingto purchasetheARTAS^®System or the ARTAS^® iX System;

• changesin thelengthof our salesprocessfortheARTAS^®and ARTAS^® iX Systems;

• performance of new functionalities and system updates, such as the robotic implantation functionality in the new ARTAS^® iX System;

• performanceof our internationaldistributors;

• positiveor negativemediacoverageof theARTAS^®System or ARTAS^® iX System,theproceduresor productsof our competitors,or our industrygenerally;

• our abilityto maintainour current,or obtainfurther,regulatoryclearancesor approvals such as the regulatory clearances and approvals necessary to market the ARTAS^® iX System outside the U.S.;

• delaysin, or failureof, productand componentdeliveriesby our third-partymanufacturersor suppliers;

• seasonalor othervariationsin patientdemandforaestheticprocedures;

• introductionof new aestheticproceduresor productsthatcompetewith theARTAS^®System or ARTAS^® iX System;

• changesin accountingrulesthatmaycauserestatementof our consolidatedfinancialstatementsor have otheradverseeffects;and

• adversechangesin theeconomythatreducepatientdemandforelectiveaestheticprocedures.

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The long salescycle, low unit volumeforsalesof the ARTAS^®System and ARTAS^® iX Systemand the historicseasonalityof our industry,each maycontributeto substantialfluctuationsin our operatingresultsand stockpriceand makeit difficultto compareour resultsof operationsto priorperiodsand predictfuturefinancialresults.

We sella relativelysmallnumberof ARTAS^®and ARTAS^® iX Systemsata relativelyhigh price,with eachsaleof an ARTAS^® Systemor ARTAS^® iX System typicallyinvolvinga significantamountof time.Becauseof therelativelysmallnumberof ARTAS^® and ARTAS^® iX Systemswe expectto sellin any period,eachsaleof a systemcouldrepresenta significantpercentage of our revenuefora period.Furthermore,due to thesignificantamountof timeitcan taketo finalizethesaleof a system,itislikelythata salecouldbe recognizedin a subsequentperiodwhich could have a materialeffecton our resultsfromquarterto quarterand increasethevolatilityof quarterlyresults.In addition,our industryischaracterizedby seasonallylowerdemandduringthethirdquarterof thecalendaryear, generallywhen both physiciansand prospectivepatientstakesummervacation.As a resultof thesefactors, futurefluctuationsin quarterlyresultscouldcauseour revenueand cashflowsto be below analystand investor expectations,which couldcausedeclinein our stockprice.Due to futurefluctuationsin revenueand costs,as well as otherpotentialfluctuations,you shouldnot relyupon our operatingresultsin any periodas an indicationof futureperformance.Ifwe do not sellARTAS^® and ARTAS^® iX Systemsas anticipated,our operatingresultswillvary significantlyfromour expectations.In addition,sellingtheARTAS^®and ARTAS^® iX Systemsrequiressignificantmarketingeffort and expenditurein advanceof thereceiptof revenueand our effortsmaynot resultin a sale.

Our recurringlossesfromoperationsand negativecash flowshave raisedsubstantialdoubt regardingour abilityto continueas a going concern.

Our independentregisteredpublicaccountingfirmincludedan explanatory paragraphin itsreporton our consolidatedfinancialstatementsas of, and fortheyearended, December31, 2018 that our recurring losses from operations and negative cash flows raise substantial doubt about our ability to continue as a going concern. As of the filing date of this Quarterly Report, we believe our current cash and cash equivalents will not be sufficient to fund our operations for the next twelve months. Our abilityto continueas a going concernwillrequireus to obtainadditionalfinancingto fund our operations. The perceptionof our abilityto continueas a going concernmaymakeitmoredifficultforus to obtainfinancing forthecontinuationof our operationsand couldresultin thelossof confidenceby investors,suppliersand employees.

We willrequiresubstantialadditionalfinancingto achieveour goals,and a failureto obtainthisnecessary capitalwhenneeded on acceptableterms,or at all,could forceus to delay,limit,reduceor terminateour productdevelopment,commercializationand otheroperationsor efforts.

Sinceour inception,we have investeda significantportionof our effortsand financialresourcesin researchand developmentand salesand marketingactivities.Researchand development,clinicaltrials,productengineering, ongoing productupgradesand otherenhancementssuch as software-updatesfortheARTAS^®and ARTAS^® iX Systemsand seeking regulatoryclearancesand approvalsto marketfutureproducts willrequiresubstantialfundsto complete.As of September 30, 2019, we had capital resourcesconsistingof cashand cashequivalentsof $8.9 million.We believethatwe willcontinueto expend substantialresourcesfortheforeseeablefuturein connectionwith theongoing commercializingof theARTAS^® and ARTAS^® iX System,increasingour salesand marketingefforts,and continuingresearchand developmentand product enhancementsactivities.

We believeour existingcashand cashequivalents and cash expected to be generated from the sale of our products will not be enough for us to fund our planned operations forthenexttwelvemonths.Therefore, we will need additional capital to fund our future operations. In addition, our operatingplansmaychange as a resultof manyfactors some of which may be unknown to us, and we mayneed to seekadditionalfundssoonerthanplanned, throughpublicor privateequityor debtfinancingsor othersources,such as strategiccollaborations.Such financingmayresultin dilutionto stockholders,impositionof burdensomedebtcovenantsand repayment obligations,thelicensingof rightsto our technologyor otherrestrictionsthatmayaffectour business.In addition,we mayseekadditionalcapitaldue to favorablemarketconditionsor strategicconsiderationseven ifwe believewe have enoughfundsforour currentor futureoperatingplans.

Additionalfundsmaynot be availablewhen we need them,on termsthatareacceptableto us, or atall.If adequatefundsarenot availableto us on a timelybasis,we maybe requiredto:

• delayor curtailour effortsto developenhancementsto theARTAS^®and ARTAS^® iX Systems,includingany clinicaltrials thatmaybe requiredto marketsuch enhancements;

• delayor curtailour plansto increaseand expand our salesand marketingefforts;or

• delayor curtailour plansto enhanceour customersupportand marketingactivities.

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We arerestrictedby covenantsin the Solar Agreement. These covenantsrestrict,amongotherthings,our abilityto incuradditionaldebtwithout Solar’s consent,which may limitour abilityto obtainadditionalfunds. In addition, the Solar 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

We are dependentupon the successof the ARTAS^® System and ARTAS® iX System,which has a limitedcommercialhistory.Ifwe are unsuccessfulin developingthe marketforrobotichair restorationor the marketacceptanceforthe ARTAS^® System and ARTAS® iX Systemfailsto grow significantly,our businessand futureprospectswillbe harmed.

We commencedcommercialsalesof theARTAS^®Systemforhairfollicledissectionin theU.S.in 2011 and expectthattherevenuewe generatefromboth systemsalesand servicingas wellas recurringprocedure-based feeswillaccountforallour revenuefortheforeseeablefuture.Accordingly,our successdependson the acceptanceamongphysiciansand patientsof theARTAS^®and ARTAS^® iX Systemsas thepreferredsystemforperforminghair restorationsurgery. Acceptanceof theARTAS^®and ARTAS^® iX Systemsby physiciansissignificantlydependenton our abilityto convincephysiciansof thebenefitsof theARTAS^®and ARTAS^® iX Systemsto theirpracticesand, accordingly,developthemarket forrobotic-assistedhairrestorationsurgery.Acceptanceof theARTASprocedureby patientsisequally importantas patientdemandwillinfluencephysiciansto offertheARTASprocedure,and thedegreeof marketacceptanceof theARTAS^®and ARTAS^® iX Systemsby physiciansand patientsisunproven.We believethatmarket acceptanceof theARTAS^®and ARTAS^® iX Systemswilldepend on manyfactors,including:

• theperceivedadvantagesor disadvantagesof theARTAS^®and ARTAS^® iX Systemscomparedto otherhairrestoration productsand treatments;

• thesafetyand efficacyof theARTAS^®and ARTAS^® iX Systemsrelativeto otherhairrestorationproductsand treatments;

• thepriceof theARTAS^®and ARTAS^® iX Systemsrelativeto otherhairrestorationproductsand treatments;

• our successin expandingour salesand marketingorganization;

• theeffectivenessof our marketing,advertising,and commercializationinitiatives;

• our successin addingnew functionalitiesto theARTAS^®and ARTAS^® iX Systemsand enhancingexistingfunctions;and

• our abilityto obtainregulatoryclearanceto markettheARTAS^®and ARTAS^® iX Systemsforadditionaltreatment indicationsin theU.S.

Further, the ARTAS^® iX System, which was launched in June 2018, includes our recently approved robotic implantation functionality. As this functionality is new, it is possible that it could include defaults, “bugs” or present other technical issues which could prompt potential physician customers to delay their purchase of the ARTAS^® iX System or could prompt physicians that have purchased the ARTAS^® iX System to either return or not utilize the system.

We cannotassureyou thattheARTAS^®System or ARTAS^® iX Systemwillachievebroadmarketacceptanceamongphysiciansand patients.Becausewe expectto derivesubstantiallyallour revenuefortheforeseeablefuturefromARTAS^® and ARTAS^® iX Systemssales,servicingand procedure-based fees,any failureof thisproductto satisfyphysicianor patient demandor to achievemeaningfulmarketacceptancewillharmour businessand futureprospects.

Ifthereisnot sufficientpatientdemand forARTASprocedures,our financialresultsand futureprospectswill be harmed.

The ARTASprocedureisan electiveaestheticprocedure,thecostof which mustbe borneby thepatient and is not coveredby or reimbursablethroughgovernmentor privatehealthinsurance.The decisionto undergothe ARTASprocedureisthusdrivenby patientdemand,which maybe influencedby a numberof factors,such as:

• thesuccessof our salesand marketingprograms;

• theextentto which our physiciancustomersrecommendtheARTASproceduresto theirpatients;

• our successin attractingconsumerswho have not previouslyundergonehairrestorationtreatment;

• theextentto which theARTASproceduresatisfiespatientexpectations;

• our abilityto properlytrainour physiciancustomersin theuse of theARTAS^®and ARTAS^® iX Systemsso thattheir patientsdo not experienceexcessivediscomfortduringtreatmentor adversesideeffects;

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• thecost,safety,and effectivenessof theARTAS^®and ARTAS^® iX Systemsversusotheraesthetictreatments;

• consumersentimentaboutthebenefitsand risksof aestheticproceduresgenerallyand theARTAS^® and ARTAS^® iX Systemsin particular;

• thesuccessof any direct-to-consumermarketingeffortswe mayinitiate;and

• generalconsumerconfidence,which maybe impactedby economicand politicalconditionsoutsideof our control.

Our financialperformancewillbe materiallyharmedin theeventwe cannotgeneratesignificantpatientdemand forproceduresperformedwith theARTAS^®System.

Our successdepends in partupon patientsatisfactionwith the effectivenessof the ARTAS^®and ARTAS® iX Systems.

In orderto generaterepeatand referralbusiness,patientsmustbe satisfiedwith theeffectivenessof theARTAS^® Systems.IftheARTAS^®Systemor ARTAS^® iX System procedureisnot done correctly,and or thepatientsuffersfromcomplicationsand otheradverseeffects,thepatientmaynot be satisfiedwith thebenefitsof theARTAS^®System or ARTAS^® iX System.Furthermore,if thetransplantedhairfolliclesdo not grow or survivethetransplant,thepatientwilllikelynot view theprocedure as havinga satisfactoryoutcome.Ifpatientsarenot satisfiedwith theaestheticbenefitsof theARTAS^®System, ARTAS^® iX System or feelthatitistoo expensivefortheresultsobtained,our reputationand futuresaleswillsuffer.

Our successdepends on growing physicianadoptionand use of the ARTAS^®System and ARTAS® iX System.

Our abilityto increasethenumberof physicianswillingto makea significantcapitalexpenditureto purchasethe ARTAS^®System, or ARTAS^® iX Systemand makeita significantpartof theirpractices,dependson thesuccessof our salesand marketingprograms.We mustbe ableto demonstratethatthecostof theARTAS^®and ARTAS^® iX Systemsand therevenuethata physiciancan derivefromperformingARTASproceduresarecompellingwhen comparedto thecostsand revenueassociatedwith alternativeaesthetictreatmentsthephysiciancan offer.In addition,we believeour marketingprograms,includingclinicaland practicedevelopmentsupport,willbe criticalto increasingutilization and awarenessof theARTAS^®and ARTAS^® iX Systems,but theseprogramsrequirephysiciancommitmentand involvementto succeed.Ifwe areunableto increasephysicianadoptionand use of theARTAS^®System,or ARTAS^® iX System our financial performancewillbe adverselyaffected.

Our inabilityto effectivelycompetewith competitivehair restorationtreatmentsor proceduresmaypreventus fromachievingsignificantmarketpenetrationor improvingour operatingresults.

The medicaltechnologyand aestheticproductmarketsarehighlycompetitiveand dynamic and arecharacterized by rapidand substantialtechnologicaldevelopmentand productinnovations.We designedtheARTAS^®Systemto assistphysiciansin performingfollicularunitextractionsurgery.Demand fortheARTAS^®Systemsand ARTAS procedurescouldbe limitedby otherproductsand technologies.Competitionto addresshairlosscomesfrom varioussources,including:

• therapeuticoptionsincludingRogaine, which isappliedtopically,and Propecia,which isingested,both of which have been approvedby theFDA;

• non-surgicaloptions,such as wigs, hair-lossconcealerspraysand similarproducts;and

• othersurgicalalternatives,includinghairtransplantationsurgeryusingthestripsurgerymethodor usinghand-helddevices.

Surgicalalternativesto theARTAS^®and ARTAS^® iX Systemsmaybe ableto competemoreeffectivelythantheARTASprocedure in establishedpracticeswith trainedstaffand workflowsbuiltaroundperformingthesesurgicalalternatives. Practicesexperiencedin offeringstripsurgeryor follicularunitextractionsusinghand-helddevicesmaybe reluctantto incorporate or converttheirpracticesto offerARTASproceduresdue to theeffortinvolvedto make such changes.

Many optionsmaybe ableto providesatisfactoryresultsformalehairloss, generallyata lowercostto the patientthantheARTAS^®and ARTAS^® iX Systems.As a result,ifpatientschoosethesecompetitivealternatives,our resultsof operationcouldbe adverselyaffected.

We also face competition from other aesthetic devices that physicians may consider adding to their practice in lieu of building a hair restoration practice, for instance CoolSculpting, which is utilized for body contouring or cosmetic fat reduction. As a result, if physicians choose these competitive products over building a hair restoration practice with the ARTAS^® System or ARTAS^® iX System, our results of operation could be adversely affected.

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Some of our competitorshave a broadrangeof productofferings,largedirectsalesforces,and long-term customerrelationshipswith our targetphysicians,which couldinhibitour marketpenetrationefforts.Our potentialphysiciancustomersalsomayneed to recoupthecostof expensiveproductsthattheyhave already purchasedfromour competitors,and thustheymaydecideto delaypurchasing,or not to purchase,theARTAS^® System or ARTAS^® iX System.

Many of our competitorsarelarge,experiencedcompaniesthathave substantiallygreaterresourcesand brand recognitionthanwe do. Competitioncouldresultin price-cutting,reducedprofitmargins,and limitedmarket share,any of which would harmour business,financialcondition,and resultsof operations.

We maynot be ableto establishor strengthenour brand.

We believethatestablishingand strengtheningtheRestorationRoboticsand ARTASbrandiscriticalto achievingwidespreadacceptanceof theARTAS^®Systems,particularlybecauseof thehighlycompetitivenatureof themarketforaesthetictreatmentsand proceduresto addressmalehairloss. Promotingand positioningour brandwilldepend largelyon thesuccessof our marketingeffortsand our abilityto providephysicianswith a reliableproductto assistthemin performinghairrestorationsurgery. Given theestablishednatureof our competitors,and our limitedcommercializationin theU.S., itislikelythatour futuremarketingeffortswill requireus to incursignificantadditionalexpenses.These brandpromotionactivitiesmaynot yieldincreased salesand, even iftheydo, any salesincreasesmaynot offsettheexpenseswe incurto promoteour brand.Ifwe failto successfullypromoteand maintainour brand,or ifwe incursubstantialexpensesin an unsuccessful attemptto promoteand maintainour brand,ourARTAS^®Systemsmaynot be acceptedby physicians,which would adverselyaffectour business,resultsof operationsand financialcondition.

We have limitedexperiencewith our directsalesand marketingforceand any failureto buildand manage our directsalesand marketingforceeffectivelycould have a materialadverseeffecton our business.

We rely on a direct sales force to sell the ARTAS^® and ARTAS^® iX Systems in the U.S. and certain markets outside the U.S. In order to meet our anticipated sales objectives, we expect to grow our direct sales and marketing organization significantly over the next several years and intend to opportunistically build a direct sales and marketing force in certain international markets where we do not have a direct sales force. There are significant risks involved in building and managing our sales and marketing organization, including risks related to our ability to:

• hirequalifiedindividualsas needed;

• generatesufficientleadswithinour targetphysiciangroup forour salesforce;

• provideadequatetrainingfortheeffectivesaleand marketingof theARTAS^®System or ARTAS^® iX System;

• retainand motivateour directsalesand marketingprofessionals;and

• effectivelyoverseegeographicallydispersedsalesand marketingteams.

Our failureto adequatelyaddresstheseriskscouldhave a materialadverseeffecton our abilityto increasesales and use of theARTAS^®and ARTAS^® iX Systems,which would causeour revenueto be lowerthanexpectedand harmour results of operations.

To marketand sellthe ARTAS^® and/or ARTAS^® iX Systemin certainmarketsoutsideof the U.S., we depend on third-party distributors.

We depend on third-partydistributorsto sell,market,and servicetheARTAS^®Systemsin certainmarketsoutside of theU.S.and to trainour physiciancustomersin such markets.Furthermore,we mayneed to engageadditional third-partydistributorsto expand intonew marketsoutsideof theU.S.where we do not have a directsalesforce. We aresubjectto a numberof risksassociatedwith our dependenceon thesethird-parties,including:

• thelackof day-to-daycontrolovertheactivitiesof third-partydistributors;

• third-partydistributorsmaynot committhenecessaryresourcesto market,sell,train,supportand serviceour systemsto thelevelof our expectations;

• third-partydistributorsmayemphasizethesaleof third-partyproductsoverour products;

• third-partydistributorsmaynot be as selectiveas we would be in choosingphysiciansto purchasethe ARTAS^®Systemor as effectivein trainingphysiciansin marketingand patientselection;

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• third-partydistributorsmayviolateapplicablelaws and regulationswhich mayexposeus to potential liabilityor limitour abilityto sellproductsin certainmarkets

• third-partydistributorsmayterminatetheirarrangementswith us on limited,or no, noticeor may changethetermsof thesearrangementsin a mannerunfavorableto us;and

• disagreementswith our distributorsthatcouldrequireor resultin costlyand time-consuminglitigation or arbitrationwhich we couldbe requiredto conductin jurisdictionswith which we arenot familiar.

Ifwe failto establishand maintainsatisfactoryrelationshipswith our third-partydistributors,our revenueand marketsharemaynot grow as anticipated,and we couldbe subjectto unexpectedcostswhich would harmour resultsof operationsand financialcondition.

To successfullymarketand sellthe ARTAS^® and ARTAS^® iX Systemin marketsoutsideof the U.S., we mustaddressmany internationalbusinessriskswith which we have limitedexperience.

Salesin marketsoutsideof theU.S.accountedforapproximately40% of our revenuefortheyearended December31, 2018 and 43% of our revenueforthe ninemonthsended September 30, 2019 and 2018, respectively. We believethata significantpercentageof our businesswillcontinueto comefromsalesin marketsoutsideof theU.S.through increasedpenetrationin countrieswhere we marketand selltheARTAS^® or ARTAS^® iX System.However, internationalsalesaresubjectto a numberof risks,including:

• difficultiesin staffingand managingour internationaloperations;

• increasedcompetitionas a resultof moreproductsand proceduresreceivingregulatoryapprovalor otherwisefreeto marketin internationalmarkets;

• longeraccountsreceivablepaymentcyclesand difficultiesin collectingaccountsreceivable;

• reducedor variedprotectionforintellectualpropertyrightsin somecountries;

• exportrestrictions,traderegulations,and foreigntaxlaws;

• fluctuationsin currencyexchangerates;

• foreigncertificationand regulatoryclearanceor approvalrequirements, including receiving regulatory approval and clearance for the robotic implantation functionality included in our ARTAS^® iX System;

• difficultiesin developingeffectivemarketingcampaignsin unfamiliarforeigncountries;

• customsclearanceand shippingdelays;

• political,social,and economicinstabilityabroad,terroristattacks,and securityconcernsin general;

• preferenceforlocallyproducedproducts;

• potentiallyadversetaxconsequences,includingthecomplexitiesof foreignvalue-addedtaxsystems, taxinefficienciesrelatedto our corporatestructure,and restrictionson therepatriationof earnings;

• theburdensof complyingwith a wide varietyof foreignlaws and differentlegalstandards;and

• increasedfinancialaccountingand reportingburdensand complexities.

Ifone or moreof theseriskswere realized,our resultsof operationsand financialconditioncouldbe adversely affected.

We expect that our revenue from international markets may decrease in the near term as we have received regulatory approval or clearance for the implantation function outside of the U.S., which may result in purchasing delays in international markets as customers await the availability of that function. In addition, the number of ARTAS^® Systems previously sold to distributors that have not yet been placed with an end user has increased in recent periods, which, in combination with the launch of ARTAS^® iX, System may further exaggerate delays in international system sales.

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Whiletraditionalhair transplantationsurgeryhas been availableformany years,the ARTAS^®Systemhas only been commerciallyavailablesince2011. As a result,we have a limitedtrackrecordcomparedto traditional hair transplantationsurgeryand the safetyand efficacyof the ARTAS^®Systemisnot yetsupportedby long-termclinicaldata, which could limitsales,and the ARTAS^®Systemcould proveto be lesssafeor effectivethan initiallythought.

The ARTAS^®Systemthatwe marketin theU.S.isregulatedas a medicaldeviceby theU.S.Food and Drug Administration,or theFDA,and has receivedpremarketclearanceunderSection510(k)of theU.S.Federal Food, Drug and CosmeticAct, or FDCA.In the510(k)clearanceprocess,beforea devicemaybe marketed,the FDAmustdeterminethata proposeddeviceis“substantiallyequivalent”to a legally-marketed“predicate” device,which includesa devicethathas been previouslyclearedthroughthe510(k)process,a devicethatwas legallymarketedpriorto May 28, 1976 (pre-amendmentsdevice),a devicethatwas originallyon theU.S.market pursuantto an approvedpremarketapproval,or PMA, applicationand laterdown-classified,or a 510(k)-exempt device.This processistypicallyshorterand generallyrequiresthesubmissionof lesssupportingdocumentation thantheFDA’s PMA processand does not alwaysrequirelong-termclinicalstudies.

Hairtransplantationsurgeryhas been a treatmentoptionforhairrestorationformanyyears,whilewe only began commercializingtheARTAS^®Systemin 2011. Consequently,we lackthebreadthof publishedlong-termclinical datasupportingthesafetyand efficacyof theARTAS^®Systemand thebenefitsitoffersthatmighthave been generatedin connectionwith otherhairrestorationtechniques.As a result,physiciansmaybe slow to adoptthe ARTAS^®System,we maynot have comparativedatathatour competitorshave or aregenerating,and we maybe subjectto greaterregulatoryand productliabilityrisks.Furthermore,futurepatientstudiesor clinicalexperience mayindicatethattreatmentwith theARTAS^®Systemdoes not improvepatientoutcomescomparedto otherhair restorationtechniques.Such resultswould slow theadoptionof theARTAS^®Systemby physicians,would significantlyreduceour abilityto achieveexpectedsalesand couldpreventus fromachievingand maintaining profitability.

We have limitedcomplicationor patientsuccessratedatawith respectto treatmentusingtheARTAS^®System.If futurepatientstudiesor clinicaltestingdo not supportour beliefthatour systemoffersa moreadvantageous treatmentforhairrestoration,marketacceptanceof theARTAS^®Systemcouldfailto increaseor coulddecrease and our businesscouldbe harmed.Moreover,iffutureresultsand experienceindicatethatour implantproducts causeunexpectedor seriouscomplicationsor otherunforeseennegativeeffects,we couldbe subjectto mandatoryproductrecalls,suspensionor withdrawalof FDAor othergovernmentalclearanceor approvalor, CE Certificatesof Conformity,significantlegalliabilityor harmto our businessreputation.Furthermore,ifpatients thatreceivetraditionalhairtransplantationsurgery,such as stripsurgery,were to experienceunexpectedor seriouscomplicationsor otherunforeseeneffects,themarketfortheARTAS^®Systemmaybe adverselyaffected, even ifsuch effectsarenot applicableto theARTAS^®System.

Ifwe chooseto, or arerequiredto, conductadditionalstudies,such studiesor experiencecould,slow themarket adoptionof theARTAS^®Systemby physicians,significantlyreduceour abilityto achieveexpectedrevenueand preventus frombecomingprofitable.

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

In May and June 2018, a number of purported stockholder class action complaints were filed against us, the members of our board of directors (and affiliated venture funds), as well as certain of our current and former officers and the underwriters in our IPO. 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. In addition, in July 2019, a shareholder derivative complaint was filed which alleges that certain of our current and former executive officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the Exchange Act in connection with our IPO and our 2018 proxy statement. The complaints seek unspecified money damages, other equitable relief and attorneys’ fees and costs. 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.

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 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.

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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:

• our various procedure kits may not be manufactured in accordance with agreed upon specifications or in compliance with regulatory requirements, or its manufacturing facilities may not be able to maintain compliance with regulatory requirements, which could negatively affect the safety or efficacy of our procedure kits, cause delays in shipments of our procedure kits, or require us to recall procedure kits previously delivered to customers;

• we may not be able to timely respond to unanticipated changes in customer orders, and if orders do not match forecasts, we may have excess or inadequate inventory of materials and components;

• we may be subject to price fluctuations when a supply contract is renegotiated or if our existing contract is not renewed;

• NPI may wish to discontinue manufacturing and supplying products to us for risk management reasons; and

• NPI may encounter financial or other hardships unrelated to our demand for products, which could inhibit its ability to fulfill our orders and meet our requirements.

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 impacted.

If NPI is unable to manufacture the reusable procedure kits, disposable procedure kits and spare procedures kits used with the ARTAS^® System and the ARTAS^® iX System in high-quality commercial quantities successfully and consistently to meet demand, our growth will be limited.

To manufacture our reusable procedure kits, disposable procedure kits and spare procedure kits in the quantities that we believe will be required to meet anticipated market demand, NPI will need to increase manufacturing capacity, which will involve significant challenges. In addition, the development of commercial-scale manufacturing capabilities will require us and NPI to invest substantial additional funds and hire and retain the technical personnel who have the necessary manufacturing experience. Neither we nor NPI may successfully complete any required increase to existing manufacturing processes in a timely manner, or at all.

If NPI is unable to produce the reusable procedure kits, disposable procedure kits and spare kits in sufficient quantities to meet anticipated customer demand, our revenue, business, and financial prospects would be harmed. The limited experience NPI has in producing larger quantities of the procedure kits may also result in quality issues, and possibly result in product recalls. Manufacturing delays related to quality control could harm our reputation and decrease our revenue. Any recall could be expensive and generate negative publicity, which could impair our ability to market the ARTAS^® System and the ARTAS^® iX System and procedures and further affect our results of operations.

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If we are unable to manufacture our next generation ARTAS^® System, called the ARTAS^® iX System in high-quality commercial quantities successfully and consistently to meet demand, our growth will be limited, and our reputation could be harmed.

To manufacture our ARTAS^® iX System in the quantities that we believe will be required to meet anticipated market demand, we will need to develop and maintain sufficient manufacturing capacity, which will involve significant challenges. Historically, we have not manufactured any of our other products (e.g. ARTAS^® System) in-house or without the contract manufacturer involvement. Over the next 12 months, we will manufacture the ARTAS^® iX System without a third-party contract manufacturer’s involvement. The development of commercial-scale manufacturing capabilities will require us (or our contract manufacturer for ARTAS^® iX System, if we decide to utilize one on a long-term basis) to invest substantial additional funds and hire and retain the technical personnel who have the necessary manufacturing experience. Neither we nor a third-party manufacturer, if one is utilized, may successfully complete any required increase to existing manufacturing processes in a timely manner, or at all.

If we or a contract manufacturer, if one is utilized, are unable to produce the ARTAS^® iX System in sufficient quantities to meet anticipated customer demand, our revenue, business, financial prospects, and reputation would be harmed. The limited experience we or a third-party manufacturer, if one is utilized, in producing the ARTAS^® iX System may also result in quality issues, and possibly result in product recalls. Manufacturing delays related to quality control could harm our reputation and decrease our revenue. Any recall could be expensive and generate negative publicity, which could impair our ability to market the ARTAS^® iX System and procedures and further affect our results of operations.

Both our manufacturing of the ARTAX ^® iX System and NPI’s manufacturing of the procedure kits are dependent upon third-party suppliers and, in some cases, sole suppliers, for the majority of our components, subassemblies and materials, making us vulnerable to supply shortages and price fluctuations, which could harm our business.

We and NPI, as the case may be, rely on several sole source suppliers, including Kuka Robotics, Inc., FLIR Integrated Imaging Solutions Inc. and 3D-CAM International Corporation, for certain components of the ARTAS^® iX System, reusable procedure kits, disposable procedure kits and spare procedure kits. These sole suppliers, and any of our other suppliers, may be unwilling or unable to supply components of these systems to us or NPI reliably and at the levels we anticipate or are required by the market. For us to be successful, our suppliers must be able to provide products and components in substantial quantities, in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. An interruption in our commercial operations could occur if we encounter delays or difficulties in securing these components, and if we cannot then obtain an acceptable substitute. If we are required to transition to new third-party suppliers for certain components of the ARTAS^® iX System or our procedure kits, we believe that there are only a few such suppliers that can supply the necessary components. A supply interruption, price fluctuation or an increase in demand beyond our current suppliers’ capabilities could harm our ability to manufacture the ARTAS^® iX System and NPI’s ability to manufacture our procedure kits until new sources of supply are identified and qualified. In addition, the use of components or materials furnished by these alternative suppliers could require us to alter our operations.

Our relianceon thesesupplierssubjectsus to a number of risksthatcouldharmour reputation,business,and financialcondition,including,amongotherthings:

• interruptionof supplyresultingfrommodificationsto or discontinuationof a supplier’soperations;

• delaysin productshipmentsresultingfromuncorrecteddefects,reliabilityissues,or a supplier’s variationin a component;

• a lackof long-termsupplyarrangementsforkey componentswith our suppliers;

• inabilityto obtainadequatesupplyin a timelymanner,or to obtainadequatesupplyon commercially reasonableterms;

• difficultyand costassociatedwith locatingand qualifyingalternativesuppliersforour componentsin a timelymanner;

• productiondelaysrelatedto theevaluationand testingof productsfromalternativesuppliers,and correspondingregulatoryqualifications;

• delayin deliverydue to our suppliersprioritizingothercustomerordersoverours;

• damageto our reputationcausedby defectivecomponentsproducedby our suppliers;

• increasedcostof our warrantyprogramdue to productrepairor replacementbasedupon defectsin componentsproducedby our suppliers;and

• fluctuationin deliveryby our suppliersdue to changesin demandfromus or theirothercustomers.

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Wherepracticable,we areseeking,or intendingto seek, second-sourcemanufacturersforcertainof our components.However, we cannotprovideassurancethatwe willbe successfulin establishingsecond-source manufacturersor thatthesecond-sourcemanufacturerswillbe ableto satisfycommercialdemandforthe ARTAS^®System and ARTAS^® iX System.

Ifany of theserisksmaterialize,costscouldsignificantlyincreaseand our abilityto meetdemandforour productscouldbe impacted.Ifwe areunableto satisfycommercialdemandfortheARTAS^® System and ARTAS^® iXSystemin a timely manner,our abilityto generaterevenuewould be impairedand marketacceptanceof our productscouldbe adverselyaffected.

We forecastsalesto determinerequirementsforcomponentsand materialsused in the ARTAS^® System and ARTAS® iX System, reusableprocedurekits,disposableprocedurekits,upgrade kitsand sparekitsand ifour forecastsare incorrect,we mayexperiencedelaysin shipmentsor increasedinventorycosts.

We keep limited finished products on hand. To manage our operations, we forecast anticipated product orders and material requirements to predict our inventory needs and enter into purchase orders on the basis of these requirements. Several components of the ARTAS^® and ARTAS^® iX Systems require significant order lead time. Our limited historical commercial experience and anticipated growth may not provide us with enough data to consistently and accurately predict future demand. If our business expands and our demand for components and materials increases beyond our estimates, our manufacturers and suppliers may be unable to meet our demand. In addition, if we underestimate our component and material requirements, we may have inadequate inventory, which could interrupt, delay, or prevent delivery of the ARTAS^® System or the ARTAS^® iX System and related products to our customers. In contrast, if we overestimate our requirements, we may have excess inventory, which would increase use of our working capital. Any of these occurrences would negatively affect our financial condition and the level of satisfaction our physician customers have with our business.

Even though the ARTAS^® System and ARTAS® iX Systemaremarketedto physicians,thereexistsa potentialformisuseby the operator of the systemsby physicians,non-physiciansor individualswhoare not sufficientlytrained,which could harm our reputationand our business.

We and our independent distributors market and sell the ARTAS^® System and ARTAS^® iX System to physicians. Under state law in the U.S., our physician customers can generally allow nurse practitioners, technicians, and other non-physicians to perform the ARTAS procedures under their direct supervision. Similarly, in markets outside of the U.S., physicians can allow non-physicians to perform the ARTAS procedures under their supervision. Although we and our distributors provide training on the use of the ARTAS^® System and ARTAS^® iX System, we do not supervise the procedures performed with the ARTAS^® System and ARTAS^® iX System, nor can we be assured that direct physician supervision of procedures occurs according to our recommendations. The potential misuse of the ARTAS^® System or ARTAS^® iX System by physicians and non-physicians may result in adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.

We and our distributorsofferproducttrainingsessions,but neitherwe nor our distributorsrequirepurchasersor operatorsof our productsto attendtrainingsessions.The lackof requiredtrainingforoperatorsof our product and theuse of our productsby non-physiciansmayresultin productmisuseand adversetreatmentoutcomes, which couldharmour reputationand exposeus to costlyproductliabilitylitigation.

Product liabilitysuitscould be brought againstus fordefectivedesign,labeling,material,or workmanship, or misuseof the ARTAS^® System or ARTAS® iX System,and could resultin expensiveand time-consuminglitigation,paymentof substantialdamages,an increasein our insuranceratesand substantialharm to our reputation.

IftheARTAS^®System or ARTAS® iX Systemaredefectivelydesigned,manufactured,or labeled,containsdefectivecomponents,or is misused,we maybecomesubjectto substantialand costlylitigationby our physiciancustomersor theirpatients. Misuseof theARTAS^®System or ARTAS^® iX Systemor failureto adhereto operatingguidelinescan causeskindamageand underlying tissuedamageand, ifour operatingguidelinesarefound to be inadequate,we maybe subjectto liability. Furthermore,ifa patientisinjuredin an unexpectedmanneror suffersunanticipatedadverseeventsafter undergoingtheARTASprocedure,even iftheprocedurewas performedin accordancewith our operating guidelines,we maybe subjectto productliabilityclaims.Claimscouldalsobe assertedunderstateconsumer protectionacts.Ifwe cannotsuccessfullydefendourselvesagainstproductliabilityclaims,we mayincur substantialliabilities.Even successfuldefensewould requiresignificantfinancialand managementresources. Regardlessof themeritsor eventualoutcome,liabilityclaimsmayresultin:

• decreaseddemandfortheARTAS^® System and ARTAS^® iX System,or any futureproducts;

• damageto our reputation;

• withdrawalof clinicaltrialparticipants;

• coststo defendtherelatedlitigation;

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• a diversionof management’stimeand our resources;

• substantialmonetaryawardsto physiciancustomers,patientsor clinicaltrialparticipants;

• regulatoryinvestigations,productrecalls,withdrawalsor labeling,marketingor promotional restrictions;

• lossof revenue;and

• theinabilityto commercializeany futureproducts.

Our inabilityto obtainand maintainsufficientproductliabilityinsuranceatan acceptablecostand scopeof coverageto protectagainstpotentialproductliabilityclaimscouldinhibitcommercializationof theARTAS^® and ARTAS^® iX Systems.As of September 30, 2019, we carryproductliabilityinsurancein theamountof $4.0 millionin theaggregate.Although we maintainsuch insurance,any claimthatmaybe broughtagainstus couldresultin a courtjudgmentor settlementin an amountthatisnot covered,in whole or in part,by our insuranceor thatisin excessof thelimitsof our insurancecoverage.Our insurancepoliciesalsohave variousexclusionsand deductibles,and we maybe subject to a productliabilityclaimforwhich we have no coverage.We willhave to pay any amountsawardedby a court or negotiatedin a settlementthatexceedour coveragelimitationsor thatarenot coveredby our insurance,andwe maynot have, or be ableto obtain,sufficientfundsto pay such amounts.Moreover,in thefuture,we maynot be ableto maintaininsurancecoverageata reasonablecostor in sufficientamountsto protectus againstlosses.

The clinicaltrialprocessrequiredto obtainregulatoryclearancesor approvalsislengthyand expensivewith uncertainoutcomes and could resultin delaysin new productintroductions.

In orderto obtain510(k)clearancefortheARTAS^®System,we were requiredto conducta clinicaltrial,and we expectto conductclinicaltrialsin supportof marketingauthorizationforfutureproductsand product enhancements.Conductingclinicaltrialsisa complexand expensiveprocess,can takemanyyears,and outcomes areinherentlyuncertain.We maysuffersignificantsetbacksin clinicaltrials,even afterearlierclinicaltrials showed promisingresults,and failurecan occuratany timeduringtheclinicaltrialprocess.Any of our products maymalfunctionor mayproduceundesirableadverseeffectsthatcouldcauseus or regulatoryauthoritiesto interrupt,delayor haltclinicaltrials.We, theFDA,or anotherregulatoryauthoritymaysuspendor terminate clinicaltrialsatany timeto avoidexposingtrialparticipantsto unacceptablehealthrisks.

Successfulresultsof pre-clinicalstudiesarenot necessarilyindicativeof futureclinicaltrialresults,and predecessorclinicaltrialresultsmaynot be replicatedin subsequentclinicaltrials.Additionally,theFDAmay disagreewith our interpretationof thedatafromour pre-clinicalstudiesand clinicaltrials,or mayfindthe clinicaltrialdesign,conductor resultsinadequateto provesafetyor efficacy,and mayrequireus to pursue additionalpre-clinicalstudiesor clinicaltrials,which couldfurtherdelaytheclearanceor approvalof our products.The datawe collectfromour pre-clinicalstudiesand clinicaltrialsmaynot be sufficientto support FDAclearanceor approval,and ifwe areunableto demonstratethesafetyand efficacyof our futureproductsin our clinicaltrials,we willbe unableto obtainregulatoryclearanceor approvalto marketour products.

In addition,we mayestimateand publiclyannouncetheanticipatedtimingof theaccomplishmentof various clinical,regulatoryand otherproductdevelopmentgoals,which areoftenreferredto as milestones.These milestonescouldincludetheobtainmentof therightto affixtheCEMarkin theEuropeanUnion; thesubmission to theFDAof an investigationaldeviceexemption,or IDE, applicationto commencea pivotalclinicaltrialfora new product;theenrollmentof patientsin clinicaltrials;thereleaseof datafromclinicaltrials;and otherclinical and regulatoryevents.The actualtimingof thesemilestonescouldvarydramaticallycomparedto our estimates, in somecasesforreasonsbeyond our control.We cannotassureyou thatwe willmeetour projectedmilestones and ifwe do not meetthesemilestonesas publiclyannounced,thecommercializationof our productsmaybe delayedand, as a result,our stockpricemaydecline.

Delaysin thecommencementor completionof clinicaltestingcouldsignificantlyaffectour productdevelopment costs.We do not know whetherplannedclinicaltrialswillbeginon time,need to be redesigned,enrollan adequatenumberof patientsin a timelymanneror be completedon schedule,ifatall.The commencementand completionof clinicaltrialscan be delayedor terminatedfora number of reasons,includingdelaysor failures relatedto:

• theFDAor comparableforeignregulatoryauthoritiesdisagreeingas to thedesignor implementationof our clinicalstudies;

• obtainingregulatoryapprovalto commencea clinicaltrial;

• reachingagreementon acceptabletermswith prospectiveclinicalresearchorganizations,or CROs,and trialsites,thetermsof which can be subjectto extensivenegotiationand mayvarysignificantlyamong differentCROsand trialsites;

• manufacturingsufficientquantitiesof a productforuse in clinicaltrials;

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• obtaininginstitutionalreviewboard,or IRB, or ethicscommittees’approvalto conducta clinicaltrialat eachprospectivesite;

• recruitingand enrollingpatientsand maintainingtheirparticipationin clinicaltrials;

• havingclinicalsitesobservetrialprotocolor continueto participatein a trial;

• addressingany patientsafetyconcernsthatariseduringthecourseof a clinicaltrial;

• addressingany conflictswith new or existinglaws or regulations;and

• addinga sufficientnumberof clinicaltrialsites.

Patientenrollmentin clinicaltrialsand completionof patientfollow-updepend on manyfactors,includingthe sizeof thepatientpopulation,thenatureof thetrialprotocol,theproximityof patientsto clinicalsites,the eligibilitycriteriafortheclinicaltrial,patientcompliance,competingclinicaltrialsand clinicians’and patients’ perceptionsas to thepotentialadvantagesof theproductbeingstudiedin relationto otheravailabletherapies, includingany new treatmentsthatmaybe clearedor approvedfortheindicationswe areinvestigating.For example,patientsmaybe discouragedfromenrollingin our clinicaltrialsifthetrialprotocolrequiresthemto undergoextensivepost-treatmentproceduresor follow-upto assessthesafetyand efficacyof a product,or they maybe persuadedto participatein contemporaneousclinicaltrialsof a competitor’sproduct.In addition,patients participatingin our clinicaltrialsmaydrop out beforecompletionof thetrialor sufferadversemedicalevents unrelatedto our products.Delaysin patientenrollmentor failureof patientsto continueto participatein a clinical trialmaydelaycommencementor completionof theclinicaltrial,causean increasein thecostsof theclinical trialand delays,or resultin thefailureof theclinicaltrial.

We couldalsoencounterdelaysiftheFDAconcludedthatour financialrelationshipswith our principal investigatorsresultedin a perceivedor actualconflictof interestthatmayhave affectedtheinterpretationof a study,theintegrityof thedatageneratedattheapplicableclinicaltrialsiteor theutilityof theclinicaltrialitself. Principalinvestigatorsforour clinicaltrialsmayserveas scientificadvisorsor consultantsto us fromtimeto timeand receivecashcompensationand/orstockoptionsin connectionwith such services.Iftheserelationships and any relatedcompensationto or ownershipinterestby theclinicalinvestigatorcarryingout thestudyresultin perceivedor actualconflictsof interest,or theFDAconcludesthatthefinancialrelationshipmayhave affected interpretationof thestudy,theintegrityof thedatageneratedattheapplicableclinicaltrialsitemaybe questionedand theutilityof theclinicaltrialitselfmaybe jeopardized,which couldresultin thedelayor rejectionof our marketingapplicationby theFDA.Any such delayor rejectioncouldpreventus from commercializingany of our productsin development.

Furthermore,clinicaltrialsmayalsobe delayedbecause of ambiguousor negativeinterimresults.In addition, a clinicaltrialmaybe suspendedor terminatedby us, theFDA,theIRB overseeingtheclinicaltrialatissue,the Data SafetyMonitoringBoard forsuch trial,any of our clinicaltrialsiteswith respectto thatsite,or other regulatoryauthoritiesdue to several factors,including:

• failureto conducttheclinicaltrialin accordancewith applicableregulatoryrequirementsor our clinical protocols;

• inspectionof theclinicaltrialoperationsor trialsitesby theFDAor otherregulatoryauthorities resultingin theimpositionof a clinicalhold;

• inabilityof a clinicalinvestigatoror clinicaltrialsiteto continueto participatein theclinicaltrial;

• unforeseensafetyissuesor adversesideeffects;

• failureto demonstratea benefitfromusingtheproduct;and

• lackof adequatefundingto continuetheclinicaltrial.

Additionally,changesin regulatoryrequirementsand guidancemayoccurand we mayneed to amendclinical trialprotocolsto reflectthesechanges.Amendmentsmayrequireus to resubmitour clinicaltrialprotocolsto IRBs forreexamination,which mayimpactthecosts,timingor successfulcompletionof a clinicaltrial.Ifwe experiencedelaysin completionof, or ifwe terminate,any of our clinicaltrials,thecommercialprospectsforour productsmaybe harmedand our abilityto generateproductrevenuefromtheseproductswillbe delayedor not realizedatall.In addition,any delaysin completingour clinicaltrialswillincreaseour costs,slow down our productdevelopmentand approvalprocessand jeopardizeour abilityto commenceproductsalesand generate revenue.Any of theseoccurrencesmaysignificantlyharmour business,financialconditionand prospects significantly.In addition,manyof thefactorsthatcause,or leadto, a delayin thecommencementor completion of a clinicaltrialmayalsoultimatelyleadto thedenialof regulatoryapprovalof thesubjectproduct.

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Our businesscould be adverselyaffectedifwe are unable to extendthe cleareduses of the ARTAS^®System and ARTAS® iX Systemor successfullypursue the development,regulatoryclearanceor approvaland commercializationof future products.

TheARTAS^®System and ARTAS^® iX Systemforhairfollicledissection, which has been clearedforuse in theU.S. only fordissectinghairfolliclesfromthescalpin mendiagnosedwith AGAwho have blackor brown straight hair, recipientsitemakingfor the follicle transplantation sites and, in our ARTAS^® iX System, robotic implantation in which hair follicles are robotically transplanted, which recently has been approved for commercial marketing in the U.S., are our only products.Our businesscouldbe adverselyaffectedifwe areunableto extendtheclearedusesof theARTAS^® System and ARTAS^® iX Systemor successfullypursuethedevelopment,regulatoryclearanceor approvaland commercializationof futureproducts. In thefuture,we mayalsobecomedependenton otherproductsthatwe maydevelopor acquire.The clinicaland commercialsuccessof our productswilldepend on several factors,includingthefollowing:

• theabilityto raiseany additionalrequiredcapitalon acceptableterms,or atall;

• timelycompletionof our nonclinicalstudiesand clinicaltrials,which maybe significantlyslower,or costmorethanwe anticipateand willdepend substantiallyupon theperformanceof third-party contractors;

• whetherwe arerequiredby theFDAor similarforeignregulatoryagenciesto conductadditional clinicaltrialsor otherstudiesbeyond thoseplannedto supporttheclearanceor approvaland commercializationof any futureindicationsor products;

• our abilityto demonstrateto thesatisfactionof theFDAand similarforeignregulatoryauthoritiesthe safety,efficacyand acceptableriskto benefitprofileof any futureindicationsor products;

• theprevalence,durationand severityof potentialsideeffectsor othersafetyissuesexperiencedwith our futureapprovedproducts,ifany;

• thetimelyreceiptof necessarymarketingapprovalsor clearancesfromtheFDAand foreignregulatory authorities;

• achievingand maintaining,and, where applicable,ensuringthatour third-partycontractorsachieveand maintain,compliancewith our contractualobligationsand with allregulatoryrequirementsapplicable to any futureproductsor additionalapprovedindications, ifany;

• acceptanceby physiciansand patientsof thebenefits,safetyand efficacyof any futureproducts,if approvedor cleared,includingrelativeto alternativeand competingtreatments;

• our abilityto establishand enforceintellectualpropertyrightsin and to our productsor any future indicationsor products;and

• our abilityto avoidthird-partypatentinterference,intellectualpropertychallengesor intellectual propertyinfringementclaims.

Even ifregulatoryapprovalsor clearancesareobtained,we mayneverbe ableto successfullycommercializeany futureindicationsor products.Accordingly,we cannotprovideassurancesthatwe willbe ableto generate sufficientrevenuethroughthesaleof any futureproductsto continueour business.

We willneed to increasethe sizeof our organization,and we mayexperiencedifficultiesin managing growth.

As of September 30, 2019, we had 90 employees,with 35 employeesin salesand marketing,24 employeesin customersupport,18 employeesin researchand development,includingclinical,regulatoryand certainquality controlfunctions, fiveemployeesin manufacturingoperationsand eight employeesin generalmanagementand administration.We willneed to continueto expand our sales,marketing,managerial,operational,financeand administrativeresourcesfortheongoing commercializationof theARTAS^® System and ARTAS^® iX System and continueour developmentactivitiesof any futureproducts.

Our existingmanagement,personnel,systemsand facilitiesmaynot be adequateto supportour futuregrowth. Our need to effectivelyexecuteour growth strategyrequiresthatwe:

• identify,recruit,retain,incentivizeand integrateadditionalemployees,includingsalespersonnel;

• manageour internaldevelopmentand operationaleffortseffectivelywhilecarryingout our contractual obligationsto thirdparties;and

• continueto improveour operational,financialand managementcontrols,reportssystemsand procedures.

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Ifwe failto attractand retainseniormanagementand key personnel,we maybe unable to successfullygrow our business.

Our successdependsin parton our continuedabilityto attract,retainand motivatehighlyqualifiedmanagement, clinicaland otherpersonnel.We arehighlydependentupon our seniormanagement,particularlyour President and ChiefExecutiveOfficer,our managementteamand otherkey personnel.The lossof servicesof any of these individualscoulddelayor preventenhancementof theARTAS^® System and ARTAS^® iX System,theexpansionof theARTAS^® System and ARTAS^® iX Systemto new indications,or thedevelopmentof any futureproducts.Although we have enteredintoemployment agreementswith our seniormanagementteam,theseagreementsdo not providefora fixedtermof service.

Competitionforqualifiedpersonnelin themedicaldevicefieldisintensedue to thelimitednumberof individualswho possesstheskillsand experiencerequiredby our industry.We willneed to hireadditional personneland we maynot be ableto attractand retainqualitypersonnelon acceptableterms,or atall.In addition,to theextentwe hirepersonnelfromcompetitors,we maybe subjectto allegationsthattheyhave been improperlysolicitedor thattheyhave divulgedproprietaryor otherconfidentialinformation,or thattheirformer employersown theirresearchoutput.

Becausewe have optedto takeadvantageof the JOBSAct provisionwhich allowsus to delayimplementing new accountingstandards,our consolidatedfinancialstatementsmaynot be directlycomparableto other publiccompanies.

Pursuantto theJumpstartOur BusinessStartupsAct of 2012, or theJOBSAct, emerginggrowth companiescan delayadoptingnew or revisedaccountingstandardsissuedafter theenactmentof theJOBSAct until such timeas thosestandardsapplyto privatecompanies.We have electedto use thisextendedtransitionperiod forcomplyingwith new or revisedaccountingstandardsthathave differenteffectivedatesforpublicand private companiesuntiltheearlierof thedatewe (i)areno longeran emerginggrowth companyor (ii)affirmativelyand irrevocablyopt out of theextendedtransitionperiodprovidedin theJOBSAct. Becausewe have electedto take advantageof thisprovisionof theJOBSAct, our consolidatedfinancialstatementsand thereportedresultsof operationscontainedthereinmaynot be directlycomparableto otherpubliccompanies.

We incur significantcostsbecause of operatingas a publiccompany,and our managementdevotes substantialtimeto new complianceinitiatives.We mayfailto complywith the rulesthatapplyto public companies,includingSection404 of the Sarbanes-OxleyAct of 2002, which could resultin sanctionsor other penaltiesthatwould harm our business.

Weincursignificantlegal,accountingand otherexpensesas a publiccompany,includingcostsresulting frompubliccompanyreportingobligationsundertheSecuritiesExchange Act of 1934, as amended,and regulationsregardingcorporategovernancepractices.The listingrequirementsof The NasdaqGlobalMarket and therulesof theSecuritiesand Exchange Commission,or SEC,requirethatwe satisfycertaincorporate governancerequirementsrelatingto directorindependence,filingannualand interimreports,stockholder meetings,approvalsand voting,solicitingproxies,conflictsof interestand a code of conduct.Our management and otherpersonnel devotea substantialamountof timeto ensurethatwe complywith allof these requirements.Moreover,thereportingrequirements,rulesand regulationswill continue toincreaseour legaland financial compliancecostsand willmakesomeactivitiesmoretime-consumingand costlier.Any changeswe maketo complywith theseobligationsmaynot be sufficientto allowus to satisfyour obligationsas a publiccompanyon a timelybasis,or atall.These reportingrequirements,rulesand regulations,coupledwith theincreasein potentiallitigationexposureassociatedwith beinga publiccompany,couldalsomakeitmoredifficultforus to attractand retainqualifiedpersonsto serveon our boardof directorsor boardcommitteesor to serveas executiveofficers,or to obtaincertaintypesof insurance,includingdirectors’and officers’insurance,on acceptableterms.

We are subject to Section 404 of The Sarbanes-Oxley Act of 2002, or Section 404, and the related rules of the SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. During the course of our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports.

If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the market price of our stock to decline. In addition, as a public company we are required to file accurate and timely quarterly and annual reports with the SEC under the Securities Exchange Act of 1934, as amended. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Global Market or other adverse consequences that would materially harm to our business and cause the market price of our common stock to decline.

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Further, for so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, our independent registered public accounting firm will be engaged to provide an attestation report on the effectiveness of our internal control over financial reporting. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a)following the fifth anniversary of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Unfavorableglobaleconomicconditionscould adverselyaffectour business,financialconditionor resultsof operations.

Our resultsof operationscouldbe adverselyaffectedby generalconditionsin theglobaleconomyand in the globalfinancialmarkets.Furthermore,themarketforaestheticmedicalproceduresmaybe particularly vulnerableto unfavorableeconomicconditions.In particular,theARTASprocedureswillnot receivecoverage and reimbursementand, as a result,demandforthisproductwillbe tiedto discretionaryspendinglevelsof our targetedpatientpopulation.The recentglobalfinancialcrisiscausedextremevolatilityand disruptionsin the capitaland creditmarkets.A severeor prolongedeconomicdownturn, such as therecentglobalfinancialcrisis, couldresultin a varietyof risksto our business,includingweakened demandfortheARTAS^®and ARTAS^® iX Systems,ARTAS proceduresor any futureproducts,ifapproved,and our abilityto raiseadditionalcapitalwhen neededon acceptableterms,ifatall.A weak or decliningeconomycouldalsostrainour manufacturersor suppliers, possiblyresultingin supplydisruption,or causeour customersto delaymakingpaymentsforour services.Any of theforegoingcouldharmour businessand we cannotanticipateall of theways in which theeconomicclimate and financialmarketconditionscouldadverselyimpactour business.

We or the thirdpartiesupon whom we depend maybe adverselyaffectedby earthquakesor othernatural disastersand our businesscontinuityand disasterrecoveryplans maynot adequatelyprotectus froma serious disaster.

Our corporateheadquartersand otherfacilitiesarelocatedin San Jose,California,which in thepasthas experiencedboth severeearthquakesand floods.We do not carryearthquakeor floodinsurance.Earthquakesor othernaturaldisasterscouldseverelydisruptour operations,and have a materialadverseeffecton our business, resultsof operations,financialconditionand prospects.

Ifa naturaldisaster,power outageor othereventoccurredthatpreventedus fromusingallor a significantportion of our headquarters,thatdamagedcriticalinfrastructure,such as our ARTASenterprisesystem,enterprise financialsystemsand records,manufacturingresourceplanningand enterprisequalitysystems,or thatotherwise disrupted operations,itmaybe difficultor, in certaincases,impossible,forus to continueour businessfora substantialperiodof time.The disasterrecoveryand businesscontinuityplanwe have in placearelimitedand areunlikelyto proveadequatein theeventof a seriousdisasteror similarevent.We mayincursubstantial expensesbecause of thelimitednatureof our disasterrecoveryand businesscontinuityplans,which, particularlywhen takentogetherwith our lackof earthquakeor floodinsurance,couldhave a materialadverse effecton our business.

Furthermore,integralpartiesin our supplychainaresimilarlyvulnerableto naturaldisastersor othersudden, unforeseenand severeadverseevents.Ifsuch an eventwere to affectour supplychain,itcouldhave a material adverseeffecton our business.

Significantdisruptionsof informationtechnologysystemsor breachesof data securitycould materially adverselyaffectour business,resultsof operationsand financialcondition.

We collectand maintaininformationin digitalformthatisnecessaryto conductour business,and we are increasinglydependenton informationtechnologysystemsand infrastructureto operateour business.In the ordinarycourseof our business,we collect,storeand transmitlargeamountsof confidentialinformation, includingintellectualproperty,proprietarybusinessinformationand personalinformation.Itiscriticalthatwe do so in a securemannerto maintaintheconfidentialityand integrityof such confidentialinformation.We have establishedphysical,electronic,and organizationalmeasuresto safeguardand secureour systemsto preventa datacompromise,and relyon commerciallyavailablesystems,software,tools,and monitoringto providesecurityforour informationtechnologysystemsand theprocessing,transmissionand storageof digital information.We have alsooutsourcedelementsof our informationtechnologyinfrastructure,and as a resulta few third-partyvendorsmayor couldhave accessto our confidentialinformation.Our internalinformation technologysystemsand infrastructure,and thoseof our currentand any futurecollaborators,contractorsand consultantsand otherthirdpartieson which we rely,arevulnerableto damagefromcomputerviruses,malware, naturaldisasters,terrorism,war, telecommunicationand electricalfailures,cyber-attacksor cyber-intrusionsover theInternet,attachmentsto emails,personsinsideour organization,or personswith accessto systemsinsideour organization.The riskof a securitybreachor disruption,particularlythroughcyber-attacksor cyberintrusion, includingby computerhackers,foreigngovernments,and cyberterrorists,has generallyincreasedas thenumber, intensityand sophisticationof attemptedattacksand

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intrusionsfromaroundtheworld have increased.In addition,theprevalentuse of mobiledevicesthataccessconfidentialinformationincreasestheriskof data securitybreaches,which couldleadto thelossof confidentialinformationor otherintellectualproperty.The coststo us to mitigatenetworksecurityproblems,bugs, viruses,worms,malicioussoftwareprogramsand securityvulnerabilitiescouldbe significant,and whilewe have implementedsecuritymeasuresto protectour datasecurityand informationtechnologysystems,our effortsto addresstheseproblemsmaynot be successful, and theseproblemscouldresultin unexpectedinterruptions,delays,cessationof serviceand otherharmto our businessand our competitiveposition.Ifsuch an eventwere to occurand causeinterruptionsin our operations,it couldresultin a materialdisruptionof our productdevelopmentprograms.Moreover,ifa computersecurity breachaffectsour systemsor resultsin theunauthorizedreleaseof personallyidentifiableinformation,our reputationcouldbe materiallydamaged.In addition,such a breachmayrequirenotificationto governmental agencies,themediaor individualspursuantto variousfederaland stateprivacyand securitylaws, ifapplicable, includingtheHealthInsurancePortabilityand AccountabilityAct of 1996, or HIPAA,as amendedby theHealth InformationTechnologyforClinicalHealthAct of 2009, or HITECH,and itsimplementingrulesand regulations,as wellas regulationspromulgatedby theFederalTradeCommission and statebreachnotification laws. We would alsobe exposedto a riskof lossor litigationand potentialliability,which couldmaterially adverselyaffectour business,resultsof operationsand financialcondition.

Our employeesand independentcontractors,includingconsultants,manufacturers,distributors,commercial collaborators,serviceprovidersand othervendorsmayengage in misconductor otherimproperactivities, includingnoncompliancewith regulatorystandardsand requirements,which could have an adverseeffecton our resultsof operations.

We areexposedto theriskthatour employeesand independentcontractors,includingconsultants, manufacturers,distributors,commercialcollaborators,serviceprovidersand othervendorsmayengagein misconductor otherillegalactivity.Misconductby thesepartiescouldincludeintentional,recklessand/or negligentconductor otherunauthorizedactivitiesthatviolatethelaws and regulationsof theFDAand other similarregulatorybodies,includingthoselaws thatrequirethereportingof true,completeand accurate informationto such regulatorybodies;manufacturingstandards;U.S.federaland statehealthcarefraudand abuse,dataprivacylaws and othersimilarnon-U.S. laws;or laws thatrequirethetrue,completeand accurate reportingof financialinformationor data.Activitiessubjectto theselaws alsoinvolvetheimproperuse or misrepresentationof informationobtainedin thecourseof clinicaltrials,thecreationof fraudulentdatain our nonclinicalstudiesor clinicaltrials,or illegalmisappropriationof product,which couldresultin regulatory sanctionsand causeseriousharmto our reputation.Itisnot alwayspossibleto identifyand determisconductby employeesand otherthird-parties,and theprecautionswe taketo detectand preventthisactivitymaynot be effectivein controllingunknown or unmanagedrisksor lossesor in protectingus fromgovernmental investigationsor otheractionsor lawsuitsstemmingfroma failureto be in compliancewith such laws or regulations.In addition,we aresubjectto theriskthata personor governmentcouldallegesuch fraudor other misconduct,even ifnone occurred.Ifany such actionsareinstitutedagainstus, and we arenot successfulin defendingourselvesor assertingour rights,thoseactionscouldhave a significantimpacton our businessand financialresults,including,withoutlimitation,theimpositionof significantcivil,criminaland administrative penalties,damages,monetaryfines,disgorgements,individualimprisonment,othersanctions,contractual damages,reputationalharm,diminishedprofitsand futureearningsand curtailmentof our operations,any of which couldadverselyaffectour abilityto operateour businessand our resultsof operations.

Risks Relatedto IntellectualProperty

We mayin the futurebecomeinvolvedin lawsuitsto defendourselvesagainstintellectualpropertydisputes, which could be expensiveand timeconsuming,and ultimatelyunsuccessful,and could resultin the diversion of significantresources,and hinder our abilityto commercializeour existingor futureproducts.

Our successdependsin parton not infringingthepatentsor violatingtheotherproprietaryrightsof others. Intellectualpropertydisputescan be costlyto defendand maycauseour business,operatingresultsand financial conditionto suffer.Significantlitigationregardingpatentrightsoccursin themedicalindustry.Whethermerited or not, itispossiblethatU.S.and foreignpatentsand pendingpatentapplicationscontrolledby thirdpartiesmay be allegedto coverour products.We mayalsofaceallegationsthatour employeeshave misappropriatedthe intellectualpropertyrightsof theirformeremployersor otherthirdparties.Our competitorsin both theU.S.and abroad,manyof which have substantiallygreaterresourcesand have madesubstantialinvestmentsin patent portfoliosand competingtechnologies,mayhave appliedforor obtainedor mayin thefutureapplyforand obtain,patentsthatwillprevent,limit,or otherwiseinterferewith our abilityto make,use, sell,and/orexportour products.Our competitorsmayhave one or morepatentsforwhich theycan threatenand/orinitiatepatent infringementactionsagainstus and/orany of our third-partysuppliers.Our abilityto defendourselvesand/orour third-partysuppliersmaybe limitedby our financialand humanresources,theavailabilityof reasonable defenses,and theultimateacceptanceof our defensesby thecourtsor juries.Furthermore,ifsuch patentsare successfullyassertedagainstus, thismayresultin an adverseimpacton our business,includinginjunctions, damages,and/orattorneys’fees.Fromtimeto timeand in theordinarycourseof business,we maydevelop noninfringementand/orinvaliditypositionswith respectto third-partypatents,which mayor not be ultimately adjudicatedas successfulby a judgeor juryifsuch patentswere assertedagainstus.

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We mayreceivein thefuture,particularlyas a publiccompany,communicationsfrompatentholders,including non-practicingentities,alleginginfringementof patentsor otherintellectualpropertyrightsor misappropriation of tradesecrets,or offeringlicensesto such intellectualproperty.Any claimsthatwe assertagainstperceived infringerscouldalsoprovokethesepartiesto assertcounterclaimsagainstus allegingthatwe infringetheir intellectualpropertyrights.At any giventime,we maybe involvedas eithera plaintiffor a defendantin a numberof patentinfringementactions,theoutcomesof which maynot be known forprolongedperiodsof time.

The largenumberof patents,therapidrateof new patentapplicationsand issuances,thecomplexitiesof the technologiesinvolved,and theuncertaintyof litigationsignificantlyincreasetherisksrelatedto any patent litigation.Any potentialintellectualpropertylitigationalsocouldforceus to do one or moreof thefollowing:

• stopselling,making,using,or exportingproductsthatuse thedisputedintellectualproperty;

• obtaina licensefromtheintellectualpropertyowner to continueselling,making,exporting,or using products,which licensemayrequiresubstantialroyaltypaymentsand maynot be availableon reasonableterms,or atall;

• incursignificantlegalexpenses;

• pay substantialdamagesor royaltiesto thepartywhose intellectualpropertyrightswe maybe found to be infringing,potentiallyincludingtrebledamagesifthecourtfindsthattheinfringementwas willful;

• ifa licenseisavailablefroma third-party,we mayhave to pay substantialroyalties,upfrontfeesor grantcross-licensesto intellectualpropertyrightsforour productsand services;

• pay theattorneyfeesand costsof litigationto thepartywhose intellectualpropertyrightswe maybe found to be infringing;

• findnon-infringingsubstituteproducts,which couldbe costlyand createsignificantdelaydue to the need forFDAregulatoryclearance;

• findalternativesuppliesforinfringingproductsor processes,which couldbe costlyand create significantdelaydue to theneed forFDAregulatoryclearance;and/or

• redesignthoseproductsor processesthatinfringeany third-partyintellectualproperty,which couldbe costly,disruptive,and/orinfeasible.

Fromtimeto time,we maybe subjectto legalproceedingsand claimsin theordinarycourseof businesswith respectto intellectualproperty.Even ifresolvedin our favor,litigationor otherlegalproceedingsrelatingto intellectualpropertyclaimsmaycauseus to incursignificantexpenses and coulddistractour technicaland managementpersonnelfromtheirnormalresponsibilities.In addition,therecouldbe publicannouncementsof theresultsof hearings,motionsor otherinterimproceedingsor developments,and ifsecuritiesanalystsor investorsperceivetheseresultsto be negative,itcouldhave a materialadverseeffecton thepriceof our common stock.Finally,any uncertaintiesresultingfromtheinitiationand continuationof any litigationcouldhave a materialadverseeffecton our abilityto raisethefundsnecessaryto continueour operations.

Ifany of theforegoingoccurs,we mayhave to withdrawexistingproductsfromthemarketor maybe unableto commercializeone or moreof our products,allof which couldhave a materialadverseeffecton our business, resultsof operationsand financialcondition.Any litigationor claimagainstus, even thosewithoutmerit,may causeus to incursubstantialcosts,and couldplacea significantstrainon our financialresources,divertthe attentionof managementfromour corebusinessand harmour reputation.Furthermore,as thenumberof participantsin therobotichairrestorationsurgerymarketgrows, thepossibilityof intellectualproperty infringementclaimsagainstus increases.

In addition,we mayindemnifyour customers,suppliersand internationaldistributorsagainstclaimsrelatingto theinfringementof theintellectualpropertyrightsof thirdpartiesrelatingto our products,methods,and/or manufacturingprocesses.Thirdpartiesmayassertinfringementclaimsagainstour customers,suppliers,or distributors.These claimsmayrequireus to initiateor defendprotractedand costlylitigationon behalfof our customers,suppliersor distributors,regardlessof themeritsof theseclaims.Ifany of theseclaimssucceed,we maybe forcedto pay damageson behalfof our customers,suppliers,or distributorsor maybe requiredto obtain licensesfortheproductstheyuse. Ifwe cannotobtainallnecessarylicenseson commerciallyreasonableterms, our customersmaybe forcedto stopusingour products,or our suppliersmaybe forcedto stopprovidingus with products.

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Similarly,interferenceor derivationproceedingsprovokedby thirdpartiesor broughtby theUnitedStatedPatent and TrademarkOffice,or USPTO,or any foreignpatentauthoritymaybe necessaryto determinethepriorityof inventionsor othermattersof inventorshipwith respectto our patentsor patentapplications.We mayalso becomeinvolvedin otherproceedings,such as re-examinationor oppositionproceedings,beforetheUSPTOor itsforeigncounterpartsrelatingto our intellectualpropertyor theintellectualpropertyrightsof others.An unfavorableoutcomein any such proceedingscouldrequireus to ceaseusingtherelatedtechnologyor to attempt to licenserightsto itfromtheprevailingparty or couldcauseus to losevaluableintellectualpropertyrights.Our businesscouldbe harmediftheprevailingpartydoes not offerus a licenseon commerciallyreasonableterms,if any licenseisofferedatall.Litigationor otherproceedingsmayfailand, even ifsuccessful,mayresultin substantialcostsand distractour managementand otheremployees.We mayalsobecomeinvolvedin disputes with othersregardingtheownershipof intellectualpropertyrights.For example,we jointlydevelopintellectual propertywith certainparties,and disagreementsmaythereforeariseas to theownershipof theintellectual propertydevelopedpursuantto theserelationships.Ifwe areunableto resolvethesedisputes,we couldlose valuableintellectualpropertyrights.

Changes in patentlaw could diminishthe valueof patentsin general,therebyimpairingour abilityto protect our existingand futureproducts.

Recentpatentreformlegislationcouldincreasetheuncertaintiesand costssurroundingtheprosecutionof our patentapplicationsand theenforcementor defenseof our issuedpatents.On September16, 2011, theLeahy- SmithAmericaInventsAct, or theLeahy-SmithAct, was signedintolaw. The Leahy-SmithAct includesa numberof significantchangesto U.S.patentlaw. These includeprovisionsthataffecttheway patentapplications areprosecuted,redefinepriorart,mayaffectpatentlitigation,and switchedtheU.S.patentsystemfroma “first-to-invent”systemto a “first-to-file”system.Under a “first-to-file”system,assumingtheotherrequirementsfor patentabilityaremet,thefirstinventorto filea patentapplicationgenerallywillbe entitledto thepatenton an inventionregardlessof whetheranotherinventorhad madetheinventionearlier.The USPTOrecentlydeveloped new regulationsand proceduresto governadministrationof theLeahy-SmithAct, and manyof thesubstantive changesto patentlaw associatedwith theLeahy-SmithAct, in particular,thefirst-to-fileprovisions,only became effectiveon March16, 2013. Accordingly,itisnot clearwhat, ifany, impacttheLeahy-SmithAct willhave on theoperationof our business.The Leahy-SmithAct and itsimplementationcouldincreasetheuncertaintiesand costssurroundingtheprosecutionof our patentapplicationsand theenforcementor defenseof our issuedpatents, allof which couldhave a materialadverseeffecton our businessand financialcondition.

Inaddition,patentreformlegislationmaypassinthefuturethatcouldleadtoadditionaluncertaintiesandincreased costssurroundingtheprosecution,enforcementanddefenseofourpatentsandapplications.Furthermore,theU.S. SupremeCourtandtheU.S.CourtofAppealsfortheFederalCircuithavemade,andwilllikelycontinuetomake, changesinhowthepatentlawsoftheU.S.areinterpreted.Forexample,theU.S.SupremeCourthasruledon severalpatentcasesinrecentyears,suchasAssociationforMolecularPathologyv.MyriadGenetics,Inc.(Myriad I),MayoCollaborativeServicesv.PrometheusLaboratories,Inc.,andAliceCorporationPty.Ltd.v.CLSBank International,eithernarrowingthescopeofpatentprotectionavailableincertaincircumstancesorweakeningthe rightsofpatentownersincertainsituations.Similarly,foreigncourtshavemade,andwilllikelycontinuetomake, changesinhowthepatentlawsintheirrespectivejurisdictionsareinterpreted.Wecannotpredictfuturechangesin theinterpretationofpatentlawsorchangestopatentlawsthatmightbeenactedintolawbyU.S.andforeign legislativebodies.Thosechangesmaymateriallyaffectourpatentsorpatentapplicationsandourabilitytoobtain additionalpatentprotectioninthefuture.

Obtaining and maintainingpatentprotectiondepends on compliancewith variousprocedural,document submission,feepaymentand otherrequirementsimposedby governmentalpatentagencies,and our patent protectioncould be reducedor eliminatedfornon-compliancewith theserequirements.

The USPTOand variousforeigngovernmentalpatentagenciesrequirecompliancewith a numberof procedural, documentary,feepayment,and othersimilarprovisionsduringthepatentapplicationprocess.In addition, periodicmaintenancefeeson issuedpatentsoftenmustbe paidto theUSPTOand foreignpatentagenciesover thelifetimeof thepatent.Whilean unintentionallapsecan in manycasesbe curedby paymentof a latefeeor by othermeansin accordancewith theapplicablerules,therearesituationsin which noncompliancecan resultin abandonmentor lapseof thepatentor patentapplication,resultingin partialor completelossof patentrightsin therelevantjurisdiction.Non-complianceeventsthatcouldresultin abandonmentor lapseof a patentor patent applicationinclude,but arenot limitedto, failureto respondto officialactionswithinprescribedtimelimits,non-paymentof feesand failureto properlylegalizeand submitformaldocuments.Ifwe failto maintainthepatents and patentapplicationscoveringour productsor procedures,we maynot be ableto stopa competitorfrom marketingproductsthatarethesameas or similarto our own, which would have a materialadverseeffecton our business.

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We maynot be ableto adequatelyprotectour intellectualpropertyrightsthroughout the world.

Filing,prosecutingand defendingpatentson our productsin allcountriesthroughouttheworld would be prohibitivelyexpensive.The requirementsforpatentabilitymaydifferin certaincountries,particularly developingcountries,and thebreadthof patentclaimsallowedcan be inconsistent.In addition,thelaws of some foreigncountriesmaynot protectour intellectualpropertyrightsto thesameextentas laws in theU.S. Consequently,we maynot be ableto preventthirdpartiesfrompracticingour inventionsin allcountriesoutside theU.S. Competitorsmayuse our technologiesin jurisdictionswhere we have not obtainedpatentprotectionto developtheirown productsand, furthermore,mayexportotherwiseinfringingproductsto territoriesin which we have patentprotectionthatmaynot be sufficientto terminateinfringingactivities.

We do not have patentrightsin certainforeigncountriesin which a marketmayexist.Moreover,in foreign jurisdictionswhere we do have patentrights,proceedingsto enforcesuch rightscouldresultin substantialcosts and divertour effortsand attentionfromotheraspectsof our business,couldput our patentsatriskof being invalidatedor interpretednarrowly,and our patentapplicationsatriskof not issuing.Additionally,such proceedingscouldprovokethirdpartiesto assertclaimsagainstus. We maynot prevailin any lawsuitsthatwe initiate,and thedamagesor otherremediesawarded,ifany, maynot be commerciallymeaningful.Thus, we may not be ableto stopa competitorfrommarketingand sellingin foreigncountriesproductsthatarethesameas or similarto our products,and our competitivepositionin theinternationalmarketwould be harmed.

We depend on certaintechnologiesthatare licensedto us. We do not controlthesetechnologiesand any loss of our rightsto themcould preventus fromsellingour products.

We aredependenton licensesfromHSCDevelopmentLLCand JamesA. Harris,M.D. forsomeof our key technologies.We do not own thepatentsthatunderlietheselicenses.Our rightsto use thetechnologywe license aresubjectto thenegotiationof, continuationof and compliancewith thetermsof thoselicenses.In somecases, we do not controltheprosecution,maintenance,or filingof thepatentsto which we hold licenses,or the enforcementof thesepatentsagainstthirdparties.These patentsand patentapplicationsarenot writtenby us or our attorneys,and we did not have controloverthedraftingand prosecution.Our licensorsmightnot have given thesameattentionto thedraftingand prosecutionof thesepatentsand applicationsas we would have ifwe had been theowners of thepatentsand applicationsand had controloverthedraftingand prosecution.We cannotbe certainthatdraftingand/orprosecutionof thelicensedpatentsand patentapplicationsby thelicensorshave been or willbe conductedin compliancewith applicablelaws and regulationsor willresultin validand enforceable patentsand otherintellectualpropertyrights.

Our intellectualpropertyagreementswith thirdpartiesmaybe subjectto disagreementsovercontract interpretation,which could narrow the scopeof our rightsto the relevantintellectualpropertyor technology or increaseour financialor otherobligationsto our licensors.

Certainprovisionsin our intellectualpropertyagreementsmaybe susceptibleto multipleinterpretations.The resolutionof any contractinterpretationdisagreementthatmayarisecouldaffectthescopeof our rightsto the relevantintellectualpropertyor technology or affectfinancialor otherobligationsundertherelevantagreement, eitherof which couldhave a materialadverseeffecton our business,financialcondition,resultsof operations and prospects.

In addition,whileitisour policyto requireour employeesand contractorswho maybe involvedin the conceptionor developmentof intellectualpropertyto executeagreementsassigningsuch intellectualpropertyto us, we maybe unsuccessfulin executingsuch an agreementwith eachpartywho in factconceivesor develops intellectualpropertythatwe regardas our own. Our assignmentagreementsmaynot be self-executingor maybe breached,and we maybe forcedto bringclaimsagainstthirdparties,or defendclaimstheymaybringagainstus, to determinetheownershipof what we regardas our intellectualproperty.

We maybe subjectto damagesresultingfromclaimsthatwe or our employeeshave wrongfullyused or disclosedallegedtradesecretsof our competitorsor are in breach of non-competitionor non-solicitation agreementswith our competitors.

We couldin thefuturebe subjectto claimsthatwe or our employeeshave inadvertentlyor otherwiseused or disclosedallegedtradesecretsor otherproprietaryinformationof formeremployersor competitors.Although we have proceduresin placethatseekto preventour employeesand consultantsfromusingtheintellectualproperty, proprietaryinformation,know-how or tradesecretsof othersin theirwork forus, we mayin thefuturebe subject to claimsthatwe causedan employeeto breachthetermsof hisor hernon-competitionor non-solicitation agreement,or thatwe or theseindividualshave, inadvertentlyor otherwise,used or disclosedtheallegedtrade secretsor otherproprietaryinformationof a formeremployeror competitor.Litigationmaybe necessaryto defendagainsttheseclaims.Even ifwe aresuccessfulin defendingagainsttheseclaims,litigationcouldresultin substantialcostsand couldbe a distractionto management.Ifour defenseto thoseclaimsfails,in additionto payingmonetarydamages,a courtcouldprohibitus fromusingtechnologiesor functionalitiesthatareessential to our products,ifsuch technologiesor functionalitiesarefound to incorporateor be derivedfromthetrade secretsor otherproprietaryinformationof theformeremployers.An inabilityto incorporatetechnologiesor functionalitiesthatareimportantor essentialto our productswould have a materialadverseeffecton our business and maypreventus fromsellingour productsor frompracticingour processes.In addition,we may losevaluableintellectualpropertyrightsor personnel.Moreover,any such litigationor thethreatthereofmay adverselyaffectour abilityto hireemployeesor contractwith independentsalesrepresentatives.A lossof key personnelor theirwork productcouldhamperor preventour abilityto commercializeour products,which could have an adverseeffecton our business,resultsof operationsand financialcondition.

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Ifour trademarksand tradenamesare not adequatelyprotected,then we maynot be ableto buildname recognitionin our marketsof interestand our businessmaybe adverselyaffected.

We hold varioustrademarksforour productsand services.Many of thesetrademarksareregisteredwith the USPTOand correspondinggovernmentagenciesin numerousothercountries,and we hold trademark applicationsforthesemarksin a numberof foreigncountries,althoughthelaws of manycountriesmaynot protectour trademarkrightsto thesameextentas thelaws of theU.S. Actionstakenby us to establishand protectour trademarksmightnot preventimitationof our productsor services,infringementof our trademark rightsby unauthorizedpartiesor otherchallengesto our ownershipor validityof our trademarks.Ifany of these eventsoccur,we maynot be ableto protectand enforceour rightsin thesetrademarks,which we need in orderto buildnamerecognitionwith potentialpartnersor customersin our marketsof interest.In addition,unauthorized third-partiesmayhave registeredtrademarkssimilarand identicalto our trademarksin foreignjurisdictionsor mayin thefuturefileforregistrationof such trademarks.Iftheysucceedin registeringor developingcommon law rightsin such trademarks,and ifwe were not successfulin challengingsuch third-partyrights,we maynot be ableto use such trademarksto marketour productsand servicesin thosecountries.Ifwe areunableto register our trademarks,enforceour trademarks,or bara third-partyfromregisteringor usinga trademark,our abilityto establishnamerecognitionbasedon our trademarksand competeeffectivelyin our marketsof interestmaybe adverselyaffected.

Ifwe are unable to protectthe confidentialityof our tradesecrets,our businessand competitivepositionmay be harmed.

In additionto patentand trademarkprotection,we alsorelyon tradesecrets,includingunpatentedknow-how, technologyand otherproprietaryinformation,to maintainour competitiveposition.We seekto protectour trade secrets,in part,by enteringintonon-disclosureand confidentialityagreementswith partieswho have accessto them,such as our consultantsand vendors,or our formeror currentemployees.We alsoenterintoconfidentiality and inventionor patentassignmentagreementswith our employeesand consultants.Despitetheseefforts, however, any of thesepartiesmaybreachtheagreementsand discloseour tradesecretsand otherunpatentedor unregisteredproprietaryinformation,and once disclosed,we arelikelyto losetradesecretprotection.Monitoring unauthorizedusesand disclosuresof our intellectualpropertyisdifficult,and we do not know whetherthesteps we have takento protectour intellectualpropertywillbe effective.In addition,we maynot be ableto obtain adequateremediesforany such breaches.Enforcinga claimthata partyillegallydisclosedor misappropriateda tradesecretisdifficult,expensiveand time-consuming,and theoutcomeisunpredictable.In addition,some courtsinsideand outsidetheU.S.arelesswillingor unwillingto enforcetradesecretprotection.

Furthermore,ourcompetitorsmayindependentlydevelopknowledge,methodsandknow-howsimilar,equivalent, orsuperiortoourproprietarytechnology.Competitorscouldpurchaseourproductsandattempttoreplicatesomeor allofthecompetitiveadvantageswederivefromourdevelopmentefforts,willfullyinfringeourintellectual propertyrights,designaroundourprotectedtechnology,ordeveloptheirowncompetitivetechnologiesthatfall outsideofourintellectualpropertyrights.Inaddition,ourkeyemployees,consultants,suppliersorotherindividuals withaccesstoourproprietarytechnologyandknow-howmayincorporatethattechnologyandknow-howinto projectsandinventionsdevelopedindependentlyorwiththirdparties.Asaresult,disputesmayariseregardingthe ownershipoftheproprietaryrightstosuchtechnologyorknow-how,andanysuchdisputemaynotberesolvedin ourfavor.Ifanyofourtradesecretsweretobelawfullyobtainedorindependentlydevelopedbyacompetitor,we wouldhavenorighttopreventthem,orthosetowhomtheycommunicateit,fromusingthattechnologyor informationtocompetewithusandourcompetitivepositioncouldbeadverselyaffected.Ifourintellectualproperty isnotadequatelyprotectedsoastoprotectourmarketagainstcompetitors’productsandmethods,ourcompetitive positioncouldbeadverselyaffected,ascouldourbusiness.

Risks Relatedto GovernmentRegulation

The ARTAS^®and ARTAS® iX Systemsand our operationsare subjectto extensivegovernmentregulationand oversightboth in the U.S.and abroad, and our failureto complywith applicablerequirementscould harm our business.

The ARTAS^®and ARTAS^® iX Systemsand relatedproductsand servicesareregulatedas medicaldevicessubjectto extensive regulationin theU.S.and elsewhere,includingby theFDAand itsforeigncounterparts.The FDAand foreign regulatoryagenciesregulate,amongotherthings,with respectto medicaldevices:

• design,developmentand manufacturing;

• testing,labeling,contentand languageof instructionsforuse and storage;

• clinicaltrials;

• productsafety;

• marketing,salesand distribution;

• premarketclearanceand approval;

• recordkeepingprocedures;

• advertisingand promotion;

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• recallsand fieldsafetycorrectiveactions;

• post-marketsurveillance,includingreportingof deathsor seriousinjuriesand malfunctionsthat,ifthey were to recur,couldleadto deathor seriousinjury;

• post-marketapprovalstudies;and

• productimportand export.

The regulationsto which we aresubjectarecomplexand have tendedto becomemorestringentovertime. Regulatorychangescouldresultin restrictionson our abilityto carryon or expand our operations,higherthan anticipatedcostsor lowerthananticipatedsales.

In theU.S., beforewe can marketa new medicaldevice,or a new use of, new claimforor significant modificationto an existingproduct,we mustfirstreceiveeitherclearanceunderSection510(k)of theFDCAor approvalof a PMA applicationfromtheFDA,unlessan exemptionapplies.In the510(k)clearanceprocess, beforea devicemaybe marketed,theFDAmustdeterminethata proposeddeviceis“substantiallyequivalent”to a legally-marketed“predicate”device,which includesa devicethathas been previouslyclearedthroughthe 510(k)process,a devicethatwas legallymarketedpriorto May 28, 1976 (pre-amendmentsdevice),a devicethat was originallyon theU.S.marketpursuantto an approvedpremarketapproval,or PMA, applicationand later down-classified,or a 510(k)-exemptdevice.To be “substantiallyequivalent,”theproposeddevicemusthave the sameintendeduse as thepredicatedevice,and eitherhave thesametechnologicalcharacteristicsas thepredicate deviceor have differenttechnologicalcharacteristicsand not raisedifferentquestionsof safetyor effectiveness thanthepredicatedevice.Clinicaldataaresometimesrequiredto supportsubstantialequivalence.In thePMA process,theFDAmustdeterminethata proposeddeviceissafeand effectiveforitsintendeduse based,in part, on extensivedata,including,but not limitedto, technical,pre-clinical,clinicaltrial,manufacturingand labeling data.The PMA processistypicallyrequiredfordevicesthataredeemedto pose thegreatestrisk,such as life- sustaining,life-supportingor implantabledevices.

Modificationsto productsthatareapprovedthrougha PMA applicationgenerallyrequireFDAapproval. Similarly,certainmodificationsmadeto productsclearedthrougha 510(k)mayrequirea new 510(k)clearance.Both thePMA approvaland the510(k)-clearanceprocesscan be expensive,lengthyand uncertain.The FDA’s510(k)clearanceprocessusuallytakesfromthreeto 12 months but can lastlonger.The processof obtaininga PMA ismuchcostlierand more uncertainthanthe510(k)-clearanceprocessand generallytakesfromone to three years,or even longer,fromthetimetheapplicationisfiledwith theFDA.In addition,a PMA generallyrequires, and the510(k)-clearanceprocesssometimesrequires,theperformanceof one or moreclinicaltrials.Despitethe time,effortand cost,we cannotassureyou thatany particulardevicewillbe approvedor clearedby theFDA. Any delayor failureto obtainnecessaryregulatoryapprovalscouldharmour business.

In theU.S., we have obtained510(k)premarketclearancefromtheFDAto markettheARTAS^®and ARTAS^® iX Systemfor harvestinghairfolliclesfromthescalpin mendiagnosedwith AGAwho have blackor brown straighthair.An elementof our strategyisto continueto add new functionalitiesand enhanceexistingfunctionalitiesto the ARTAS^®and ARTAS^® iX Systems.We expectthatcertainmodificationswe maymaketo theARTAS^®and ARTAS^® iX Systemsmayrequirenew 510(k)clearance; however, futuremodificationsmaybe subjectto thesubstantiallymorecostly,time-consuming and uncertainPMA process.IftheFDArequiresus to go througha lengthier,morerigorousexaminationfor futureproductsor modificationsto existingproductsthanwe had expected,productintroductionsor modificationscouldbe delayedor canceled,which couldcauseour salesto decline.

The FDAcan delay,limitor deny clearanceor approvalof a deviceformanyreasons,including:

• we maynot be ableto demonstrateto theFDA’s satisfactionthattheproductor modificationis substantiallyequivalentto theproposedpredicatedeviceor safeand effectiveforitsintendeduse;

• thedatafromour pre-clinicalstudiesand clinicaltrialsmaybe insufficientto supportclearanceor approval,where required;and

• themanufacturingprocessor facilitieswe use maynot meetapplicablerequirements.

The FDA’s and otherregulatoryauthorities’policiesmaychange,and additionalgovernmentregulationsmaybe enactedthatcouldprevent,limitor delayregulatoryapprovalof our products.For example,in December2016, the21stCenturyCures Act, or Cures Act, was signedintolaw. The Cures Act, amongotherthings,isintendedto modernizetheregulationof medicaldevicesand spurinnovation,but itsultimateimplementationremains unclear.Ifwe areslow or unableto adaptto changesin existingrequirementsor theadoptionof new requirementsor policies,or ifwe arenot ableto maintainregulatorycompliance,we mayfailto obtainany marketingclearancesor approvals,loseany marketingclearanceor approvalthatwe mayhave obtained,and we maynot achieveor sustainprofitability.

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Wealsocannotpredictthelikelihood,natureorextentofgovernmentregulationthatmayarisefromfuture legislationoradministrativeaction,eitherintheU.S.orabroad.Forexample,certainpoliciesoftheTrump administrationmayimpactourbusinessandindustry.Namely,theTrumpadministrationhastakenseveral executiveactions,includingtheissuanceofseveralExecutiveOrders,thatcouldimposesignificantburdens on,orotherwisemateriallydelay,theFDA’sabilitytoengageinroutineregulatoryandoversightactivitiessuchas implementingstatutesthroughrulemaking,issuanceofguidance,andreviewandapprovalofmarketing applications.Notably,onJanuary30,2017,PresidentTrumpissuedanExecutiveOrder,applicabletoallexecutive agenciesincludingtheFDA,requiringthatforeachnoticeofproposedrulemakingorfinalregulationtobeissuedin fiscalyear2017,theagencymustidentifyatleasttwoexistingregulationstoberepealed,unlessprohibitedbylaw. Theserequirementsarereferredtoasthe“two-for-one”provisions.ThisExecutiveOrderincludesabudget neutralityprovisionthatrequiresthetotalincrementalcostofallnewregulationsinthe2017fiscalyear,including repealedregulations,tobenogreaterthanzero,exceptinlimitedcircumstances.Forfiscalyears2018andbeyond, theExecutiveOrderrequiresagenciestoidentifyregulationstooffsetanyincrementalcostofanewregulationand approximatethetotalcostsorsavingsassociatedwitheachnewregulationorrepealedregulation.Ininterim guidanceissuedbytheOfficeofInformationandRegulatoryAffairswithinOMBonFebruary2,2017,the administrationindicatesthatthe“two-for-one”provisionsmayapplynotonlytoagencyregulations,butalsoto significantagencyguidancedocuments.Inaddition,onFebruary24,2017,PresidentTrumpissuedanexecutive orderdirectingeachaffectedagencytodesignateanagencyofficialasa“RegulatoryReformOfficer”andestablish a“RegulatoryReformTaskForce”toimplementthetwo-for-oneprovisionsandotherpreviouslyissuedexecutive ordersrelatingtothereviewoffederalregulations,howeveritisdifficulttopredicthowtheserequirementswillbe implemented,andtheextenttowhichtheywillimpacttheFDA’sabilitytoexerciseitsregulatoryauthority.Ifthese executiveactionsimposeconstraintsonFDA’sabilitytoengageinoversightandimplementationactivitiesinthe normalcourse,ourbusinessmaybenegativelyimpacted.

Even afterwe have obtainedtheproperregulatoryclearanceor approvalto marketa product,we have ongoing responsibilitiesunderFDAregulations.The failureto complywith applicableregulationscouldjeopardizeour abilityto selltheARTAS^®and ARTAS^® iX Systemsand resultin enforcementactionssuch as:

• warningletters;

• fines;

• injunctions;

• civilpenalties;

• terminationof distribution;

• recallsor seizuresof products;

• delaysin theintroductionof productsintothemarket;

• totalor partialsuspensionof production;

• refusalto grantfutureclearancesor approvals;

• withdrawalsor suspensionsof currentclearancesor approvals,resultingin prohibitionson salesof our productor products;and

• in themostseriouscases,criminalpenalties.

Any of thesesanctionscouldresultin higherthananticipatedcostsor lowerthananticipatedsalesand harmour reputation,business,financialconditionand resultsof operations.

We are subjectto extensivegovernmentalregulationin foreignjurisdictions,such as Europe, and our failure to complywith applicablerequirementscould cause our businessto suffer.

We mustmaintainregulatoryapprovalin foreignjurisdictionsin which we planto marketand selltheARTAS^® System.

In theEuropeanEconomicArea or EEA,manufacturersof medicaldevicesneed to complywith theEssential Requirementslaiddown in Annex IIto theEUMedicalDevicesDirective(CouncilDirective93/42/EEC).

Compliancewith theserequirementsisa prerequisiteto be ableto affixtheCEmarkto medicaldevices,without which theycannotbe marketedor soldin theEEA.To demonstratecompliancewith theEssentialRequirements and obtaintherightto affixtheCEMark,manufacturersof medicaldevicesmustundergoa conformity assessmentprocedure,which variesaccordingto thetypeof medicaldeviceand itsclassification.Exceptforlow riskmedicaldevices(ClassI with no measuringfunctionand which arenot sterile),where themanufacturercan issuean ECDeclarationof Conformitybasedon a self-assessmentof theconformityof itsproductswith the EssentialRequirements,a conformityassessmentprocedurerequirestheinterventionof a NotifiedBody, which isan organizationdesignatedby a competentauthorityof an EEAcountryto conductconformityassessments.

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Depending on therelevantconformityassessmentprocedure,theNotifiedBody would auditand examinethe TechnicalFileand thequalitysystemforthemanufacture,designand finalinspectionof our devices.The NotifiedBody issuesa CECertificateof Conformityfollowingsuccessfulcompletionof a conformityassessment procedureconductedin relationto themedicaldeviceand itsmanufacturerand theirconformitywith theEssentialRequirements.This Certificateentitlesthemanufacturerto affixtheCEmarkto itsmedicaldevices afterhavingpreparedand signeda relatedECDeclarationof Conformity.

As a rule,demonstrationof conformityof medicaldevicesand theirmanufacturerswith theEssential Requirementsmustbe based,amongotherthings,on theevaluationof clinicaldatasupportingthesafetyand performanceof theproductsduringnormalconditionsof use. Specifically,a manufacturermustdemonstratethat thedeviceachievesitsintendedperformanceduringnormalconditionsof use and thattheknown and foreseeable risks,and any adverseevents,areminimizedand acceptablewhen weighed againstthebenefitsof itsintended performance,and thatany claimsmadeabouttheperformanceand safetyof thedevice(e.g.,productlabelingand instructionsforuse)aresupportedby suitableevidence.This assessmentmustbe basedon clinicaldata,which can be obtainedfrom(1)clinicalstudiesconductedon thedevicesbeingassessed,(2)scientificliteraturefrom similardeviceswhose equivalencewith theassesseddevicecan be demonstratedor (3)both clinicalstudiesand scientificliterature.Withrespectto activeimplantablemedicaldevicesor ClassIIIdevices,themanufacturer mustconductclinicalstudiesto obtaintherequiredclinicaldata,unlessrelianceon existingclinicaldatafrom equivalentdevicescan be justified.The conductof clinicalstudiesin theEEAisgovernedby detailedregulatory obligations.These mayincludetherequirementof priorauthorizationby thecompetentauthoritiesof thecountry in which thestudytakesplaceand therequirementto obtaina positiveopinionfroma competentEthics Committee.This processcan be expensiveand time-consuming.

On April5, 2017, theEuropeanParliamentpassedtheMedicalDevicesRegulation,which repealsand replaces theEUMedicalDevicesDirective.Unlikedirectives,which mustbe implementedintothenationallaws of the EEAmemberStates,theregulationswould be directlyapplicable,i.e.,withouttheneed foradoptionof EEA memberStatelaws implementingthem,in allEEAmemberStatesand areintendedto eliminatecurrent differencesin theregulationof medicaldevicesamongEEAmemberStates.The MedicalDevicesRegulation, amongotherthings,isintendedto establisha uniform,transparent,predictableand sustainableregulatory frameworkacrosstheEEAformedicaldevicesand in vitrodiagnosticdevicesand ensurea high levelof safety and healthwhilesupportinginnovation.

The MedicalDevicesRegulationwillhowever only becomeapplicablethreeyearsafterpublication.Once applicable,thenew regulationswillamongotherthings:

• strengthentheruleson placingdeviceson themarketand reinforcesurveillanceonce theyare available;

• establishexplicitprovisionson manufacturers’responsibilitiesforthefollow-upof thequality, performanceand safetyof devicesplacedon themarket;

• improvethetraceabilityof medicaldevicesthroughoutthesupplychainto theend-useror patient througha uniqueidentificationnumber;

• setup a centraldatabaseto providepatients,healthcareprofessionalsand thepublicwith comprehensiveinformationon productsavailablein theEU; and

• strengthenrulesfortheassessmentof certainhigh-riskdevices,such as implants,which mayhave to undergoan additionalcheckby expertsbeforetheyareplacedon themarket.

These modificationsmayhave an impacton theway we conductour businessin theEEA.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security. Our actual or perceived failure to comply with such obligations could harm our business.

We are subject to diverse laws and regulations relating to data privacy and security, including, in the United States, the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and, in the European Union (EU) and shortly in the European Economic Area (EEA), Regulation 2016/679, known as the General Data Protection Regulation, or GDPR. New global privacy rules are being enacted and existing ones are being updated and strengthened. Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized use or disclosure of sensitive or confidential patient or consumer information, whether by us, one of our business associates or another third-party, could have a material adverse effect on our business, reputation, financial condition and results of operations, including but not limited to: material fines and penalties; damages; litigation; consent orders; and injunctive relief.

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Furthermore, these rules are constantly changing; for example, the GDPR came into effect in May this year reforming the European regime. The GDPR implements more stringent operational requirements than its predecessor legislation. For example, the GDPR requires us to make more detailed disclosures to data subjects, requires disclosure of the legal basis on which we can process personal data, makes it harder for us to obtain valid consent for processing, provides more robust rights for data subjects, introduces mandatory data breach notification through the EU, imposes additional obligations on us when contracting with service providers and requires us to adopt appropriate privacy governance including policies, procedures, training and data audit. If we do not comply with our obligations under the GDPR, we could be exposed to fines of up to the higher of 20,000,000 Euros or up to 4% of our total worldwide annual turnover in the event of a significant breach. In addition, we may be the subject of litigation and/or adverse publicity, which could have material adverse effect on our reputation and business.

We are also subject to evolving European laws on data export and electronic marketing. The rules on data export will apply when we transfer personal data to group companies or third parties outside of the EEA. For example, in 2015, the Court of Justice of the EU ruled that the U.S.-EU Safe Harbor framework, one compliance method by which companies could transfer personal data regarding citizens of the EU to the United States, was invalid and could no longer be relied upon. The U.S.-EU Safe Harbor framework was replaced with the U.S.-EU Privacy Shield framework, which is now under review and there is currently litigation challenging another EU mechanism for adequate data transfers, the standard contractual clauses. It is uncertain whether the Privacy Shield framework and/or the standard contractual clauses will be similarly invalidated by the European courts. These changes may require us to find alternative bases for the compliant transfer of personal data from the EEA to the U.S and we are monitoring developments in this area. The EU is also in the process of replacing the e-Privacy Directive with a new set of rules taking the form of a regulation, which will be directly implemented in the laws of each European member state, without the need for further enactment. The current draft of the e-Privacy Regulation retains strict op-in for electronic marketing and the penalties for contravention have significantly increased with fining powers to the same levels as GDPR (i.e. the greater of 20,000,000 Euros or 4% of total global annual revenue).

Modificationsto the ARTAS^®Systemor ARTAS® iX System and any futureproductsthatreceive510(k)clearancesmayrequirenew 510(k)clearancesor PMA approvals,and ifwe makesuch modificationswithout seekingnew clearancesor approvals,the FDAmayrequireus to ceasemarketingor recallthe modifiedproductsuntilclearancesor approvalsare obtained.

The ARTAS^®and ARTAS® iX Systemshave received510(k)clearancesfromtheFDA.Any modificationto a 510(k)-cleareddevice thatcouldsignificantlyaffectitssafetyor effectiveness,or thatwould constitutea majorchangein itsintended use, designor manufacture,requiresa new 510(k)clearanceor, possibly,approvalof a PMA. The FDArequires everymanufacturerto makethisdeterminationin thefirstinstance,but theFDAmayreviewany manufacturer’s decision.The FDAmaynot agreewith our decisionsregardingwhethernew clearancesor approvalsare necessary.We have mademodificationsto theARTAS^®Systemin thepastand have determinedbasedon our reviewof theapplicableFDAregulationsand guidancethatin certaininstancesnew 510(k)clearancesor PMA approvalswere not required.We maymakesimilarmodificationsor add additionalfunctionalitiesin thefuture thatwe believedo not requirea new 510(k)clearanceor approvalof a PMA. The FDAhas issueda guidance documentintendedto assistmanufacturersin determiningwhethermodificationsto cleareddevicesrequirethe submissionof a new 510(k),and such guidancehas comeunderscrutinyin recentyears,thepracticalimpactof which isunclear.IftheFDAdisagreeswith our determinationand requiresus to submitnew 510(k)notifications or PMA applicationsformodificationsto our previouslyclearedproductsforwhich we have concludedthatnew clearancesor approvalsareunnecessary,we maybe requiredto ceasemarketingor to recallthemodifiedproduct untilwe obtainclearanceor approval,which couldrequireus to redesignour products,conductclinicaltrialsto supportany modifications,and pay significantregulatoryfinesor penalties.In addition,theFDAmaynot approveor clearour productsfortheindicationsthatarenecessaryor desirableforsuccessfulcommercialization or couldrequireclinicaltrialsto supportany modifications.Any delayor failurein obtainingrequiredclearances or approvalswould adverselyaffectour abilityto introducenew or enhancedproductsin a timelymanner,which in turnwould harmour futuregrowth. Any of theseactionswould harmour operatingresults.

We are subjectto restrictionson the indicationsforwhich we are permittedto marketour products,and any violationof thoserestrictions,or marketingof the ARTAS^®Systemor ARTAS® iX System foroff-labeluses, could subjectus to regulatoryenforcementaction.

The FDA’s 510(k)clearancefortheARTAS^®and ARTAS^® iX Systemsspecifiestheclearedindicationforuse of theproductis dissectinghairfolliclesfromthescalpin mendiagnosedwith AGAwho have blackor brown straighthair.The ARTAS^®and ARTAS^® iX Systemsareintendedto assistphysiciansin identifyingand extractinghairfollicularunitsfromthescalp duringhairtransplantation.

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We trainour marketingand directsalesforceto not promotetheARTAS^®Systemor ARTAS® iX System forusesoutsideof theFDA-clearedindicationsforuse, known as “off-labeluses.”We cannot,however, preventa physicianfromusingthe ARTAS^®Systemor ARTAS^® iX System off-labelwhen, in thephysician’sindependentprofessionalmedicaljudgment,he or she deems itappropriate.Theremaybe increasedriskof injuryto patientsifphysiciansattemptto use theARTAS^®System or ARTAS^® iX System off-label.Furthermore,theuse of theARTAS^®System or ARTAS^® iX Systemforindicationsotherthanthoseclearedby theFDAor approvedby any foreignregulatorybody maynot effectivelytreatsuch conditions,which couldharmour reputationin themarketplaceamongphysiciansand patients.

IftheFDAor any foreignregulatorybody determinesthatour promotionalmaterialsor trainingconstitute promotionof an off-labeluse, itcouldrequestthatwe modifyour trainingor promotionalmaterialsor subjectus to regulatoryor enforcementactions,including,amongotherthings,theissuanceor impositionof an untitled letter,a warningletter,injunction,seizure,refusalto issuenew 510(k)sor PMAs, withdrawalof existing510(k)s or PMAs, refusalto grantexportapprovals,and civilfinesor criminalpenalties.Itisalsopossiblethatother federal,stateor foreignenforcementauthoritiesmighttakeactionunderotherregulatoryauthority,such as false claimslaws, iftheyconsiderour businessactivitiesto constitutepromotionof an off-labeluse, which could resultin significantpenalties,including,but not limitedto, criminal,civiland administrativepenalties,damages, fines,disgorgement,exclusionfromparticipationin governmenthealthcareprogramsand thecurtailmentof our operations.

The ARTAS^®System or ARTAS® iX Systemmaycause or contributeto adversemedicaleventsthatwe are requiredto reportto the FDA,and ifwe failto do so, we would be subjectto sanctionsthatcould harm our reputation,business, financialconditionand resultsof operations.The discoveryof serioussafetyissueswith the ARTAS^®System or ARTAS® iX System, or a recallof the ARTAS^®Systemor ARTAS® iX System eithervoluntarilyor at the directionof the FDAor another governmental authority,could have a negativeimpacton us.

We aresubjectto theFDA’s medicaldevicereportingregulationsand similarforeignregulations.The FDA’s medicaldevicereportingregulationsrequireus to reportto theFDAwhen we receiveor becomeawareof informationthatreasonablysuggeststhattheARTAS^®Systemor ARTAS^® iX System mayhave causedor contributedto a deathor seriousinjuryor malfunctionedin a way that,ifthemalfunctionwere to recur,itcouldcauseor contributeto a deathor seriousinjury.The timingof our obligationto reportistriggeredby thedatewe becomeawareof the adverseeventas wellas thenatureof theevent.We mayfailto reportadverseeventsof which we becomeaware withintheprescribedtimeframe.We mayalsofailto recognizethatwe have becomeawareof a reportable adverseevent,especiallyifitisnot reportedto us as an adverseeventor ifitisan adverseeventthatis unexpectedor removedin timefromtheuse of theARTAS^®System ARTAS^® iX System, as the case may be.Ifwe failto complywith our reporting obligations,theFDAcouldact,includingwarningletters,untitledletters,administrativeactions,criminal prosecution,impositionof civilmonetarypenalties,revocationof our deviceclearance,seizureof our productsor delayin clearanceof futureproducts.

The FDAand foreignregulatorybodieshave theauthorityto requiretherecallof commercializedproductsin the eventof materialdeficienciesor defectsin designor manufactureof a productor ifa productposes an unacceptableriskto health.The FDA’s authorityto requirea recallmustbe basedon a findingthatthereis reasonableprobabilitythatthedevicecouldcauseseriousinjuryor death.We mayalsochooseto voluntarily recalla productifany materialdeficiencyisfound. A government-mandatedor voluntaryrecallby us could occurbecause of an unacceptableriskto health,componentfailures,malfunctions,manufacturingdefects, labelingor designdeficiencies,packagingdefectsor otherdeficienciesor failuresto complywith applicable regulations.We cannotassureyou thatproductdefectsor othererrorswillnot occurin thefuture.Recalls involvingtheARTAS^®Systemor ARTAS^® iX System couldbe particularlyharmfulto our business,financialconditionand resultsof operationsbecauseitisour only product.

Companiesarerequiredtomaintaincertainrecordsofrecallsandcorrections,eveniftheyarenotreportabletothe FDA.WemayinitiatevoluntarywithdrawalsorcorrectionsfortheARTAS^®Systemor ARTAS^® iX System inthefuturethatwedetermine donotrequirenotificationoftheFDA.IftheFDAdisagreeswithourdeterminations,itcouldrequireustoreport thoseactionsasrecallsandwemaybesubjecttoenforcementaction.Afuturerecallannouncementcouldharmour reputationwithcustomers,potentiallyleadtoproductliabilityclaimsagainstusandnegativelyaffectoursales.

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Ifwe or our distributorsdo not obtainand maintaininternationalregulatoryregistrationsor approvalsforthe ARTAS^®System,our abilityto marketand sellthe ARTAS^®Systemoutsideof the U.S.willbe diminished.

Saleof theARTAS^®SystemoutsidetheU.S.aresubjectto foreignregulatoryrequirementsthatvarywidelyfrom countryto country.In addition,theFDAregulatesexportsof medicaldevicesfromtheU.S. Whilethe regulationsof somecountriesmaynot imposebarriersto marketingand sellingtheARTAS^®Systemor only requirenotification,othersrequirethatwe or our distributorsobtaintheapprovalof a specifiedregulatorybody. Complyingwith foreignregulatoryrequirements,includingobtainingregistrationsor approvals,can be expensiveand time-consuming,and we cannotbe certainthatwe or our distributorswillreceiveregulatory approvalsin eachcountryin which we planto markettheARTAS^®Systemor thatwe willbe ableto do so on a timelybasis.The timerequiredto obtainregistrationsor approvals,ifrequiredby othercountries,maybe longer thanthatrequiredforFDAclearance,and requirementsforsuch registrations,clearances,or approvalsmay significantlydifferfromFDArequirements.Ifwe modifytheARTAS^®System,we or our distributorsmayneed to applyforadditionalregulatoryapprovalsor otherauthorizationsbeforewe arepermittedto sellthemodified product.In addition,we maynot continueto meetthequalityand safetystandardsrequiredto maintainthe authorizationsthatwe or our distributorshave received.Ifwe or our distributorsareunableto maintainour authorizationsin a particularcountry,we willno longerbe ableto selltheapplicableproductin thatcountry, which couldharmour business.

Regulatoryclearanceor approvalby theFDAdoes not ensureclearanceor approvalby regulatoryauthoritiesin othercountries,and clearanceor approvalby one or moreforeignregulatoryauthoritiesdoes not ensure clearanceor approvalby regulatoryauthoritiesin otherforeigncountriesor by theFDA.However, a failureor delayin obtainingregulatoryclearanceor approvalin one countrymayhave a negativeeffecton theregulatory processin others.

We mustmanufactureour productsin accordancewith federaland stateregulations,and we could be forced to recallour installedsystemsor terminateproductionifwe failto complywith theseregulations.

The methods used in, and the facilities used for, the manufacture of the ARTAS^® and ARTAS^® iX Systems and related products must comply with the FDA’s Quality System Regulation, or QSR, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices.

Furthermore, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality and applicable regulatory requirements. The FDA enforces the QSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors. The ARTAS^® and ARTAS^® iX Systems are also subject to similar state regulations and various laws and regulations of foreign countries governing manufacturing.

We cannotguaranteethatwe or any subcontractorswilltakethenecessarystepsto complywith applicable regulations,which couldcausedelaysin thedeliveryof theARTAS^®System or ARTAS^® iX System.In addition,failureto complywith applicableFDArequirementsor laterdiscoveryof previouslyunknown problemswith theARTAS^®System or ARTAS^® iX System manufacturingprocessescouldresultin, amongotherthings:

• warninglettersor untitledletters;

• fines,injunctionsor civilpenalties;

• suspensionor withdrawalof approvalsor clearances;

• seizuresor recallsof our products;

• totalor partialsuspensionof productionor distribution;

• administrativeor judiciallyimposedsanctions;

• theFDA’s refusalto grantpendingor futureclearancesor approvalsforour products;

• clinicalholds;

• refusalto permittheimportor exportof our products;and

• criminalprosecutionto us or our employees.

Any of these actions could significantly and negatively impact supply of our products. If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and suffer reduced revenue and increased costs.

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We maybe subjectto variousfederaland statelaws pertainingto healthcarefraud and abuse, and any violationsby us of such laws could resultin finesor otherpenalties.

WhileproceduresutilizingtheARTAS^®and ARTAS^® iX Systemsarenot currentlycoveredor reimbursedby any third-partypayor, our commercial,researchand otherfinancialrelationshipswith healthcareprovidersand othersmaybe subjectto variousfederaland statelaws intendedto preventhealthcarefraudand abuse.Such laws includetheU.S.federal Anti-KickbackStatuteand similarlaws thatapplyto statehealthcareprograms,privatepayorsand self-pay patients;theU.S.federalciviland criminalfalseclaimslaws, such as thecivilFalseClaimsAct, and civil monetarypenaltieslaws;stateand federaldataprivacyand securitylaws and regulations;stateand federal physicianpaymenttransparencylaws;and stateand federalconsumerprotectionand unfaircompetitionlaws.

Further,theselaws mayimpactany sales,marketingand educationprogramswe currentlyhave or maydevelop in thefutureand theway we implementany of thoseprograms.Penaltiesforviolationsof theselaws can includeexclusionfromfederalhealthcareprogramsand substantialciviland criminalpenalties.

Recentlyenactedand futurelegislationmayincreasethe difficultyand costforus to sellour products.

In theU.S.and somenon-U.S. jurisdictions,therehave been, and we expecttherewillcontinueto be, a number of legislativeand regulatorychangesand proposedchangesregardingthehealthcaresystemthatcould,among otherthings,restrictor regulatepost-approvalactivitiesand affectour abilityto profitablysellour products.For example,in March2010, thePatientProtectionand AffordableCare Act, as amendedby theHealthCare and EducationReconciliationAct, collectivelytheAffordableCare Act, was enacted.The AffordableCare Act, imposed,amongotherthings,an annualexcisetaxof 2.3% on any entitythatmanufacturesor importsmedical devicesofferedforsalein theU.S.,which, due to subsequentlegislativeamendments,has been suspendedfrom January1, 2016 to December31, 2019, and, absentfurtherlegislativeaction,willbe reinstatedstartingJanuary1, 2020. Itisuncertaintheextentto which any challenges,amendmentsand attemptsto repealand replacethe AffordableCare Act in thefuturemayimpactour businessor financialcondition.We expectthattheAffordable Care Act, as wellas otherhealthcarereformmeasuresthatmaybe adoptedin thefuture,maypotentiallyincrease our coststo sellour productand decreaseour profitability.

Recent U.S. tax legislation and future changes to applicable U.S. or foreign tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.

We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in laws and policy relating to taxes or trade may have an adverse effect on our business, financial condition and results of operations. For example, the U.S. government recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a more generally territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections and will be subject to interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation. Generally, future changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial conditions and results of operations.

Risks Relatedto Our Common Stock

Our stockpricemaybe volatile,and you maynot be ableto resellsharesof our commonstockat or above the priceyou paid.

The marketpriceof our commonstockcouldbe highlyvolatileand couldbe subjectto wide fluctuationsin responseto variousfactors,someof which arebeyond our control.These factorsinclude thosediscussedin this“Risk Factors”sectionand otherssuch as:

• any failure to integrate with Venus Concept following the completion of the Merger;

• thecontinuedgrowth in demandfortheARTAS^®Systemsand ARTASprocedures;

• our commercialization,marketingand manufacturing capabilities;

• thecontinuingproductivityand effectivenessof our commercialinfrastructureand salesforce;

• our financialperformance;

• our intentionsand our abilityto establishcollaborationsand/orpartnerships;

• the timing or likelihood of regulatory filings and approvals for the ARTAS^® Systems for expanded indications and functionality;

• our commercialization,marketingand manufacturingcapabilities;

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• our expectationsregardingthepotentialmarketsizeand thesizeof thepatientpopulationsforthe ARTAS^®Systems;

• theeffectivepricingof theARTAS^®Systems,servicesand procedures;

• theimplementationof our businessmodeland strategicplansforour businessand technology;

• thescopeof protectionwe can establishand maintainforintellectualpropertyrightscovering theARTAS^®Systems,alongwith any productenhancements;

• estimatesof our expenses,futurerevenue,capitalrequirements,our needsforadditionalfinancingand our abilityto obtainadditionalcapital;

• our financialperformance;and

• developmentsand projectionsrelatingto our competitorsand our industry,includingcompeting therapiesand procedures.

In addition,thestockmarketsin general,and themarketsformedicaldeviceand aestheticstocksin particular, have experiencedextremevolatilitythatmayhave been unrelatedto theoperatingperformanceof theissuer. These broadmarketfluctuationsmayadverselyaffectthemarketpriceor liquidityof our commonstock.In the past,when themarketpriceof a stockhas been volatile,holdersof thatstockhave sometimesinstitutedsecurities classactionlitigationagainsttheissuer.Recently, several securities class action complaints have been filed against us, certain of our current and former executive officers and directors, certain of our investors and certain underwriters in our IPO. These complaints allege violations of Sections 11, 12(a)(2) and 15 of the Securities Act due to allegedly false and misleading statements made in connection with our IPO. While we believe that these lawsuits are without merit and we intend to vigorously defend against these claims, we could incur substantial costs in defending these lawsuits and the attention of our management could be diverted from the operation of our business. Further, if more of our stockholders were to bring additional lawsuits on similar or unrelated grounds, we could incur substantial costs defending these additional lawsuits and the attention of our management would be further diverted from the operation of our business.

Anactivemarketforour commonstockmaynot be maintained.

Priorto our IPO,there had been no publicmarketforsharesof our commonstock. Our stock only recently began trading on the Nasdaq Global Market, but we can provide no assurance that we will be able to maintain an active trading market on the Nasdaq Global Market or any other exchange in the future. If an active market for our common stock does not develop or is not maintained, it may be difficult for our stockholders to sell shares without depressing the market price for the shares or at all. An inactivemarket mayalsoimpairour abilityto raisecapitalby sellingsharesand mayimpairour abilityto acquireother businesses,applications,or technologiesusingour sharesas consideration.

Ifsecuritiesor industryanalystsissuean adverseor misleadingopinion regardingour stock,our stockpriceand tradingvolumecould decline.

The tradingmarketforour commonstockis influencedby theresearchand reportsthatindustryor securitiesanalystspublishaboutus or our business.We currently have very limited researchcoverageby securitiesand industryanalysts.Ifno additional securitiesor industryanalystscommencecoverageof us, themarket price or trading volumeofour stockcould be negativelyimpacted.Ifany of theanalystswho coverus issuean adverseor misleadingopinionregardingus, our businessmodel,our intellectualpropertyor our stockperformance,or ifour operatingresultsfailto meettheexpectationsof analysts, our stockpricewould likelydecline.Ifone or moreof theseanalystsceasecoverageof us or failto publish reportson us regularly,we couldlosevisibilityin thefinancialmarkets,which in turncouldcauseour stockprice or tradingvolumeto decline.

We are an “emerginggrowth company”and as a result of the reduceddisclosureand governance requirementsapplicableto emerginggrowth companies,our commonstockmaybe lessattractiveto investors.

We arean “emerginggrowth company,”as definedin theJOBSAct, and we intendto takeadvantageof certain exemptionsfromvariousreportingrequirementsthatareapplicableto otherpubliccompaniesthatarenot emerginggrowth companiesincluding,but not limitedto, not beingrequiredto complywith theauditor attestationrequirementsof Section404, reduceddisclosureobligationsregardingexecutivecompensationin our periodicreportsand proxy statements,and exemptionsfromtherequirementsof holdinga nonbindingadvisory voteon executivecompensation,stockholderapprovalof any goldenparachutepaymentsnot previously approvedand delayedadoptionof new or revisedaccountingstandardsissuedsubsequentto theenactmentof the JOBSAct untilsuch timeas thosestandardsapplyto privatecompanies.We cannotpredictifinvestorswillfind our commonstocklessattractivebecausewe willrelyon theseexemptions.Ifsomeinvestorsfindour common stocklessattractiveas a result,theremaybe a lessactivetradingmarketforour commonstockand our stock pricemaybe morevolatile.We maytakeadvantageof thesereportingexemptionsuntilwe areno longeran emerginggrowth company.We willremainan emerginggrowth companyuntiltheearlierof (1)thelastday of thefiscalyear(a)followingthefifthanniversaryof thecompletionof our IPO,(b)in which we have total annualgrossrevenueof atleast$1.07 billion,or (c)in which we aredeemedto be a largeacceleratedfiler,which meansthemarketvalueof our commonstockthatisheldby non-affiliatesexceeds$700.0 millionas of theprior June 30th, and (2)thedateon which we have issuedmorethan$1.0 billionin non-convertibledebtduringthe priorthree-yearperiod.

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Ifwe sellsharesof our commonstockin futurefinancings,stockholdersmayexperienceimmediatedilution and, as a result,our stockpricemaydecline.

We mayfromtimeto timeissueadditionalsharesof commonstockata discountfromthecurrentmarketpriceof our commonstock.As a result,our stockholderswould experienceimmediatedilutionupon thepurchaseof any sharesof our commonstocksoldatsuch discount.In addition,as opportunitiespresentthemselves,we mayenter intofinancingor similararrangementsin thefuture,includingtheissuanceof debtsecurities,preferredstockor commonstock.Ifwe issuecommonstockor securitiesconvertibleintocommonstock,our commonstockholders would experienceadditionaldilutionand, as a result,our stockpricemaydecline.

Our abilityto use our net operatinglosscarryforwardsand certainothertax attributesmaybe limited.

We have incurredsubstantiallossesduringour historyand do not expectto becomeprofitablein thenearfuture, and we mayneverachieveprofitability.To theextentthatwe continueto generatetaxablelosses,unused losses willcarryforwardto offsetfuturetaxableincome,ifany, untilsuch unused lossesexpire.Under Sections382 and 383 of theInternalRevenue Code of 1986, as amended,ifa corporationundergoesan “ownershipchange,” generallydefinedas a greaterthan50 percentagepointchange(by value)in itsequityownershipby certain stockholdersovera three-yearperiod,thecorporation’sabilityto use itspre-changenetoperatingloss carryforwards,or NOLs,and otherpre-changetaxattributes(suchas researchand developmenttaxcredits)to offsetitspost-changeincomeor taxesmaybe limited.We mayhave experiencedownershipchangesin thepast and mayexperienceownershipchangesin thefutureand/orsubsequentshiftsin our stockownership(someof which shiftsareoutsideour control).As a result,ifwe earnnettaxableincome,our abilityto use our pre-changeNOLsto offsetsuch taxableincomecouldbe subjectto limitations.Similar provisionsof statetaxlaw mayalsoapply.As a result,even ifwe attainprofitability,we maybe unableto use a materialportionof our NOLsand othertaxattributes.

Provisionsin our charterdocumentsand under Delaware law could discouragea takeoverthatstockholders mayconsiderfavorableand mayleadto entrenchmentof management.

Our amendedand restatedcertificateof incorporationand amendedand restatedbylaws containprovisionsthatcoulddelayor prevent changesin controlor changesin our managementwithouttheconsentof our boardof directors.These provisions willincludethefollowing:

• a classifiedboardof directorswith three-yearstaggeredterms,which maydelaytheabilityof stockholdersto changethemembershipof a majorityof our boardof directors;

• no cumulativevotingin theelectionof directors,which limitstheabilityof minoritystockholdersto electdirectorcandidates;

• theexclusiverightof our boardof directorsto electa directorto filla vacancycreatedby theexpansion of theboardof directorsor theresignation,deathor removalof a director,which preventsstockholders frombeingableto fillvacancieson our boardof directors;

• theabilityof our boardof directorsto authorizetheissuanceof sharesof preferredstockand to determinethepriceand othertermsof thoseshares,includingpreferencesand votingrights,without stockholderapproval,which couldbe used to significantlydilutetheownershipof a hostileacquirer;

• theabilityof our boardof directorsto alterour bylaws withoutobtainingstockholderapproval;

• therequiredapprovalof atleast66 2/3%of thesharesentitledto voteatan electionof directorsto adopt,amendor repealour bylaws or repealtheprovisionsof our amendedand restatedcertificateof incorporationregardingtheelectionand removalof directors;

• a prohibitionon stockholderactionby writtenconsent,which forcesstockholderactionto be takenat an annualor specialmeetingof our stockholders;

• therequirementthata specialmeetingof stockholdersmaybe calledonly by thechairmanof theboard of directors,thechiefexecutiveofficer,thepresidentor theboardof directors,which maydelaythe abilityof our stockholdersto forceconsiderationof a proposalor to act,includingtheremoval of directors;and

• advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

In addition,theseprovisionswould applyeven ifwe were to receivean offerthatsomestockholdersmay considerbeneficial.

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We arealsosubjectto theanti-takeoverprovisionscontainedin Section203 of theDelawareGeneral CorporationLaw. Under Section203, a corporationmaynot, in general,engagein a businesscombinationwith any holderof 15% or moreof itscapitalstockunlesstheholderhas heldthestockforthreeyearsor, amongother exceptions,theboardof directorshas approvedthetransaction.

Claimsforindemnificationby our directorsand officersmayreduceour availablefunds to satisfysuccessful third-partyclaimsagainstus and mayreducethe amount of moneyavailableto us.

Our amendedand restatedcertificateof incorporationand amendedand restatedbylaws providethatwe will indemnifyour directorsand officers,in eachcaseto thefullestextentpermittedby Delawarelaw.

In addition,as permittedby Section145 of theDelawareGeneralCorporationLaw, our amendedand restated bylaws and our indemnificationagreements thatwe have enteredintowith our directorsand officersprovidethat:

• we willindemnifyour directorsand officersforservingus in thosecapacitiesor forservingother businessenterprisesatour request,to thefullestextentpermittedby Delawarelaw. Delawarelaw providesthata corporationmayindemnifysuch personifsuch personactedin good faithand in a mannersuch personreasonablybelievedto be in or not opposed to thebestinterestsof theregistrant and, with respectto any criminalproceeding,had no reasonablecauseto believesuch person’sconduct was unlawful;

• we may,in our discretion,indemnifyemployeesand agentsin thosecircumstanceswhere indemnificationispermittedby applicablelaw;

• we arerequiredto advanceexpenses,as incurred,to our directorsand officersin connectionwith defendinga proceeding,exceptthatsuch directorsor officersshallundertaketo repaysuch advancesif itisultimatelydeterminedthatsuch personisnot entitledto indemnification;

• we willnot be obligatedpursuantto our amendedand restatedbylaws to indemnifya personwith respectto proceedingsinitiatedby thatpersonagainstus or our otherindemnitees,exceptwith respect to proceedingsauthorizedby our boardof directorsor broughtto enforcea rightto indemnification;

• therightsconferredin our amendedand restatedbylaws arenot exclusive,and we areauthorizedto enterintoindemnificationagreementswith our directors,officers,employeesand agentsand to obtain insuranceto indemnifysuch persons;and

• we maynot retroactivelyamendour amendedand restatedbylaw provisionsto reduceour indemnificationobligationsto directors,officers,employeesand agents.

Our certificateof incorporationprovidesthatthe Court of Chancery of the Stateof Delaware willbe the exclusiveforumforsubstantiallyalldisputesbetween us and our stockholders,which could limitour stockholders’abilityto obtaina favorablejudicialforumfordisputeswith us or our directors,officersor employees.

Our amended and restated certificateof incorporationprovidesthattheCourt of Chanceryof theStateof Delawareistheexclusive forumforany derivativeactionor proceedingbroughton our behalf,any actionassertinga breachof fiduciary duty, any actionassertinga claimagainstus arisingpursuantto theDelawareGeneralCorporationLaw, our certificateof incorporationor our bylaws, any actionto interpret,apply,enforce,or determinethevalidityof our certificateof incorporationor bylaws, or any actionassertinga claimagainstus thatisgovernedby theinternal affairsdoctrine.The choiceof forumprovisionmaylimita stockholder’sabilityto bringa claimin a judicial forumthatitfindsfavorablefordisputeswith us or our directors,officersor otheremployees,which may discouragesuch lawsuitsagainstus and our directors,officersand otheremployees.Alternatively,ifa courtwere to findthechoiceof forumprovisioncontainedin our certificateof incorporationto be inapplicableor unenforceablein an action,we mayincuradditionalcostsassociatedwith resolvingsuch actionin other jurisdictions,which couldadverselyaffectour businessand financialcondition.

We do not intendto pay dividendson our commonstock,and, consequently,our stockholders’ abilityto achievea returnon their investmentwilldepend on appreciationin the priceof our commonstock.

We do not intendto pay any cashdividendson our commonstockfortheforeseeablefuture.We intendto invest our futureearnings,ifany, to fund our growth. Therefore,our stockholders arenot likelyto receiveany dividendson their common stockfortheforeseeablefuture.Sincewe do not intendto pay dividends,our stockholders’ abilityto receivea returnon their investmentwilldepend on any futureappreciationin themarketvalueof our commonstock.Thereisno guaranteethatour commonstockwillappreciateor even maintainthepriceatwhich our stockholdershave purchased it.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

There were no unregistered securities issued and sold during the quarter ended September 30, 2019.

Use of Proceeds

None

Issuer Purchases of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit Number	Description	Form	Date	Number	Filed Herewith
2.1	Second Amendment to the Agreement and Plan of Merger and Reorganization, dated October 31, 2019, by and among Restoration Robotics, Inc., Radiant Merger Sub Ltd. and Venus Concept, Ltd.	8-K	10-31-19	2.1
3.1	Amended and Restated Certificate of Incorporation	8-K	10-17-17	3.1
3.2	Amended and Restated Bylaws	8-K	11-7-19	3.2
4.1	Reference is made to exhibits 3.1 through 3.2.
4.2	Form of Common Stock Certificate	S-1/A	9-18-17	4.2
10.1	Fourth Amendment to Loan and Security Agreement dated June 14, 2019, by and between the Company and Solar Capital Ltd.	S-4/A	7-29-19	10.37
31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* 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 SEC and is not to be incorporated by reference into any filing of Restoration Robotics, 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 Form 10-Q, irrespective of any general incorporation language contained in such filing.

69

SIGNATURES

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.

	Venus Concept Inc.
Date: November 14, 2019	By:	/s/ Domenic Serafino
		Domenic Serafino
		Chief Executive Officer
Date: November 14, 2019	By:	/s/ Domenic Della Penna
		Domenic Della Penna
		Chief Financial Officer

70

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Domenic Serafino, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Venus Concept Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2019	By:	/s/ Domenic Serafino
		Domenic Serafino
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Domenic Della Penna, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Venus Concept Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2019	By:	/s/ Domenic Della Penna
		Domenic Della Penna
		Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Venus Concept Inc. formerly “Restoration Robotics, Inc.” (the “Company”) on Form 10-Q for the period ending September 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 14, 2019	By:	/s/ Domenic Serafino
		Domenic Serafino
		Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Venus Concept Inc. formerly “Restoration Robotics, Inc.” (the “Company”) on Form 10-Q for the period ending September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 14, 2019	By:	/s/ Domenic Della Penna
		Domenic Della Penna
		Chief Financial Officer (Principal Financial Officer)

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Stock Option Plan - Summary of Recognized Stock-based Compensation Expense for Employees and Non-employees (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation			$ 1,073	$ 419
Employees and Non-employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation	$ 355	$ 167	1,073	419
Cost of Revenue | Employees and Non-employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation	11	6	31	14
Sales and Marketing | Employees and Non-employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation	158	31	427	77
Research and Development | Employees and Non-employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation	27	11	78	39
General and Administrative | Employees and Non-employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation	$ 159	$ 119	$ 537	$ 289

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Long-Term Debt - Schedule Principal Payments on Outstanding Borrowings (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Debt Instrument [Line Items]
2019 (remaining 3 months)	$ 5,167
2020	15,000
2021	8,000
2022	4,643
Total	32,810
Less: debt discount	(1,274)
Less: current portion	(17,378)
Non-current portion	14,158
Solar Debt
Debt Instrument [Line Items]
2019 (remaining 3 months)	667
2020	8,000
2021	8,000
2022	4,643
Total	21,310
Less: debt discount	(1,274)
Less: current portion	(5,878)
Non-current portion	14,158
Related Party Convertible Promissory Notes
Debt Instrument [Line Items]
2020	7,000
Total	7,000
Less: current portion	(7,000)
Unsecured Subordinated Promissory Notes
Debt Instrument [Line Items]
2019 (remaining 3 months)	4,500
Total	4,500
Less: current portion	$ (4,500)

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Stock Option Plan

9 Months Ended

Sep. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Option Plan

10. STOCK OPTION PLAN

2005 and 2015 Plans

The Company granted incentive stock options (ISOs) and non-statutory stock options (NSOs) pursuant to its 2005 Stock Option Plan (the 2005 Plan) until the Board of Directors approved the 2015 Stock Option Plan (the 2015 Plan), and all remaining shares available for future award under the 2005 Plan were transferred to the 2015 Plan and the 2005 Plan was terminated. The Company granted ISOs and NSOs pursuant to its 2015 Plan until the 2017 Equity Incentive Plan (the 2017 Plan) was approved by the Board of Directors and became effective on October 11, 2017. As a result of the 2017 Plan becoming effective, all remaining shares available for future award under the 2015 Plan were transferred to the 2017 Plan, the 2015 Plan was terminated, and no further grants will be made under the Company’s 2005 Plan and the 2015 Plan. Any outstanding stock awards granted under the 2005 Plan and the 2015 Plan will remain outstanding, subject to the terms of the Company’s 2005 Plan and 2015 Plan and the applicable stock award agreements, until such outstanding stock awards that are stock options are exercised or until they terminate or expire by their terms, or until such stock awards are fully settled, terminated or forfeited.

2017 Plan

The Company’s 2017 Plan provides for the grant of ISOs, NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other forms of equity compensation to employees, directors and consultants. In addition, the Company’s 2017 Plan provides for the grant of performance cash awards to employees, directors and consultants.

The Company recognizedstock-basedcompensationforitsemployeesand non-employeesin the accompanyingconsolidatedstatementsof operationsas follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of revenue	$	11	$	6	$	31	$	14
Sales and marketing		158		31		427		77
Research and development		27		11		78		39
General and administrative		159		119		537		289
Total stock-based compensation	$	355	$	167	$	1,073	$	419

Stock Options

The fair value of each option is estimated at the date of grant using the Black-Scholes-Merton option pricing model, based on the following assumptions:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019	2018
Expected term (years)		—		6.0	5.1	5.37 - 6.10
Risk-free interest rate		—	2.82%		2.65%	2.40 - 2.82%
Expected volatility		—	53.87%		60.00%	53.72 - 55.49%
Dividend yield		—	0%		0%	0%

The Company did not grant any options in the three months ended September 30, 2019.

Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the outstanding stock options in the table below. The following table summarizes stock option activity under the Company’s stock option plan:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise Price		Contractual		Intrinsic
	Shares			per Share		Term		Value
Outstanding — December 31, 2018		265,962		$	1.95		8.7	$	—
Options granted		2,200			0.96
Options cancelled		(46,221	)		1.68
Outstanding — September 30, 2019		221,941		$	1.99		7.4	$	—
Vested and expected to vest —    September 30, 2019		207,893		$	2.00		7.3	$	—
Exercisable — September 30, 2019		117,524		$	2.02		7.0	$	—

The weighted-average grant date fair value of options granted was $0.44 per share for nine months ended September 30, 2019.

No options were exercised for the three and nine months ended September 30, 2019. The total intrinsic value of options exercised was $92 and $413 for the three and nine months ended September 30, 2018, respectively.

Unamortized stock-based compensation was $1,607 as of September 30, 2019, which is expected to be recognized over a weighted-average period of approximately 2.48 years.

Restricted Stock Awards

The Company’s Board of Directors appointed Keith Sullivan, a current Board member of the Company, as interim Chief Commercial Officer, effective November 1, 2018, and for a period up to one year. Under the terms of the arrangement, Mr. Sullivan was granted 360,000 restricted stock awards, which shall vest in quarterly installments equal to 25% of the shares starting with the first vest date on January 15, 2019 so long as Mr. Sullivan is providing services. As of September 30, 2019, the Company had no unrecognized compensation expense. The aggregate intrinsic value of the RSAs outstanding was $58.

Restricted Stock Units

On February 27, 2019, the Company’s Board of Directors granted our Chief Financial Officer and interim Chief Commercial Officer each 500,000 restricted stock units that will vest contingent on the closing of the merger of the Company with Venus (as discussed in Note 1). During the three and nine months ended September 30, 2019, no stock-based compensation expense was recorded.

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Balance Sheet Components

9 Months Ended

Sep. 30, 2019

Balance Sheet Components [Abstract]

Balance Sheet Components

6. BALANCESHEETCOMPONENTS

Inventory

Inventoryconsistsof thefollowing:

	September 30,		December 31,
	2019		2018
Raw materials	$	2,417	$	2,464
Work-in-process		225		323
Finished goods		2,981		2,735
Total inventory	$	5,623	$	5,522

Propertyand Equipment,Net

Propertyand equipment,netconsistof thefollowing:

	September 30,			December 31,
	2019			2018
Equipment	$	4,028		$	3,531
Computer hardware and software		927			901
Leasehold improvements		874			874
Furniture and fixtures		483			457
Total property and equipment		6,312			5,763
Less: Accumulated depreciation and amortization		(4,989	)		(4,464	)
Total property and equipment, net	$	1,323		$	1,299

Depreciation and amortization expense were $220 and $524 for three and nine months ended September 30, 2019, respectively. Depreciation and amortization expense were $268 and $539 for the three and nine months ended September 30, 2018, respectively.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Liquidity

These condensed consolidated financial statements are prepared on a going concern basis that contemplates the realization of assets and extinguishment of liabilities in the normal course of business. The Company has incurred net operating losses and negative cash flows from operations since inception. As of September 30, 2019, and December 31, 2018, the Company has an accumulated deficit of $217,761 and $193,213 and, as of such dates, and through the date of this filing, does not have sufficient capital to fund its planned operations. Because of the Company’s recurring losses from operations and negative cash flows, the Company’s independent registered public accounting firm included an explanatory paragraph in its report on the Company’s consolidated financial statements as of, and for the year ended, December 31, 2018 that such factors raise substantial doubt about the Company’s ability to continue as a going concern. To continue its operations, the Company must achieve profitable operations and/or obtain additional financing. 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. The Company may never become profitable and even if it does attain profitable operations, it may not be able to sustain profitability or positive cash flows on a recurring basis.

The Company will need to raise further capital in the future to service its debt or fund its operations until the time it can sustain positive cash flows. 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.

The accompanying 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, and, as such, the 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.

Basis of Presentation

The condensed consolidated balance sheets as of September 30, 2019, the condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2019 and 2018, the condensed consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018 and the condensed consolidated statements of stockholders’ equity (deficit) for the three and nine months ended September 30, 2019 and 2018 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and in the opinion of management, reflect all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed consolidated financial statements included in this report. The condensed consolidated financial data disclosed in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The condensed consolidated results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. The consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report filed on Form 10-K for the year ended December 31, 2018, with the SEC on March 20, 2019, as amended.

Principles of Consolidation

The accompanying condensed consolidatedfinancialstatementsincludetheaccountsof Restoration Robotics, Inc. and its wholly owned subsidiaries, which are organized in the United States, United Kingdom, Spain, Hong Kong and South Korea prior to the merger with Venus Concept Inc. All significantintercompany accountsandtransactionshavebeeneliminatedinconsolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to revenue recognition, allowance for doubtful accounts, inventory valuation, stock-based compensation, warranty accrual and the recoverability of the Company’s net deferred tax assets and related valuation allowance. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist primarily of funds invested in readily available checking and savings accounts, investments in money market funds and short-term time deposits. The Company’s restricted cash is held in a separate money market account as collateral for credit cards.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows.

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	8,915	$	16,122
Restricted cash		83		83
Total cash, cash equivalents and restricted cash in the condensed consolidated    statements of cash flows	$	8,998	$	16,205

Segments

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 reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company does not assess the performance of individual product line on measures of profit or loss, or asset-based metrics.

Concentration of Customers

For the three and nine months ended September 30, 2019, one and no customers accounted for more than 10% of the Company’s revenue, respectively. For the three and nine months ended September 30, 2018, no customers accounted for more than 10% of the Company’s revenue. As of September 30, 2019, one customer accounted for 14% of the Company’s total accounts receivable. As of December 31, 2018, no customers accounted for more than 10% of the Company’s total accounts receivable.

JOBS Act Accounting Election

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until 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 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.

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), as amended by ASU No. 2015-14, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20, (collectively, ASU 2014-09). ASU 2014-09 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services and provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. ASU 2014-09 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures. The Company adopted the new revenue standard on January 1, 2019, using the modified retrospective transition method applied to those contracts which were not completed as of that date. See Note 3. Revenue, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional details.

In June 2018, the FASB issued ASU No. 2018-7, Compensation – Stock Compensation (Topic 718)— Improvements to Nonemployee Share-Based Payment Accounting. This guidance supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted this standard on January 1, 2019 using the modified retrospective adoption method. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures and no cumulative-effect adjustment was recorded to accumulated deficit at January 1, 2019.

Recently Issued Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842), or ASU 2016‑02, as amended by ASU 2019-01 issued in March 2019, (collectively, ASU 2016-02), which requires lessees to record most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Under ASU 2016‑02, a lessee would recognize a lease liability for the obligation to make lease payments and a right‑to‑use asset for the right to use the underlying asset for the lease term. For public entities, this standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. As an Emerging Growth Company, this standard is effective for the Company in annual reporting periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the standard and its impact on the condensed consolidated financial statements. However, the Company does expect a material change in its consolidated assets and liabilities upon adoption of this standard.

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Accounts receivable, allowance	$ 2,542	$ 1,772
Current portion of long-term debt, discount	789	617
Long-term debt, discount	$ 485	$ 746
Convertible preferred stock at liquidation preference par value	$ 0.0001	$ 0.0001
Convertible preferred stock, shares authorized	10,000,000	10,000,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	2,729,801	2,711,801
Common stock, shares outstanding	2,729,801	2,711,801

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Summary of Significant Accounting Policies - Summary of Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Cash and cash equivalents	$ 8,915	$ 16,122
Restricted cash	83	83
Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows	$ 8,998	$ 16,205	$ 23,692	$ 23,645

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Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Statement Of Stockholders Equity [Abstract]
Underwriters' commission and offering costs	$ 1,635	$ 1,635

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Revenue - Additional Information (Details1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-10-01	Sep. 30, 2019
Minimum
Disaggregation Of Revenue [Line Items]
Revenue, remaining performance obligation, expected timing of Satisfaction, period	30 days
Maximum
Disaggregation Of Revenue [Line Items]
Revenue, remaining performance obligation, expected timing of Satisfaction, period	180 days

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Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2019

Balance Sheet Components [Abstract]

Schedule of Inventory

Inventoryconsistsof thefollowing:

	September 30,		December 31,
	2019		2018
Raw materials	$	2,417	$	2,464
Work-in-process		225		323
Finished goods		2,981		2,735
Total inventory	$	5,623	$	5,522

Schedule of Property and Equipment, Net

Propertyand equipment,netconsistof thefollowing:

	September 30,			December 31,
	2019			2018
Equipment	$	4,028		$	3,531
Computer hardware and software		927			901
Leasehold improvements		874			874
Furniture and fixtures		483			457
Total property and equipment		6,312			5,763
Less: Accumulated depreciation and amortization		(4,989	)		(4,464	)
Total property and equipment, net	$	1,323		$	1,299

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of Reconciliation of Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows.

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	8,915	$	16,122
Restricted cash		83		83
Total cash, cash equivalents and restricted cash in the condensed consolidated    statements of cash flows	$	8,998	$	16,205

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Net Loss Per Share - Additional Information (Details) - Merger Agreement			9 Months Ended
	Nov. 07, 2019	Mar. 15, 2019	Sep. 30, 2019
Earnings Per Share [Line Items]
Reverse stock split conversion ratio		0.0667
Venus
Earnings Per Share [Line Items]
Reverse stock split			15-for-1 reverse stock split
Venus | Subsequent Event
Earnings Per Share [Line Items]
Reverse stock split conversion ratio	15

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Balance Sheet Components - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property Plant And Equipment [Abstract]
Equipment	$ 4,028	$ 3,531
Computer hardware and software	927	901
Leasehold improvements	874	874
Furniture and fixtures	483	457
Total property and equipment	6,312	5,763
Less: Accumulated depreciation and amortization	(4,989)	(4,464)
Total property and equipment, net	$ 1,323	$ 1,299

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Subsequent Events - Additional Information (Details) $ / shares in Units, $ in Thousands				3 Months Ended	9 Months Ended
	Nov. 07, 2019 shares $ / shares	Nov. 03, 2019 $ / shares shares	Mar. 15, 2019 shares	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) $ / shares shares	Nov. 07, 2019 ₪ / shares	Dec. 31, 2018 $ / shares shares
Subsequent Event [Line Items]
Common stock, par value | $ / shares				$ 0.0001	$ 0.0001		$ 0.0001
Common stock, shares outstanding				2,729,801	2,729,801		2,711,801
Merger related expenses | $				$ 1,521	$ 4,079
Subsequent Event | Loan Agreement
Subsequent Event [Line Items]
Exercise price of warrants | $ / shares	$ 6.00
Subsequent Event | Maximum | Loan Agreement
Subsequent Event [Line Items]
Debt conversion, warrants issued	50,000
Merger Agreement
Subsequent Event [Line Items]
Common stock, shares issued			212,500,000
Number of shares called by options and warrants			49,600,000
Reverse stock split conversion ratio			0.0667
Merger Agreement | Reverse Stock Split
Subsequent Event [Line Items]
Common stock, shares outstanding			29,667,622
Venus | Merger Agreement
Subsequent Event [Line Items]
Reverse stock split					15-for-1 reverse stock split
Venus | Merger Agreement | Subsequent Event
Subsequent Event [Line Items]
Common stock, par value | ₪ / shares						₪ 0.001
Nominal value of preferred share | ₪ / shares						₪ 0.001
Right to number of shares to be received in exchange of each outstanding ordinary and preferred share	8.6506
Reverse stock split conversion ratio	15
Venus | Merger Agreement | Subsequent Event | Private Placement
Subsequent Event [Line Items]
Number of shares issuable		112,000,000
Common stock, par value per share | $ / shares		$ 0.0001
Exercise price of warrants | $ / shares		$ 6.00
Venus | Merger Agreement | Subsequent Event | Private Placement | Maximum
Subsequent Event [Line Items]
Warrants to purchase shares of common stock		56,000,000

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Summary of Aggregate Future Minimum Lease Payments under Operating Leases

Aggregate future minimum lease payments required under the Company’s operating leases as of September 30, 2019 are as follows:

Years Ending December 31,
2019 (remaining 3 months)	$	131
2020		534
2021		550
2022		188
Total future minimum lease payments	$	1,403

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Revenue (Tables)

9 Months Ended

Sep. 30, 2019

Summary of Estimated Revenue Expected to be Recognized in Future Related to Performance Obligations Unsatisfied or Partially Unsatisfied at Period End

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period as follows (in thousands):

Revenue	2019 (A)		2020		2021		2022 and Thereafter		Total
System related	$	497	$	—	$	—	$	—	$	497
Procedure-based		20		—		—		—		20
Service-related fees		439		467		172		7		1,085
Total	$	956	$	467	$	172	$	7	$	1,602

(A) Represents unearned revenue for the remaining three months of the year 2019.

Deferred Revenue (Remaining Performance Obligations)

The aggregate balance of remaining performance obligations represents contracted revenue that has not yet been recognized primarily from ARTAS Care extended warranty service contracts, product training and marketing services not yet rendered to customers.

	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Balance at the beginning of the period	$	1,535		$	1,661
Additions		652			1,658
Recognition of deferred revenue		(585	)		(1,717	)
Balance at the end of the period	$	1,602		$	1,602
Less: Deferred revenue - current	$	1,346		$	1,346
Deferred revenue - non-current (A)	$	256		$	256

(A) Included in “Other long-term liabilities” on the condensed consolidated balance sheets as of September 30, 2019.

Disaggregation of Revenue Geographic Regions and Nature of Product and Services

The following tables provide information about disaggregated revenue from contracts with customers into geographic regions, and the nature of the products and services:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	1,405	$	3,856	$	6,613	$	8,712
Europe and Middle East *		1,382		362		2,819		2,323
Asia Pacific		196		553		1,291		3,213
Rest of World		324		47		909		1,050
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

* No individual country is greater than 10% of revenue

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Systems	$	1,862	$	3,040	$	6,549	$	7,571
Procedure-based		935		1,280		3,640		6,150
Service-related fees		510		498		1,443		1,577
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

Topic 606

Impact on Financial Statements in Accordance with Topic 606

In accordance with Topic 606, the disclosure of the impact of the change in accounting principle to the unaudited condensed consolidated statements of operations and balance sheet was as follows:

	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
Condensed Consolidated Statements of Operations Data	As Reported			Change		Balance Without ASC 606 Adoption			As Reported			Change			Balance Without ASC 606 Adoption
Revenue	$	3,307		$	24	$	3,331		$	11,632		$	(121	)	$	11,511
Gross profit		1,010			24		1,034			5,167			(121	)		5,046
Total operating expenses		9,232			—		9,232			27,061			9			27,070
Loss from operations	$	(8,222	)	$	24	$	(8,198	)	$	(21,894	)	$	(130	)	$	(22,024	)
Net loss before provision for income taxes	$	(9,207	)	$	24	$	(9,183	)	$	(24,515	)	$	(130	)	$	(24,645	)
Net loss attributable to common stockholders	$	(9,216	)	$	24	$	(9,192	)	$	(24,548	)	$	(130	)	$	(24,678	)
Net loss per share attributable to    common stockholders, basic and diluted	$	(3.38	)	$	0.01	$	(3.37	)	$	(9.02	)	$	(0.04	)	$	(9.06	)
Weighted-average shares used in computing    net loss per share attributable to common    stockholders, basic and diluted		2,728,888					2,728,888			2,722,922						2,722,922

	September 30, 2019
Condensed Consolidated Balance Sheets Data	As Reported			Change			Balance Without ASC 606 Adoption
Assets
Prepaid expenses and other current assets	$	1,042		$	(121	)	$	921
Other assets	$	100		$	(9	)	$	91
Stockholders' deficit
Accumulated deficit	$	(217,761	)	$	(130	)	$	(217,891	)

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Revenue - Disaggregation of Revenue Nature of Products and Services (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Total revenue	$ 3,307	$ 4,818	$ 11,632	$ 15,298
Systems
Disaggregation Of Revenue [Line Items]
Total revenue	1,862	3,040	6,549	7,571
Procedure- Based
Disaggregation Of Revenue [Line Items]
Total revenue	935	1,280	3,640	6,150
Service-Related Fees
Disaggregation Of Revenue [Line Items]
Total revenue	$ 510	$ 498	$ 1,443	$ 1,577

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Balance Sheet Components - Schedule of Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 2,417	$ 2,464
Work-in-process	225	323
Finished goods	2,981	2,735
Total inventory	$ 5,623	$ 5,522

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Stock Option Plan - Assumptions used in Fair Value of Option Estimated at Date of Grant using Black-Scholes-Merton Option Pricing Model (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (years)	6 years	5 years 1 month 6 days
Risk-free interest rate	2.82%	2.65%
Expected volatility	53.87%	60.00%
Dividend yield	0.00%	0.00%	0.00%
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (years)			5 years 4 months 13 days
Risk-free interest rate			2.40%
Expected volatility			53.72%
Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (years)			6 years 1 month 6 days
Risk-free interest rate			2.82%
Expected volatility			55.49%

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Common Stock Reserved for Issuance - Additional Information (Details) - Merger Agreement			9 Months Ended
	Nov. 07, 2019	Mar. 15, 2019	Sep. 30, 2019
Class Of Stock [Line Items]
Reverse stock split conversion ratio		0.0667
Venus
Class Of Stock [Line Items]
Reverse stock split			15-for-1 reverse stock split
Subsequent Event | Venus
Class Of Stock [Line Items]
Reverse stock split conversion ratio	15

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. COMMITMENTSANDCONTINGENCIES

OperatingLeases

The Company has various operating leases including 23,000 square feet of office space and 2,500 square feet of manufacturing space in San Jose, California. The office space lease expires in April 2022. The Company’s manufacturing space lease expired in April 2019 and is now on a month-to-month lease arrangement.

Aggregate future minimum lease payments required under the Company’s operating leases as of September 30, 2019 are as follows:

Years Ending December 31,
2019 (remaining 3 months)	$	131
2020		534
2021		550
2022		188
Total future minimum lease payments	$	1,403

Total rent expense was $161 and $481 for three and nine months ended September 30, 2019, respectively. Total rent expense was $163 and $401 for the three and nine months ended September 30, 2018, respectively.

Commitments

The Company has two master agreements and a component pricing agreement with Evolve Manufacturing Technologies, Inc. (Evolve) for the supply of the ARTAS^® System and consumable products. The terms of these master agreements are substantially similar. The master agreement for the sale of ARTAS^® Systems was effective beginning on April 1, 2016 and the master agreement for the sale of kits used with the ARTAS System was effective beginning on March 1, 2016. Both agreements are 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. Under the agreements, the Company has future purchase commitments up to $285 as of September 30, 2019.

In March 2018, the Company received U.S. FDA 510(k) clearance to expand the ARTAS^® System technology to include an implantation functionality, referred to as ARTAS^® iX. Based on manufacturing changes associated with the ARTAS^® iX System, the Company determined that certain components procured or expected to be procured by Evolve, will be in excess of expected demand or usage based on the advance notice the Company provided to Evolve under the term of the agreement mentioned above. Additionally, in the fourth quarter of 2018, the Company recorded a $188 charge related to other excess purchase commitments from another vendor based on cost reduction changes in 2019. Although the Company will be taking steps to minimize the adverse impact on the Company’s business, based on information available as of September 30, 2019, the Company’s management recorded a loss contingency accrual of $473 which is included in “Other accrued liabilities” on the condensed consolidated balance sheets as of September 30, 2019.

LicensingAgreements

In July 2006, the Company entered into a license agreement with Rassman Licensing, LLC (Rassman) for non-exclusive, royalty bearing, non-transferable, perpetual, world-wide rights for use on approved fields relating to robotically controlled hair removal and implantation procedures. In consideration for this license, the Company paid Rassman a one-time payment of $1,000. The agreement terminates on May 9, 2020. In February 2012, the Company amended its license agreement with Rassman. In exchange for a one-time $400 payment to Rassman, the Company now has a fully paid royalty-free perpetual license to a patent subject to this license agreement.

In July 2006, the Company entered into a license agreement with HSC Development, LLC for exclusive non-transferable, royalty-free worldwide rights for use in approved fields relating to a computer-controlled system in which a device is carried on a mechanized arm for extraction or implantation of a follicular unit without manual manipulation. In consideration for this license, the Company paid HSC Development, LLC a one-time payment of $25 and issued 2,500 shares of the Company’s common stock. The agreement terminates on July 27, 2024.

Legal Proceedings

From time to time the Company is involved in litigation arising out of claims in the normal course of business. Based on the information presently available, management believes that there are no claims or actions pending or threatened against the Company, the ultimate resolution of which will have a material effect on the Company’s financial position, liquidity or results of operations, although the results of litigation are inherently uncertain.

Purported Shareholder Class Action

On May 23, 2018, a putative shareholder class action complaint was filed in Superior Court of the State of California, County of San Mateo (the Superior Court), captioned Wong v. Restoration Robotics, Inc., et al., No. 18CIV02609. On June 21, 2018 and June 28, 2018, two putative class action complaints were filed in the United States District Court for the Northern District of California, captioned 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, respectively. On July 24, 2018, the U.S. Northern District Court related the Guerrini and Yzeiraj actions and reassigned the Yzeiraj action to Judge Edward J. Davila. The Wong and Guerrini complaints name the Company as defendants, and certain of its current and former executive officers and directors, certain of its venture capital investors and the underwriters in the Company’s IPO. The Yzeiraj complaint names the Company as defendants and certain of its current and former executive officers and directors. The Wong complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act. The Guerrini and Yzeiraj complaints assert claims under Sections 11 and 15 of the Securities Act. The complaints all allege, among other things, that the Company’s 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 Company’s 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 addition, on June 11, 2019, a putative shareholder class action complaint was filed in Superior Court of the State of California, County of San Mateo, captioned Li v. Restoration Robotics, Inc., et al., No. 19CIV08173. The Li complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, or the Securities Act and is based on the same set of facts as the Wong complaint. The Li complaint seeks unspecified monetary damages, other equitable relief and attorneys’ fees and costs.

On August 8, 2018, the Company, along with certain of its current and former executive officers and directors, filed a motion to dismiss the Wong complaint based on the forum selection clause designating the federal district courts as the exclusive forum for claims arising under the Securities Act contained in the Company’s Amended and Restated Certificate of Incorporation, and which asked the court in the alternative to stay the Wong action. Also, on August 8, 2018, the venture capital investor and underwriters’ defendants in the Wong action filed demurrers to the Wong complaint, and the Company, along with certain of its current and former executive officers and directors, joined in the venture capital investor defendants’ demurrer. A hearing on the Company’s motion to dismiss and the demurrers to the Wong complaint was held on October 24, 2018. On October 25, 2018, the Court ordered the defendants’ demurrers to the complaint sustained with leave to amend and granted an extension of time for plaintiff to serve a First Amended Complaint until further order of the Court. On January 31, 2019, the Court stayed the case and stayed any decision on the Company’s motion to dismiss on forum selection grounds pending resolution of an appeal of Sciabacucchi v. Salzberg, a case addressing similar issues in Delaware. On August 12, 2019, the Court consolidated the Wong and Li actions, and lifted the stay imposed on January 31, 2019 to allow further briefing on the Company’s motion to dismiss. A further hearing on the motion to dismiss was held on September 17, 2019.

On October 2, 2018, the U.S. Northern District Court granted a Motion for Consolidation of Related Actions, Appointment as Lead Plaintiff and Approval of Lead Counsel filed by Plaintiff Edgardo Guerrini, which consolidated the Guerrini and Yzeiraj actions under the caption In re Restoration Robotics, Inc. Securities Litigation, Case No. 5:18-cv-03712-EJD. On November 30, 2018, Lead Plaintiff Edgardo Guerrini filed a Consolidated Amended Complaint for violations of federal securities laws asserting the same claims, against the same defendants, as his original complaint but adding certain allegations in support of those claims. On January 29, 2019, the Company, along with certain of its current and former executive officers and directors, filed a motion to dismiss the Consolidated Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The venture capital defendants and underwriter defendants filed joinders to the Company’s motion to dismiss on the same day. On October 18, 2019, the District Court granted in part and denied in part the Company’s motion to dismiss.

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 current and former executive officers and directors breached their fiduciary duties, have been unjustly enriched and violated Section 14(a) of the Securities Exchange Act of 1934 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 related the Mason action with the federal class action, In re Restoration Robotics, Inc. Sec. Litig., and reassigned the Mason action to Judge Edward J. Davila. Also, on August 21, 2019, the District Court granted the parties’ joint stipulation to stay the Mason action during the pendency of the federal class action, In re Restoration Robotics, Inc. Sec. Litig., No. 5:18-cv-03712-EJD.

On September 24, 2019, a complaint was filed in the United States District Court for the Northern District of California, captioned Bushansky v. Restoration Robotics, Inc., et al., No. 5:19-cv-06004-MMC. The complaint alleges, among other things, that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 14d-9. The complaint alleges that the proxy statement filed with the United States Securities and Exchange Commission by Restoration Robotics on September 10, 2019 in connection with the proposed transaction whereby Restoration Robotics would merge with Venus Concept Ltd. omitted or misrepresented material information. The complaint seeks, 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 Company believes that these lawsuits are without merit and management intends to vigorously defend against these claims.

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Revenue

9 Months Ended

Sep. 30, 2019

Revenues [Abstract]

Revenue

3. REVENUE

Change in Accounting Principle

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 supersedes the revenue recognition requirements in Topic 605 Revenue Recognition (Topic 605) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB has issued several amendments to the standard, including clarifications on disclosure of prior-period performance obligations and remaining performance obligations.

The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company adopted the standard effective January 1, 2019 using the modified retrospective method. This approach was applied to all contracts that were not completed as of January 1, 2019. The adoption of Topic 606 did not have a material impact on the Company’s historical net losses and, therefore, no adjustment was made to the opening balance of accumulated deficit at January 1, 2019. Therefore, the comparative 2018 period has not been adjusted and continues to be reported under Topic 605.

Topic 606’s core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying this new guidance to contracts within its scope, an entity will:

• Identify the contract(s) with a customer;

• Identify the performance obligations in the contract;

• Determine the transaction price;

• Allocate the transaction price to the performance obligations in the contract; and

• Recognize revenue when (or as) the entity satisfies a performance obligation.

Impact on Financial Statements

In accordance with Topic 606, the disclosure of the impact of the change in accounting principle to the unaudited condensed consolidated statements of operations and balance sheet was as follows:

	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
Condensed Consolidated Statements of Operations Data	As Reported			Change		Balance Without ASC 606 Adoption			As Reported			Change			Balance Without ASC 606 Adoption
Revenue	$	3,307		$	24	$	3,331		$	11,632		$	(121	)	$	11,511
Gross profit		1,010			24		1,034			5,167			(121	)		5,046
Total operating expenses		9,232			—		9,232			27,061			9			27,070
Loss from operations	$	(8,222	)	$	24	$	(8,198	)	$	(21,894	)	$	(130	)	$	(22,024	)
Net loss before provision for income taxes	$	(9,207	)	$	24	$	(9,183	)	$	(24,515	)	$	(130	)	$	(24,645	)
Net loss attributable to common stockholders	$	(9,216	)	$	24	$	(9,192	)	$	(24,548	)	$	(130	)	$	(24,678	)
Net loss per share attributable to    common stockholders, basic and diluted	$	(3.38	)	$	0.01	$	(3.37	)	$	(9.02	)	$	(0.04	)	$	(9.06	)
Weighted-average shares used in computing    net loss per share attributable to common    stockholders, basic and diluted		2,728,888					2,728,888			2,722,922						2,722,922

	September 30, 2019
Condensed Consolidated Balance Sheets Data	As Reported			Change			Balance Without ASC 606 Adoption
Assets
Prepaid expenses and other current assets	$	1,042		$	(121	)	$	921
Other assets	$	100		$	(9	)	$	91
Stockholders' deficit
Accumulated deficit	$	(217,761	)	$	(130	)	$	(217,891	)

Revenue Recognition

The Company generates revenue primarily through the sale and delivery of promised goods and services, which consists of the sale of ARTAS® and ARTAS® iX Systems, training on the systems, extended service contracts, consumables and marketing services. Revenue is recognized when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. Sales prices are documented in the executed sales contract or purchase order prior to the transfer of control to the customer. Customers may enter into a separate extended service agreement (referred to as ARTAS Care) to purchase an extended warranty for products from the Company whereby the payment is due at the inception of the agreement or in monthly installment payments. Revenue for ARTAS Care is recognized ratably over the term of the agreement.

The Company also utilizes distributors to sell ARTAS^® and ARTAS^® iX Systems and related consumables in certain markets outside of the United States. The Company recognizes revenue when control of the goods or services is transferred to the distributors. Standard terms for all agreements with either end customers or distributors do not allow for right of return, refunds, payment contingent on obtaining financing or other terms that could impact the customer’s payment obligation. Payment terms for U.S. customers are generally at shipment, delivery, or within 30 days of shipment, while payment terms for customers outside of the U.S. vary between 30 and 180 days after shipment.

Performance Obligations, Determination and Allocation of Transaction Price and Method of Recognition

The Company's system sale arrangements generally contain multiple products and services. For these bundled sale arrangements, the Company accounts for individual products and services as separate performance obligations. These performance obligations include: ARTAS® or ARTAS® iX System, including related accessories and software license (considered as one performance obligation), product training, consumables (consisting of harvest or site making/implantation kits), extended service contracts and marketing services. All ARTAS® and ARTAS® iX Systems include an assurance-type standard warranty, generally for a 12-month period. ARTAS Care (extended warranty service contract) will commence at the expiration of the standard warranty period. For multiple performance obligations arrangements, the Company allocates revenue to each performance obligation based on its relative stand-alone selling price for each performance obligation, which is based on observable prices.

ARTAS® and ARTAS® iX Systems and consumables are performance obligations that are satisfied at a point in time (upon shipment), whereas ARTAS Care, product training, and marketing services are performance obligations that are satisfied over time (e.g. straight line over the performance period or as training and marketing services are performed).

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period as follows (in thousands):

Revenue	2019 (A)		2020		2021		2022 and Thereafter		Total
System related	$	497	$	—	$	—	$	—	$	497
Procedure-based		20		—		—		—		20
Service-related fees		439		467		172		7		1,085
Total	$	956	$	467	$	172	$	7	$	1,602

(A) Represents unearned revenue for the remaining three months of the year 2019.

Shipping and Freight Costs

Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs. Additionally, sale taxes are excluded from revenue.

Practical Expedients

In connection with the Company’s adoption of Topic 606, the Company elected to use the following practical expedients (i) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (ii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less; and (iii) not to recast revenue for contracts that begin and end in the same fiscal year.

Costs to Obtain Customer Contracts

Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. Except for sales commissions that would have been amortized in one year or less, which we have elected the practical expedient discussed above, certain sales commissions related to ARTAS Care and consumables that are sold bundled with the ARTAS^® and ARTAS^® iX Systems, are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have estimated to be three years for ARTAS Care extended warranty service contracts and five years for consumables. We determined the period of benefit by taking into consideration the length of the customer contracts, the Company’s technology lifecycle, and other factors. Amortization expense is recorded in sales and marketing expense within the condensed consolidated statement of operations. As of September 30, 2019, short-term and long-term unamortized deferred compensation were $3 and $8, which are included in “Prepaid and other current assets” and “Other Assets,” respectively, on the condensed consolidated balance sheets.

Deferred Revenue (Remaining Performance Obligations)

The aggregate balance of remaining performance obligations represents contracted revenue that has not yet been recognized primarily from ARTAS Care extended warranty service contracts, product training and marketing services not yet rendered to customers.

	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Balance at the beginning of the period	$	1,535		$	1,661
Additions		652			1,658
Recognition of deferred revenue		(585	)		(1,717	)
Balance at the end of the period	$	1,602		$	1,602
Less: Deferred revenue - current	$	1,346		$	1,346
Deferred revenue - non-current (A)	$	256		$	256

(A) Included in “Other long-term liabilities” on the condensed consolidated balance sheets as of September 30, 2019.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

The following tables provide information about disaggregated revenue from contracts with customers into geographic regions, and the nature of the products and services:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	1,405	$	3,856	$	6,613	$	8,712
Europe and Middle East *		1,382		362		2,819		2,323
Asia Pacific		196		553		1,291		3,213
Rest of World		324		47		909		1,050
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

* No individual country is greater than 10% of revenue

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Systems	$	1,862	$	3,040	$	6,549	$	7,571
Procedure-based		935		1,280		3,640		6,150
Service-related fees		510		498		1,443		1,577
Total revenue	$	3,307	$	4,818	$	11,632	$	15,298

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

11. INCOME TAXES

The Company generated a loss for the three and nine months ended September 30, 2019 and incurred $9 and $33 of tax expense for the three and nine months ended September 30, 2019, respectively. The Company’s effective tax rate is (0.10)% and (0.14)% for income tax for the three and nine months ended September 30, 2019, respectively and the Company expects that its effective tax rate for the full year 2019 will be (0.17)%. Based on available evidence, including cumulative losses since inception and expected future losses, the Company has determined that it is more likely than not that the Company’s U.S. federal, U.S. state and Korea deferred tax assets will not be realized and therefore a valuation allowance has been provided on these net deferred tax assets.

The Company has substantial net operating loss carry forwards available to offset future taxable income for U.S. federal and state income tax purposes. The Company’s ability to utilize its net operating losses may be limited due to changes in its ownership as defined by Section 382 of the Internal Revenue Code (the Code). Under the provisions of Sections 382 and 383 of the Code, a change of control, as defined in the Code, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes that can be used to reduce future tax liabilities.

The Company files tax returns for U.S. federal and state tax returns along with tax returns in the United Kingdom, Hong Kong, Spain and South Korea. The Company is not currently subject to any income tax examinations. Since the Company’s inception, the Company had incurred losses from its U.S. operations, which generally allows all tax years to remain open.

Beginning in first quarter of 2018, the Company is subject to new provisions of the tax law, including provisions related to Global Low Taxed Intangible Income (GILTI), Foreign Derived Intangible Income deductions (FDII), and other changes. However, due to the Company’s losses and full valuation allowance in the U.S., these were determined to have no material impact to the Estimated Annual Effective Tax Rate due to the full Valuation Allowance in the U.S.

Uncertain Tax Positions

Accounting Standards Codification 740-10 requires that the Company recognize the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. The gross amount of unrecognized tax benefits as of September 30, 2019 is approximately $1,540 and related to the reserve on R&D credits, none of which will affect the effective tax rate if recognized due to the valuation allowance. The Company does not expect any material changes in the next 12 months in unrecognized tax benefits.

The Company recognizes interest and/or penalties related to uncertain tax positions. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected in the period that such determination is made. The interest and penalties are recognized as other expense and not tax expense. The Company currently has no interest and penalties related to uncertain tax positions.

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
CURRENT ASSETS:
Cash and cash equivalents	$ 8,915	$ 16,122
Accounts receivable, net of allowance of $2,542 and $1,772 as of September 30, 2019 and December 31, 2018, respectively	3,663	6,569
Inventory	5,623	5,522
Prepaid expenses and other current assets	1,042	1,278
Total current assets	19,243	29,491
Property and equipment, net	1,323	1,299
Restricted cash	83	83
Other assets	100	100
TOTAL ASSETS	20,749	30,973
CURRENT LIABILITIES:
Accounts payable	5,226	3,815
Accrued compensation	1,315	1,771
Other accrued liabilities	2,629	2,337
Deferred revenue	1,346	1,407
Related party convertible promissory notes (Note 8)	7,000
Subordinated promissory notes (Note 8)	4,500
Current portion of long-term debt, net of discount of $789 and $617 as of September 30, 2019 and December 31, 2018, respectively	5,878	49
Total current liabilities	27,894	9,379
Other long-term liabilities	497	594
Long-term debt, net of discount of $485 and $746 as of September 30, 2019 and December 31, 2018	14,158	19,418
TOTAL LIABILITIES	42,549	29,391
Commitments and Contingencies (Note 6)
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $0.0001 par value; 300,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 2,729,801 and 2,711,801 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	4	4
Additional paid-in capital	195,914	194,841
Accumulated other comprehensive income (loss)	43	(50)
Accumulated deficit	(217,761)	(193,213)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)	(21,800)	1,582
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$ 20,749	$ 30,973

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Summary of Significant Accounting Policies - Additional Information (Details)		3 Months Ended		9 Months Ended		12 Months Ended
	Jan. 01, 2019 USD ($)	Sep. 30, 2019 USD ($) Customer	Sep. 30, 2018 Customer	Sep. 30, 2019 USD ($) Segment Customer	Sep. 30, 2018 Customer	Dec. 31, 2018 USD ($) Customer
Summary Of Significant Accounting Policies [Line Items]
Accumulated deficit | $		$ (217,761,000)		$ (217,761,000)		$ (193,213,000)
Number of operating segments | Segment				1
Number of reportable segments | Segment				1
Cumulative-effect adjustment to accumulated deficit | $	$ 0
Customer Concentration Risk | Revenue
Summary Of Significant Accounting Policies [Line Items]
Number of major customers | Customer		1	0	0	0
Concentration Risk, Percentage		10.00%	10.00%	10.00%	10.00%
Customer Concentration Risk | Accounts Receivable
Summary Of Significant Accounting Policies [Line Items]
Number of major customers | Customer				1		0
Concentration Risk, Percentage				14.00%		10.00%

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Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance, value at Dec. 31, 2017	$ 13,194	$ 3	$ 177,757	$ (79)	$ (164,487)
Beginning balance, shares at Dec. 31, 2017		1,929,352
Issuance of common stock pursuant to stock options exercises of vested options	392		392
Issuance of common stock pursuant to stock options exercises of vested options, shares		15,715
Stock-based compensation	419		419
Issuance of common stock warrants pursuant to debt financing	404		404
Issuance of common stock in connection with our follow-on offering, net of underwriters' commission and offering costs of $1,635	15,615	$ 1	15,614
Issuance of common stock in connection with our follow-on offering, net of underwriters' commission and offering costs of $1,635, shares		766,667
Other comprehensive gain	33			33
Net loss	(20,744)				(20,744)
Ending balance, value at Sep. 30, 2018	9,313	$ 4	194,586	(46)	(185,231)
Ending balance, shares at Sep. 30, 2018		2,711,734
Beginning balance, value at Jun. 30, 2018	603	$ 3	178,799	(37)	(178,162)
Beginning balance, shares at Jun. 30, 2018		1,942,513
Issuance of common stock pursuant to stock options exercises of vested options	6		6
Issuance of common stock pursuant to stock options exercises of vested options, shares		2,554
Stock-based compensation	167		167
Issuance of common stock in connection with our follow-on offering, net of underwriters' commission and offering costs of $1,635	15,615	$ 1	15,614
Issuance of common stock in connection with our follow-on offering, net of underwriters' commission and offering costs of $1,635, shares		766,667
Other comprehensive gain	(9)			(9)
Net loss	(7,069)				(7,069)
Ending balance, value at Sep. 30, 2018	9,313	$ 4	194,586	(46)	(185,231)
Ending balance, shares at Sep. 30, 2018		2,711,734
Beginning balance, value at Dec. 31, 2018	$ 1,582	$ 4	194,841	(50)	(193,213)
Beginning balance, shares at Dec. 31, 2018		2,711,801
Release of restricted stock awards, shares		18,000
Issuance of common stock pursuant to stock options exercises of vested options, shares	0
Stock-based compensation	$ 1,073		1,073
Other comprehensive gain	93			93
Net loss	(24,548)				(24,548)
Ending balance, value at Sep. 30, 2019	(21,800)	$ 4	195,914	43	(217,761)
Ending balance, shares at Sep. 30, 2019		2,729,801
Beginning balance, value at Jun. 30, 2019	$ (12,982)	$ 4	195,559		(208,545)
Beginning balance, shares at Jun. 30, 2019		2,723,801
Release of restricted stock awards, shares		6,000
Issuance of common stock pursuant to stock options exercises of vested options, shares	0
Stock-based compensation	$ 355		355
Other comprehensive gain	43			43
Net loss	(9,216)				(9,216)
Ending balance, value at Sep. 30, 2019	$ (21,800)	$ 4	$ 195,914	$ 43	$ (217,761)
Ending balance, shares at Sep. 30, 2019		2,729,801

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Revenue - Additional Information (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Disaggregation Of Revenue [Line Items]
Revenue performance obligation, description of payment terms	Payment terms for U.S. customers are generally at shipment, delivery, or within 30 days of shipment, while payment terms for customers outside of the U.S. vary between 30 and 180 days after shipment.
Remaining performance obligations description	one year or less
ARTAS Systems | Prepaid and Other Current Assets
Disaggregation Of Revenue [Line Items]
Unamortized deferred compensation assets, short term	$ 3
ARTAS Systems | Other Assets
Disaggregation Of Revenue [Line Items]
Unamortized deferred compensation assets, long term	$ 8

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Common Stock Reserved For Issuance (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Common Stock Reserved for Issuance

The Company isrequiredto reserveand keep availableout of itsauthorizedbut unissuedsharesof common stocka numberof sharessufficientto affecttheconversionof alloutstanding common stock warrants, plusoptionsgrantedand availableforgrantundertheincentiveplans. Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the common stock equivalents in the table below.

	September 30,		December 31,
	2019		2018
Outstanding common stock warrants		18,147		18,147
Outstanding and issued stock options		221,941		265,962
Outstanding restricted stock units		66,667		—
Shares reserved for future option grants		101,732		29,150
Total common stock reserved for issuance		408,487		313,259

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Fair Value Measurements - (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Schedule for Levels of Fair Value Measurements of Cash Equivalents

The followingtablessummarizethelevelsof fairvaluemeasurementsof theCompany’scashequivalents:

	Fair Value Measurements as of September 30, 2019
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash Equivalents:
Money market account	$	8,048	$	—	$	—	$	8,048
Restricted cash:
Money market account		83		—		—		83
Total assets	$	8,131	$	—	$	—	$	8,131

	Fair Value Measurements as of December 31, 2018
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash Equivalents:
Money market account	$	13,968	$	—	$	—	$	13,968
Restricted cash:
Money market account		83		—		—		83
Total assets	$	14,051	$	—	$	—	$	14,051

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Liquidity

Liquidity

These condensed consolidated financial statements are prepared on a going concern basis that contemplates the realization of assets and extinguishment of liabilities in the normal course of business. The Company has incurred net operating losses and negative cash flows from operations since inception. As of September 30, 2019, and December 31, 2018, the Company has an accumulated deficit of $217,761 and $193,213 and, as of such dates, and through the date of this filing, does not have sufficient capital to fund its planned operations. Because of the Company’s recurring losses from operations and negative cash flows, the Company’s independent registered public accounting firm included an explanatory paragraph in its report on the Company’s consolidated financial statements as of, and for the year ended, December 31, 2018 that such factors raise substantial doubt about the Company’s ability to continue as a going concern. To continue its operations, the Company must achieve profitable operations and/or obtain additional financing. 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. The Company may never become profitable and even if it does attain profitable operations, it may not be able to sustain profitability or positive cash flows on a recurring basis.

The Company will need to raise further capital in the future to service its debt or fund its operations until the time it can sustain positive cash flows. 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.

The accompanying 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, and, as such, the 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.

Basis of Presentation

Basis of Presentation

The condensed consolidated balance sheets as of September 30, 2019, the condensed consolidated statements of operations and condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, 2019 and 2018, the condensed consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018 and the condensed consolidated statements of stockholders’ equity (deficit) for the three and nine months ended September 30, 2019 and 2018 are unaudited. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and in the opinion of management, reflect all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed consolidated financial statements included in this report. The condensed consolidated financial data disclosed in these notes to the condensed consolidated financial statements related to the three-month periods are also unaudited. The condensed consolidated results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. The consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report filed on Form 10-K for the year ended December 31, 2018, with the SEC on March 20, 2019, as amended.

Principles of Consolidation

Principles of Consolidation

The accompanying condensed consolidatedfinancialstatementsincludetheaccountsof Restoration Robotics, Inc. and its wholly owned subsidiaries, which are organized in the United States, United Kingdom, Spain, Hong Kong and South Korea prior to the merger with Venus Concept Inc. All significantintercompany accountsandtransactionshavebeeneliminatedinconsolidation.

Use of Estimates

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to revenue recognition, allowance for doubtful accounts, inventory valuation, stock-based compensation, warranty accrual and the recoverability of the Company’s net deferred tax assets and related valuation allowance. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents. Cash and cash equivalents consist primarily of funds invested in readily available checking and savings accounts, investments in money market funds and short-term time deposits. The Company’s restricted cash is held in a separate money market account as collateral for credit cards.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows.

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	8,915	$	16,122
Restricted cash		83		83
Total cash, cash equivalents and restricted cash in the condensed consolidated    statements of cash flows	$	8,998	$	16,205

Segments

Segments

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 reportable segment, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The Company does not assess the performance of individual product line on measures of profit or loss, or asset-based metrics.

Concentration of Customers

Concentration of Customers

For the three and nine months ended September 30, 2019, one and no customers accounted for more than 10% of the Company’s revenue, respectively. For the three and nine months ended September 30, 2018, no customers accounted for more than 10% of the Company’s revenue. As of September 30, 2019, one customer accounted for 14% of the Company’s total accounts receivable. As of December 31, 2018, no customers accounted for more than 10% of the Company’s total accounts receivable

Jobs Act Accounting Election

JOBS Act Accounting Election

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until 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 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.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014‑09, Revenue from Contracts with Customers (Topic 606), as amended by ASU No. 2015-14, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12, and ASU No. 2016-20, (collectively, ASU 2014-09). ASU 2014-09 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services and provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. ASU 2014-09 is required to be adopted, using either of two methods: (i) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures. The Company adopted the new revenue standard on January 1, 2019, using the modified retrospective transition method applied to those contracts which were not completed as of that date. See Note 3. Revenue, to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional details.

In June 2018, the FASB issued ASU No. 2018-7, Compensation – Stock Compensation (Topic 718)— Improvements to Nonemployee Share-Based Payment Accounting. This guidance supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted this standard on January 1, 2019 using the modified retrospective adoption method. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures and no cumulative-effect adjustment was recorded to accumulated deficit at January 1, 2019.

Recently Issued Accounting Standards Not Yet Adopted

Recently Issued Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842), or ASU 2016‑02, as amended by ASU 2019-01 issued in March 2019, (collectively, ASU 2016-02), which requires lessees to record most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Under ASU 2016‑02, a lessee would recognize a lease liability for the obligation to make lease payments and a right‑to‑use asset for the right to use the underlying asset for the lease term. For public entities, this standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. As an Emerging Growth Company, this standard is effective for the Company in annual reporting periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the standard and its impact on the condensed consolidated financial statements. However, the Company does expect a material change in its consolidated assets and liabilities upon adoption of this standard.

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Revenue - Disaggregation of Revenue Geographic Regions (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Total revenue		$ 3,307	$ 4,818	$ 11,632	$ 15,298
United States
Disaggregation Of Revenue [Line Items]
Total revenue		1,405	3,856	6,613	8,712
Europe And Middle East
Disaggregation Of Revenue [Line Items]
Total revenue	[1]	1,382	362	2,819	2,323
Asia Pacific
Disaggregation Of Revenue [Line Items]
Total revenue		196	553	1,291	3,213
Rest Of World
Disaggregation Of Revenue [Line Items]
Total revenue		$ 324	$ 47	$ 909	$ 1,050

[1] No individual country is greater than 10% of revenue

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Net Loss Per Share - Outstanding Shares of Common Stock Equivalents Excluded from Calculation of Diluted Net Loss per Share Attributable to Common Stockholders (Details) - shares	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total potential dilutive shares	246,088	166,338
Options to Purchase Common Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total potential dilutive shares	221,941	135,126
Restricted Stock Awards
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total potential dilutive shares	6,000
Warrants for Common Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Total potential dilutive shares	18,147	31,212

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Balance Sheet Components - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Property Plant And Equipment [Abstract]
Depreciation and amortization	$ 220	$ 268	$ 524	$ 539

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Provision for income taxes	$ 9,000	$ 8,000	$ 33,000	$ 32,000
Effective income tax rate	(0.10%)		(0.14%)
Effective income tax rate, expected rate for fiscal year			(0.17%)
Unrecognized tax benefits	$ 1,540,000		$ 1,540,000
Interest and penalties related to uncertain tax positions	$ 0		$ 0

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Stock Option Plan - Additional Information (Details)						3 Months Ended		9 Months Ended
	Nov. 07, 2019	Mar. 15, 2019	Feb. 27, 2019 shares	Nov. 01, 2018 shares	Oct. 11, 2017	Sep. 30, 2019 USD ($) shares	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2018 USD ($)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options granted | shares						0		2,200
Weighted-average grant date fair value of options granted | $ / shares								$ 0.44
Number of Shares, Options exercised | shares						0		0
Total intrinsic value of options exercised							$ 92,000		$ 413,000
Unamortized stock-based compensation						$ 1,607,000		$ 1,607,000
Unamortized stock-based compensation, weighted-average period								2 years 5 months 23 days
Stock-based compensation								$ 1,073,000	$ 419,000
Restricted Stock Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized compensation expense, net of estimated forfeitures						0		0
Aggregate intrinsic value of the RSUs outstanding						58,000		58,000
Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation						$ 0		$ 0
Keith Sullivan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Term of office				1 year
Keith Sullivan | Restricted Stock Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock awards granted | shares				360,000
Vesting rights description								Under the terms of the arrangement, Mr. Sullivan was granted 360,000 restricted stock awards, which shall vest in quarterly installments equal to 25% of the shares starting with the first vest date on January 15, 2019 so long as Mr. Sullivan is providing services.
Vesting percentage				25.00%
First vest date				Jan. 15, 2019
Keith Sullivan | Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock awards granted | shares			500,000
Chief Financial Officer | Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of stock awards granted | shares			500,000
Merger Agreement
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Reverse stock split conversion ratio		0.0667
Venus | Merger Agreement
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Reverse stock split								15-for-1 reverse stock split
Subsequent Event | Venus | Merger Agreement
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Reverse stock split conversion ratio	15
2017 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Effective date of plan					Oct. 11, 2017

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Long-Term Debt - Additional Information (Details) $ in Thousands								1 Months Ended		9 Months Ended
	Aug. 20, 2019 USD ($) ConvertiblePromissoryNote $ / shares	Aug. 14, 2019 USD ($)	Jun. 25, 2019 USD ($)	Jun. 14, 2019 USD ($)	Feb. 28, 2019 USD ($) ConvertiblePromissoryNote	Feb. 13, 2019 USD ($)	Nov. 02, 2018 USD ($) $ / shares shares	Aug. 31, 2019 USD ($)	May 31, 2018 USD ($)	Sep. 30, 2019 USD ($) $ / shares shares	Aug. 19, 2019 $ / shares	Mar. 31, 2019 $ / shares	Dec. 31, 2018 $ / shares
Debt Instrument [Line Items]
Common stock, par value | $ / shares										$ 0.0001			$ 0.0001
Loan and Security Agreement
Debt Instrument [Line Items]
Debt instrument, borrowed amount									$ 20,000
Maturity date of subordinated note										May 01, 2022
Debt Instrument, full repayment date										May 01, 2022
Debt instrument, term									4 years
Proceeds from loan used to repay debt									$ 10,085
Debt instrument, final payment amount upon maturity									1,300
Debt instrument, outstanding balance repaid									8,667
Debt instrument accrued interest and prepayment fees									$ 118
Debt instrument, outstanding balance										$ 20,000
Debt instrument, accrued interest										$ 167
Debt instrument, interest rate										10.10%
Debt instrument, interest only period										Dec. 01, 2019
Loan and Security Agreement | LIBOR
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate									7.95%
Loan and Security Agreement | Maximum
Debt Instrument [Line Items]
Debt instrument, additional interest only period										3 months
Unsecured Subordinated Promissory Note
Debt Instrument [Line Items]
Debt instrument, borrowed amount		$ 2,500	$ 2,500
Debt instrument, issuance date			Jul. 05, 2019
Maturity date of subordinated note										Nov. 30, 2019
Debt instrument, interest rate, stated percentage			8.00%
Rate of interest payable on demand			4.00%
Debt Instrument, full repayment date										Nov. 30, 2019
Unsecured Subordinated Promissory Note | Tranche A
Debt Instrument [Line Items]
Debt instrument, borrowed amount		$ 1,000
Debt instrument, issuance date		Aug. 27, 2019
Unsecured Subordinated Promissory Note | Tranche B
Debt Instrument [Line Items]
Debt instrument, borrowed amount		$ 1,000
Debt instrument, issuance date		Sep. 25, 2019
Unsecured Subordinated Promissory Note | Tranche C
Debt Instrument [Line Items]
Debt instrument, borrowed amount		$ 500
Unsecured Subordinated Promissory Note | Tranche A and B
Debt Instrument [Line Items]
Debt instrument, borrowed amount		$ 2,000
8% Unsecured Convertible Promissory Notes | Note Purchase Agreement
Debt Instrument [Line Items]
Debt instrument, borrowed amount	$ 2,000				$ 5,000
Maturity date of subordinated note	Aug. 28, 2020
Debt instrument, interest rate, stated percentage	8.00%
Number of convertible promissory notes issued | ConvertiblePromissoryNote	1				2
Date of amendment of note purchase agreement					Aug. 20, 2019
Conversion price of convertible promissory notes | $ / shares	$ 0.4664										$ 0.825
Debt Instrument, full repayment date	Aug. 28, 2020
Common stock, par value | $ / shares	$ 0.0001
Accrued interest										$ 259
Loan and Security Agreement
Debt Instrument [Line Items]
Common stock, par value | $ / shares							$ 0.0001			$ 0.0001
Debt conversion, warrants issued | shares							161,725			161,725
Exercise price of warrants | $ / shares							$ 1.76			$ 3.71
Debt instrument, term										10 years
Fair value of warrants issued										$ 404
Debt instrument transaction cost related amount										$ 404
Fee paid to lenders							$ 50
Cancellation of warrants | shares							161,725
Debt instrument, default interest percentage										4.00%
Percentage of prepayment premium										0.00%
Loan and Security Agreement | On Or Prior To May 1, 2019
Debt Instrument [Line Items]
Percentage of principal amount of borrowings being prepaid										3.00%
Loan and Security Agreement | After May 1, 2019 But On Or Prior To May 1, 2020
Debt Instrument [Line Items]
Percentage of principal amount of borrowings being prepaid										2.00%
Loan and Security Agreement | After May 1, 2020 But On Or Prior To May 1, 2021
Debt Instrument [Line Items]
Percentage of principal amount of borrowings being prepaid										1.00%
Loan and Security Agreement | Other Income (Expense), Net
Debt Instrument [Line Items]
Debt instrument, unamortized debt discount and fee amount										$ 505
Loan and Security Agreement | Measurement Input, Share Price
Debt Instrument [Line Items]
Warrants and Rights Outstanding, Measurement Input | $ / shares												3.71
Loan and Security Agreement | Measurement Input, Exercise Price
Debt Instrument [Line Items]
Warrants and Rights Outstanding, Measurement Input | $ / shares												3.71
Loan and Security Agreement | Measurement Input, Risk Free Interest Rate
Debt Instrument [Line Items]
Warrants and Rights Outstanding, Measurement Input										0.0297
Loan and Security Agreement | Measurement Input, Price Volatility
Debt Instrument [Line Items]
Warrants and Rights Outstanding, Measurement Input										0.5550
Loan and Security Agreement | Measurement Input, Expected Term
Debt Instrument [Line Items]
Debt instrument, term										10 years
Loan and Security Agreement | Measurement Input, Expected Dividend Rate
Debt Instrument [Line Items]
Warrants and Rights Outstanding, Measurement Input										0.00
Loan and Security Agreement | Maximum
Debt Instrument [Line Items]
Debt instrument final fee payable increased amount				$ 1,110
Loan and Security Agreement | Minimum
Debt Instrument [Line Items]
Debt instrument final fee payable				$ 150
Loan and Security Agreement | Third Amendment | Maximum
Debt Instrument [Line Items]
Debt instrument final fee payable increased amount						$ 960
Loan and Security Agreement | Third Amendment | Minimum
Debt Instrument [Line Items]
Debt instrument final fee payable						$ 130
Loan and Security Agreement | Fifth Amendment | Maximum
Debt Instrument [Line Items]
Debt instrument final fee payable increased amount								$ 1,310
Loan and Security Agreement | Fifth Amendment | Minimum
Debt Instrument [Line Items]
Debt instrument final fee payable								$ 200

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Stock Option Plan (Tables)

9 Months Ended

Sep. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Recognized Stock-based Compensation Expense for Employees and Non-employees

The Company recognizedstock-basedcompensationforitsemployeesand non-employeesin the accompanyingconsolidatedstatementsof operationsas follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of revenue	$	11	$	6	$	31	$	14
Sales and marketing		158		31		427		77
Research and development		27		11		78		39
General and administrative		159		119		537		289
Total stock-based compensation	$	355	$	167	$	1,073	$	419

Assumptions used in Fair Value of Option Estimated at Date of Grant using Black-Scholes-Merton Option Pricing Model

The fair value of each option is estimated at the date of grant using the Black-Scholes-Merton option pricing model, based on the following assumptions

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019	2018
Expected term (years)		—		6.0	5.1	5.37 - 6.10
Risk-free interest rate		—	2.82%		2.65%	2.40 - 2.82%
Expected volatility		—	53.87%		60.00%	53.72 - 55.49%
Dividend yield		—	0%		0%	0%

Summary of Stock Option Activity

Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the outstanding stock options in the table below. The following table summarizes stock option activity under the Company’s stock option plan:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Number of			Exercise Price		Contractual		Intrinsic
	Shares			per Share		Term		Value
Outstanding — December 31, 2018		265,962		$	1.95		8.7	$	—
Options granted		2,200			0.96
Options cancelled		(46,221	)		1.68
Outstanding — September 30, 2019		221,941		$	1.99		7.4	$	—
Vested and expected to vest —    September 30, 2019		207,893		$	2.00		7.3	$	—
Exercisable — September 30, 2019		117,524		$	2.02		7.0	$	—

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Revenue - Impact on Financial Statements in Accordance with Topic 606 (Income Statement) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
Revenue	$ 3,307	$ 4,818	$ 11,632	$ 15,298
Gross profit	1,010	2,155	5,167	6,936
Total operating expenses	9,232	8,597	27,061	25,592
Loss from operations	(8,222)	(6,442)	(21,894)	(18,656)
Net loss before provision for income taxes	(9,207)	(7,061)	(24,515)	(20,712)
Net loss attributable to common stockholders	$ (9,216)	$ (7,069)	$ (24,548)	$ (20,744)
Net loss per share attributable to common stockholders, basic and diluted	$ (3.38)	$ (3.03)	$ (9.02)	$ (10.02)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	2,728,888	2,333,820	2,722,922	2,070,322
Change | Topic 606
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
Revenue	$ 24		$ (121)
Gross profit	24		(121)
Total operating expenses			9
Loss from operations	24		(130)
Net loss before provision for income taxes	24		(130)
Net loss attributable to common stockholders	$ 24		$ (130)
Net loss per share attributable to common stockholders, basic and diluted	$ 0.01		$ (0.04)
Balance Without ASC 606 Adoption | Topic 606
Revenue Initial Application Period Cumulative Effect Transition [Line Items]
Revenue	$ 3,331		$ 11,511
Gross profit	1,034		5,046
Total operating expenses	9,232		27,070
Loss from operations	(8,198)		(22,024)
Net loss before provision for income taxes	(9,183)		(24,645)
Net loss attributable to common stockholders	$ (9,192)		$ (24,678)
Net loss per share attributable to common stockholders, basic and diluted	$ (3.37)		$ (9.06)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	2,728,888		2,722,922

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Revenue	$ 3,307	$ 4,818	$ 11,632	$ 15,298
Cost of revenue	2,297	2,663	6,465	8,362
Gross profit	1,010	2,155	5,167	6,936
Operating expenses:
Sales and marketing	3,952	4,398	12,688	13,147
Research and development	1,604	2,008	4,573	6,286
General and administrative	2,155	2,191	5,721	6,159
Merger related expenses	1,521		4,079
Total operating expenses	9,232	8,597	27,061	25,592
Loss from operations	(8,222)	(6,442)	(21,894)	(18,656)
Other expense, net:
Interest expense	(930)	(631)	(2,512)	(1,489)
Other income (expense), net	(55)	12	(109)	(567)
Total other expense, net	(985)	(619)	(2,621)	(2,056)
Net loss before provision for income taxes	(9,207)	(7,061)	(24,515)	(20,712)
Provision for income taxes	9	8	33	32
Net loss attributable to common stockholders	$ (9,216)	$ (7,069)	$ (24,548)	$ (20,744)
Net loss per share attributable to common stockholders, basic and diluted	$ (3.38)	$ (3.03)	$ (9.02)	$ (10.02)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	2,728,888	2,333,820	2,722,922	2,070,322

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (24,548)	$ (20,744)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	524	539
Amortization of debt discounts and issuance costs	586	318
Non-cash loss on extinguishment of debt		178
Stock-based compensation	1,073	419
Provision for bad debt	812	839
Loss on disposal of property and equipment		41
Changes in operating assets and liabilities:
Accounts receivable	2,094	(3,417)
Inventory	(321)	(1,686)
Prepaid expenses and other assets	234	(40)
Accounts payable	1,437	1,956
Accrued and other liabilities	(262)	253
Deferred revenue	(59)	118
Net cash used in operating activities	(18,430)	(21,226)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(353)	(1,051)
Net cash used in investing activities	(353)	(1,051)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party convertible promissory notes, net	6,983
Proceeds from subordinated promissory notes	4,500
Proceeds from exercised stock options		392
Proceeds from follow-on offering, net		15,615
Proceeds from long-term debt, net		19,584
Principal payments on long-term debt		(13,300)
Net cash provided by financing activities	11,483	22,291
Effect of exchange rate changes on cash, cash equivalents and restricted cash	93	33
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(7,207)	47
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	16,205	23,645
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	8,998	23,692
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period	1,653	1,240
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Purchase of property and equipment included in accounts payable		4
Discounts and issuance costs in connection with long-term debt		1,246
Issuance of warrants in connection with long-term debt		$ 404
Transfer of equipment from inventory to property and equipment	220
Discounts in connection with amendment of long-term debt	$ 480

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Revenue - Summary of Estimated Revenue Expected to be Recognized in Future Related to Performance Obligations Unsatisfied or Partially Unsatisfied at Period End (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Disaggregation Of Revenue [Line Items]
2019	$ 956	[1]
2020	467
2021	172
2022 and Thereafter	7
Total	1,602
System Related
Disaggregation Of Revenue [Line Items]
2019	497	[1]
Total	497
Procedure- Based
Disaggregation Of Revenue [Line Items]
2019	20	[1]
Total	20
Service-Related Fees
Disaggregation Of Revenue [Line Items]
2019	439	[1]
2020	467
2021	172
2022 and Thereafter	7
Total	$ 1,085

[1] Represents unearned revenue for the remaining three months of the year 2019.

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Common Stock Reserved For Issuance

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Common Stock Reserved For Issuance

9. COMMON STOCK RESERVEDFOR ISSUANCE

The Company isrequiredto reserveand keep availableout of itsauthorizedbut unissuedsharesof common stocka numberof sharessufficientto affecttheconversionof alloutstanding common stock warrants, plusoptionsgrantedand availableforgrantundertheincentiveplans. Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the common stock equivalents in the table below.

	September 30,		December 31,
	2019		2018
Outstanding common stock warrants		18,147		18,147
Outstanding and issued stock options		221,941		265,962
Outstanding restricted stock units		66,667		—
Shares reserved for future option grants		101,732		29,150
Total common stock reserved for issuance		408,487		313,259

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Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. FAIRVALUEMEASUREMENTS

Cash and cashequivalents,restrictedcash,accountsreceivable,accountspayable,and accruedliabilities approximatefairmarketvaluebecauseof theshort-termnatureof thoseinstruments. The Company’s Term Loan with Solar and Convertible Promissory Notes (both discussed further in Note 8) have fair values that approximate their carrying value.

U.S. GAAP establishes a framework for measuring fair value and a fair value hierarchy based on the inputs used to measure fair value. This framework maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It applies to both items recognized and reported at fair value in the condensed consolidated financial statements and items disclosed at fair value in the notes to the condensed consolidated financial statements.

Observableinputsareinputsthatmarketparticipantswould use in pricingtheassetor liabilitybasedon marketdataobtainedfromindependentsources.Unobservableinputsreflectassumptionsthatmarket participantswould use in pricingtheassetor liabilitybasedon thebestinformationavailablein the circumstances.The hierarchyisbrokendown intothreelevelsbasedon thetransparencyof inputsas follows:

Level1 - Quoted pricesareavailablein activemarketsforidenticalassetsor liabilitiesas of thereport date.A quotedpriceforan identicalassetor liabilityin an activemarketprovidesthemostreliablefair valuemeasurementbecauseitisdirectlyobservableto themarket.

Level2 - Pricinginputsareotherthanquotedpricesin activemarkets,which areeitherdirectlyor indirectlyobservableas of thereportdate.The natureof thesesecuritiesincludesinvestmentsforwhich quotedpricesareavailablebut tradedlessfrequentlyand investmentsthatarefairvaluedusingother securities,theparametersof which can be directlyobserved.

Level3 - Securitiesthathave littleto no pricingobservabilityas of thereportdate.These securitiesare measuredusingmanagement’sbestestimateof fairvalue,where theinputsintothedeterminationof fair valuearenot observableand requiresignificantmanagementjudgmentor estimation.

A financialinstrument’slevelwithinthefairvaluehierarchyisbasedon thelowestlevelof any inputthatis significantto thefairvaluemeasurement.However, thedeterminationof what constitutes“observable” requiressignificantjudgmentby theCompany. The categorizationof a financialinstrumentwithinthe hierarchyisbasedupon thepricingtransparencyof theinstrumentand does not necessarilycorrespondto theCompany’sperceivedriskof thatinstrument.

The followingtablessummarizethelevelsof fairvaluemeasurementsof theCompany’scashequivalents:

	Fair Value Measurements as of September 30, 2019
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash Equivalents:
Money market account	$	8,048	$	—	$	—	$	8,048
Restricted cash:
Money market account		83		—		—		83
Total assets	$	8,131	$	—	$	—	$	8,131

	Fair Value Measurements as of December 31, 2018
	Quoted Prices in Active Markets using Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash Equivalents:
Money market account	$	13,968	$	—	$	—	$	13,968
Restricted cash:
Money market account		83		—		—		83
Total assets	$	14,051	$	—	$	—	$	14,051

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Common Stock Reserved for Issuance - Schedule of Common Stock Reserved for Issuance (Details) - shares	Sep. 30, 2019	Dec. 31, 2018
Class Of Stock [Line Items]
Outstanding and issued stock options	221,941	265,962
Shares reserved for future option grants	101,732	29,150
Total common stock reserved for issuance	408,487	313,259
Restricted Stock Units
Class Of Stock [Line Items]
Outstanding restricted stock units	66,667
Common Stock
Class Of Stock [Line Items]
Outstanding common stock warrants	18,147	18,147

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Commitments and Contingencies - Summary of Aggregate Future Minimum Lease Payments under Operating Leases (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2019 (remaining 3 months)	$ 131
2020	534
2021	550
2022	188
Total future minimum lease payments	$ 1,403

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Stock Option Plan - Summary of Stock Option Activity (Details) - $ / shares	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018
Share Based Compensation Arrangement By Share Based Payment Award Options Outstanding Roll Forward
Number of Shares, Outstanding, Beginning Balance		265,962
Number of Shares, Options granted	0	2,200
Number of Shares, Options cancelled		(46,221)
Number of Shares, Outstanding, Ending Balance	221,941	221,941	265,962
Number of Shares, Vested and expected to vest	207,893	207,893
Number of Shares, Exercisable	117,524	117,524
Weighted-Average Exercise Price Per Share, Outstanding, Beginning Balance		$ 1.95
Weighted-Average Exercise Price Per Share, Options granted		0.96
Weighted-Average Exercise Price Per Share, Options cancelled		1.68
Weighted-Average Exercise Price Per Share, Outstanding, Ending Balance	$ 1.99	1.99	$ 1.95
Weighted-Average Exercise Price Per Share, Vested and expected to vest	2.00	2.00
Weighted-Average Exercise Price Per Share, Exercisable	$ 2.02	$ 2.02
Weighted-Average Remaining Contractual Term, Outstanding		7 years 4 months 24 days	8 years 8 months 12 days
Weighted-Average Remaining Contractual Term, Vested and expected to vest		7 years 3 months 18 days
Weighted-Average Remaining Contractual Term, Exercisable		7 years

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Nature of Operations

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Operations

1. Nature of Operations

Venus Concept Inc. formerly “Restoration Robotics, Inc.” is a medical device company incorporated in the state of Delaware on November 22, 2002 and headquartered in San Jose, California. The Company develops an image-guided robotic system that enables follicular unit extraction (FUE) and implantation functionality for use in the field of hair transplantation and markets the ARTAS^® Robotic System in the United States and certain other countries. In these notes to the unaudited condensed consolidated financial statements, the “Company” and “Restoration Robotics” refers to Restoration Robotics, Inc. and its subsidiaries on a consolidated basis prior to the consummation of the Merger (as defined below).

Merger with Venus

On March 15, 2019, the Company entered into the Merger Agreement (the Merger Agreement) with Radiant Merger Sub Ltd., a company organized under the laws of Israel and a directly, wholly-owned subsidiary of the Company (Merger Sub), and Venus Concept Ltd., a company organized under the laws of Israel (Venus) to combine the companies in an all-stock transaction (the Merger). The Merger Agreement and the Merger have been approved by the Company’s board of directors and the board of directors of Venus.

The Merger Agreement provides that, upon the terms and subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into Venus, with Venus continuing as the surviving corporation and a direct wholly-owned subsidiary of the Company.

At the effective time of the Merger, each outstanding ordinary and preferred share of Venus, nominal value of New Israeli Shekels 0.001, other than shares held by Venus as treasury stock or held by the Company or Merger Sub, will be converted into the right to receive 8.6506 (“Exchange Ratio”) validly issued, fully paid and non-assessable shares of Common Stock (“Company Share”), and (ii) each outstanding Venus stock option and warrant will be assumed by the Company and converted into and become an option or warrant (as applicable) exercisable for Company Shares with the number and exercise price adjusted by the Exchange Ratio.

On August 14, 2019, the Company, Radiant Merger Sub Ltd. and Venus entered into the First Amendment to the Merger Agreement (the “Merger Agreement Amendment”). The Merger Agreement Amendment, among other things, adds as a condition to closing the Merger the satisfaction of the following: (i) Venus must have raised cash proceeds in one or more issuances of common equity interests or convertible bond indebtedness of Venus or the Company, in an aggregate amount of at least $20,000 (exclusive of any investment by Madryn Health Partners, LP (Venus’ lender) not later than the close of business on the closing date of the Merger and (ii) Venus and the other loan parties to the credit agreement by and among Venus, such parties and the Madryn entities, must have unrestricted cash of at least $20,000 immediately after giving effect to the transactions contemplated by the Merger Agreement.

Under the terms of the transaction, the Company and Venus shareholders will own approximately 15% and 85% of the combined company, respectively, on a fully diluted basis, without giving effect to the shares issued in the proposed equity commitment letter dated March 15, 2019, that is expected to close immediately after the merger (the Equity Commitment Letter). EW Healthcare Partners has committed to lead a $21,000 equity investment, priced at $0.4664 per share (subject to adjustment for stock splits), in the combined company’s common stock contingent on the closing of the Merger. Additional investors committed to participating in the proposed equity financing include HealthQuest Capital, Madryn Asset Management, Longitude Capital Management, Fred Moll and Aperture Venture Partners. On August 14, 2019, the Company, Venus and the investors party to the Equity Commitment Letter entered into the first amendment to the Equity Commitment Letter (the “Equity Commitment Letter Amendment”). Pursuant to the Equity Commitment Letter Amendment, the investors agreed to amend the Equity Commitment Letter to “pull forward” their maximum committed amounts such that the $21,000 committed under the Equity Commitment Letter would be invested on or prior to August 30, 2019 in Venus convertible promissory notes which will be convertible into shares of the Company’s common stock immediately following the consummation of the Merger. On August 14, 2019, the equity commitment letter investors purchased an aggregate of $6,950 in Convertible Notes and on August 21, 2019, certain of the remaining Equity Commitment Letter investors purchased an additional $14,050 of Convertible Notes.

In addition to the Equity Commitment Letter, Fred Moll and InterWest Partners previously funded a $5,000 convertible note to the Company, which will convert into the combined company’s common stock upon consummation of the merger at a price of $0.4664 per share (subject to adjustment for stock splits).On August 20, 2019, the Company entered into a note purchase agreement pursuant to which the Company raised $2,000 through the issuance of an unsecured subordinated convertible promissory note to Frederic Moll, M.D. as discussed in Note 8 to the condensed consolidated financial statements.

Issuance of Convertible Promissory Notes by Venus and Issuance of Subordinated Promissory Note by Restoration Robotics

On June 25, 2019, the Company entered into a Note Purchase Agreement (the Note Purchase Agreement) with Venus and certain investors named therein pursuant to which Venus sold $7,800 aggregate principal amount of unsecured senior subordinated convertible promissory notes (the Convertible Notes) to such investors (the Convertible Note Financing). The Convertible Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. Effective upon the closing of the Merger, all of the outstanding principal and unpaid accrued interest on the Convertible Notes will automatically be converted, in whole, into the number of shares of common stock, par value $0.0001 per share, of the Company at a conversion price of $0.4664 per share.

On August 14, 2019, pursuant to that certain Note Purchase Agreement, dated as of June 25, 2019, with Venus and certain investors named therein pursuant to which Venus sold an additional $7,200 aggregate principal amount of Convertible Notes to such investors. The Convertible Notes contain the same terms as the $7,800 aggregate principal amount of Convertible Notes that were sold pursuant to the Note Purchase Agreement on June 25, 2019 and bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Company’s stockholders approved a proposal that effective upon the closing of the Merger, all of the outstanding principal and unpaid accrued interest on the Convertible Notes will automatically be converted, in whole, into the number of shares of common stock, par value $0.0001 per share, of the Company at a conversion price of $0.4664 per share, subject to adjustment as provided in the Convertible Notes.

In connection with the Convertible Note Financing, on June 25, 2019, the Company entered into a $2,500 Unsecured Subordinated Promissory Note, which funded on July 5, 2019, with Venus Concept USA Inc., a wholly owned subsidiary of Venus. On August 14, 2019, the Company entered into another $2,500 Unsecured Subordinated Promissory Note funded in three tranches A and B of $1,000 each and tranche C of $500 with Venus Concept USA Inc., a wholly owned subsidiary of Venus, collectively (the Subordinated Notes). Tranches A and B were funded on August 27, 2019 and September 25, 2019, respectively, for a total of $2,000. The maturity date of the Subordinated Notes is November 30, 2019. The Subordinated Notes bear interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Notes, the Subordinated Notes shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable thereunder. The Subordinated Notes are unsecured and subordinate in priority to the Company’s existing obligations to Solar Capital, Ltd. under its amended loan and security agreement.

The Company (formerly named Restoration Robotics, Inc.), completed its business combination with Venus, in accordance with the terms of the Merger Agreement.

Immediately following the effective time of the Merger, the Company effected a 15-for-1 reverse stock split of the common stock (“Reverse Stock Split”) and the Company changed its corporate name from “Restoration Robotics, Inc.” to “Venus Concept Inc.”, (“Name Change”) and the business conducted by Venus became the primary business conducted by the Company. Venus is an innovative global medical technology company that develops, commercializes and delivers minimally invasive and non-invasive medical aesthetic technologies and related practice enhancement services. The Merger, the Reverse Stock Split and the Name Change were approved by the Company’s stockholders at an annual meeting of its stockholders held on October 4, 2019. A Form 8-K disclosing the full voting results was filed with the Securities and Exchange Commission (SEC) on October 7, 2019. The transaction closed on November 7, 2019.

This Quarterly Report on Form 10-Q includes only the accounts of Restoration Robotics, Inc. prior to the Merger with Venus Concept Inc. on November 7, 2019.

XML

Revenue - Deferred Revenue (Remaining Performance Obligations) (Details) - ARTAS Systems $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)		Sep. 30, 2019 USD ($)
Deferred Revenue Arrangement [Line Items]
Balance at the beginning of the period	$ 1,535		$ 1,661
Additions	652		1,658
Recognition of deferred revenue	(585)		(1,717)
Balance at the end of the period	1,602		1,602
Less: Deferred revenue - current	1,346		1,346
Deferred revenue - non-current	$ 256	[1]	$ 256	[1]

[1] Included in “Other long-term liabilities” on the condensed consolidated balance sheets as of September 30, 2019

XML

Nature of Operations - Additional Information (Details)						9 Months Ended
	Nov. 07, 2019 shares ₪ / shares	Aug. 20, 2019 USD ($) $ / shares	Aug. 14, 2019 USD ($) $ / shares	Jun. 25, 2019 USD ($) $ / shares	Mar. 15, 2019 USD ($) $ / shares	Sep. 30, 2019 $ / shares	Aug. 21, 2019 USD ($)	Aug. 19, 2019 $ / shares	Feb. 28, 2019 USD ($)	Dec. 31, 2018 $ / shares
Nature Of Operations [Line Items]
Common stock, par value | $ / shares						$ 0.0001				$ 0.0001
8% Unsecured Convertible Promissory Notes | Note Purchase Agreement
Nature Of Operations [Line Items]
Common stock, par value | $ / shares		$ 0.0001
Amount of convertible promissory notes		$ 2,000,000							$ 5,000,000
Conversion price of convertible promissory notes | $ / shares		$ 0.4664						$ 0.825
Debt instrument, interest rate, stated percentage		8.00%
Maturity date of subordinated note		Aug. 28, 2020
Unsecured Subordinated Promissory Note
Nature Of Operations [Line Items]
Amount of convertible promissory notes			$ 2,500,000	$ 2,500,000
Debt instrument, interest rate, stated percentage				8.00%
Debt instrument, issuance date				Jul. 05, 2019
Maturity date of subordinated note						Nov. 30, 2019
Rate of interest payable on demand				4.00%
Unsecured Subordinated Promissory Note | Tranche A
Nature Of Operations [Line Items]
Amount of convertible promissory notes			$ 1,000,000
Debt instrument, issuance date			Aug. 27, 2019
Unsecured Subordinated Promissory Note | Tranche B
Nature Of Operations [Line Items]
Amount of convertible promissory notes			$ 1,000,000
Debt instrument, issuance date			Sep. 25, 2019
Unsecured Subordinated Promissory Note | Tranche C
Nature Of Operations [Line Items]
Amount of convertible promissory notes			$ 500,000
Unsecured Subordinated Promissory Note | Tranche A and B
Nature Of Operations [Line Items]
Amount of convertible promissory notes			$ 2,000,000
Venus | 8% Unsecured Convertible Promissory Notes | Note Purchase Agreement
Nature Of Operations [Line Items]
Common stock, par value | $ / shares			$ 0.0001	$ 0.0001
Amount of convertible promissory notes			$ 7,200,000	$ 7,800,000
Conversion price of convertible promissory notes | $ / shares			$ 0.4664	$ 0.4664
Debt instrument, interest rate, stated percentage			8.00%	8.00%
Merger Agreement
Nature Of Operations [Line Items]
Percentage of ownership acquired					15.00%
Reverse stock split conversion ratio					0.0667
Merger Agreement | Venus
Nature Of Operations [Line Items]
Percentage of ownership acquired					85.00%
Reverse stock split						15-for-1 reverse stock split
Merger Agreement | Venus | Minimum
Nature Of Operations [Line Items]
Cash proceeds to be received			$ 20,000,000
Unrestricted cash balance to be kept			20,000,000
Merger Agreement | Venus | Subsequent Event
Nature Of Operations [Line Items]
Common stock, par value | ₪ / shares	₪ 0.001
Nominal value of preferred share | ₪ / shares	₪ 0.001
Right to number of shares to be received in exchange of each outstanding ordinary and preferred share | shares	8.6506
Reverse stock split conversion ratio	15
Merger Agreement | EW Healthcare Partners
Nature Of Operations [Line Items]
Equity method investments amount					$ 21,000,000
Equity method investment price per share | $ / shares					$ 0.4664
Merger Agreement | EW Healthcare Partners | Unsecured Convertible Promissory Notes
Nature Of Operations [Line Items]
Amount of convertible promissory notes			$ 6,950,000				$ 14,050,000
Merger Agreement | Fred Moll and Inter West Partners | Unsecured Convertible Promissory Notes
Nature Of Operations [Line Items]
Amount of convertible promissory notes					$ 5,000,000
Conversion price of convertible promissory notes | $ / shares					$ 0.4664
Merger Agreement | Fred Moll and Inter West Partners | Unsecured Convertible Promissory Notes | Note Purchase Agreement
Nature Of Operations [Line Items]
Amount of convertible promissory notes		$ 2,000,000

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 07, 2019
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	VERO
Entity Registrant Name	Venus Concept Inc.
Entity Central Index Key	0001409269
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Security Exchange Name	NASDAQ
Entity File Number	001-38238
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	06-1681204
Entity Address, Address Line One	235 Yorkland Blvd.
Entity Address, Address Line Two	Suite 900
Entity Address, City or Town	Toronto
Entity Address, Postal Zip Code	M2J 4Y8
Entity Address, State or Province	ON
City Area Code	877
Local Phone Number	848-8430
Document Quarterly Report	true
Document Transition Report	false
Entity Common Stock, Shares Outstanding		29,667,622
Former Address
Document Information [Line Items]
Entity Registrant Name	Restoration Robotics, Inc
Entity Address, Address Line One	128 Baytech Drive
Entity Address, City or Town	San Jose
Entity Address, Postal Zip Code	95134
Entity Address, State or Province	CA

XML

Revenue - Impact on Financial Statements in Accordance with Topic 606 (Balance Sheet) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
ASSETS
Prepaid expenses and other current assets	$ 1,042	$ 1,278
Other assets	100	100
Stockholders' deficit
Accumulated deficit	(217,761)	$ (193,213)
Change | Topic 606
ASSETS
Prepaid expenses and other current assets	(121)
Other assets	(9)
Stockholders' deficit
Accumulated deficit	(130)
Balance Without ASC 606 Adoption | Topic 606
ASSETS
Prepaid expenses and other current assets	921
Other assets	91
Stockholders' deficit
Accumulated deficit	$ (217,891)

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net loss	$ (9,216)	$ (7,069)	$ (24,548)	$ (20,744)
Other comprehensive income (loss):
Cumulative translation adjustment	43	(9)	93	33
Comprehensive loss	$ (9,173)	$ (7,078)	$ (24,455)	$ (20,711)

XML

Long-Term Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt

8. LONG-TERMDEBT

Issuance of Unsecured Subordinated Promissory Notes

In connection with the Convertible Note Financing, on June 25, 2019, the Company entered into a $2,500 Unsecured Subordinated Promissory Note, which funded on July 5, 2019, with Venus Concept USA Inc., a wholly owned subsidiary of Venus. On August 14, 2019, the Company entered into another $2,500 Unsecured Subordinated Promissory Note funded in three tranches A and B of $1,000 each and tranche C of $500 with Venus Concept USA Inc., a wholly owned subsidiary of Venus, collectively (the Subordinated Notes). Tranches A and B were funded on August 27, 2019 and September 25, 2019, respectively for a total of $2,000. The maturity date of the Subordinated Notes is November 30, 2019. The Subordinated Notes bear interest on the unpaid principal amount at a rate of eight percent (8%) per annum from the date of issuance, provided that upon any event of default pursuant to the Subordinated Notes, the Subordinated Notes shall bear interest payable on demand at a rate that is 4% per annum in excess of the rate of interest otherwise payable under thereunder. The Subordinated Notes are unsecured and subordinate in priority to the Company’s existing obligations to Solar Capital, Ltd. under its amended loan and security agreement.

Issuance of Related Party Convertible Promissory Notes

On February 28, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $5,000 through the issuance of two unsecured subordinated convertible promissory notes (the Notes) to Frederic Moll, M.D., one of the Company’s directors, and Interwest Partners IX, LP, one of the Company’s stockholders affiliated with Gil Kliman, M.D., one of the Company’s directors (together, the Investors). The Note Purchase Agreement was amended on August 20, 2019 to adjust the post-merger conversion price for per share from $0.825 to $0.4664 and to convert the Notes upon consummation of the Merger.

In addition, on August 20, 2019, the Company entered into a Note Purchase Agreement pursuant to which the Company raised $2,000 through the issuance of one unsecured subordinated convertible promissory note to Frederic Moll, M.D. The maturity date of the Notes is August 28, 2020 (the Maturity Date). The Notes bear interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Notes are unsecured and subordinate in priority to the Company’s existing obligations under the Solar Agreement.

All of the outstanding principal and unpaid accrued interest on the Notes will automatically be converted into shares of the same class and series of capital stock of the Company issued to other investors upon consummation of the Merger, into the number of fully paid and non-assessable shares of the Company’s common stock, par value $0.0001 per share, of Restoration Robotics (the “Common Stock”), calculated by dividing the outstanding principal amount of this Note (and any accrued and unpaid interest under this Note) by the Post-Merger Conversion Price then in effect. The initial Post-Merger Conversion Price is $0.4664 per share, subject to adjustment for any stock split. Upon the occurrence of certain events of default or the Maturity Date, the Notes require the Company to repay the principal amount of the Notes and any unpaid accrued interest. Issuance costs associated with the Notes were not significant and accrued interest of $259 through September 30, 2019 is reported in “Other Accrued Liabilities” on the condensed consolidated balance sheets.

Loan and Security Agreement

In May 2018, the Company entered into a Loan and Security Agreement and as subsequently amended (the Solar Agreement) with Solar Capital Ltd. (Solar) and certain other lenders thereunder (together with Solar, the Lenders), and Solar, as the Collateral Agent. The Solar Agreement consists of a four-year term loan for an aggregate principal amount of $20,000 (the Borrowings), for working capital, to fund the Company’s general business requirements and to repay indebtedness of the Company to Oxford Finance LLC (the Oxford Agreement). The Company used $10,085 of the loan proceeds to repay the outstanding principal of $8,667, a final payment fee of $1,300 plus accrued interest and prepayment fees of $118 under the Oxford Agreement. The Borrowings under the Solar Agreement bear interest through maturity at a rate equal to the U.S. Dollar LIBOR rate plus 7.95% per annum (the Interest Rate). The outstanding balance on the loan was $20,000 and accrued interest totaled $167 as of September 30, 2019. The Interest Rate was 10.1% at September 30, 2019.

Pursuant to the terms of the Solar Agreement, the Company shall make interest only payments until December 1, 2019 (the Interest Only Period). The Interest Only Period may be extended up to three additional months, if the Company achieves certain revenue and capital fundraising thresholds. Following cessation of the Interest Only Period, the Company shall make equal monthly payments on the outstanding principal balance of the Borrowings and any unpaid and accrued interest such that the Borrowings shall be fully repaid on May 1, 2022.

In addition, pursuant to the Solar Agreement, the Company issued the Lenders warrants (the Warrants) to purchase an aggregate of 161,725 shares of the Company’s common stock, $0.0001 par value per share, at an exercise price of $3.71 per share. The Warrants were immediately exercisable upon issuance, and excluding certain mergers or acquisitions, will expire on the ten-year anniversary of the date of issuance. The fair value of the Warrants issued was determined to be $404 using a Black-Scholes valuation model with the following assumptions: common stock price at issuance of $3.71 per share; exercise price of $3.71; risk-free interest rate of 2.97% based upon observed risk-free interest rates; expected volatility of 55.50% based on the Company’s implied volatility; expected term of ten years, which is the contractual life of the Warrants; and a dividend yield of 0%. The fair value of the Warrants was recorded as a debt discount within notes payable and an increase to additional paid-in capital on the Company’s condensed consolidated balance sheets. The debt discount is being amortized as interest expense over the term of the Solar Agreement, using the effective interest method.

The third-party transaction costs (not paid directly to the lenders) related to the debt of $404 are accounted for as a debt discount and classified within notes payable on the Company’s condensed consolidated balance sheets and amortized as interest expense over the term of the loan using the effective interest method.Unamortized debt discounts related to the Oxford Agreement and all fees paid directly to Solar and Oxford totaling $505 in connection with the debt financing in May 2018 were written off to “Other income (expense), net” in the condensed consolidated statements of operations.

The obligations under the Solar Agreement are secured by a lien on substantially all the Company’s property. The Solar Agreement contains certain affirmative covenants, negative covenants and events of default, including, covenants and restrictions that among other things, require the Company and its subsidiary to satisfy certain financial covenants including covenants requiring the Company to satisfy certain revenue and liquidity thresholds, and restricts the ability of the Company and its subsidiary’s ability to, incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock. A failure to comply with these covenants could permit the Lenders under the Solar Agreement to declare the Borrowings, together with accrued but unpaid interest and certain Prepayment Fees, to be immediately due and payable. On November 2, 2018, the Solar Agreement was amended to modify the compliance requirement for certain revenue and liquidity thresholds. As part of this amendment, the Company paid a fee of $50 to the Lenders and cancelled 161,725 Warrants (originally issued in May 2018, as mentioned above) and issued 161,725 new warrants of the Company’s common stock, $0.0001 par value per share, at an exercise price of $1.76 per share. All other terms of the Warrants were unchanged.

On February 13, 2019, the Company entered into a Third Amendment to the Loan and Security Agreement (the Third Amendment), which amended the Solar Agreement with the Lenders. Pursuant to the terms of the Third Amendment, the Solar Agreement was amended to modify the compliance requirement for certain liquidity thresholds to provide the Company with additional flexibility. As part of the Third Amendment, the Final Fee (as defined in the Solar Agreement) that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $130 to $960. In addition, the Solar Agreement was amended to include certain additional changes to covenants covering certain operational milestones. On June 14, 2019, the Company entered into a Fourth Amendment to the Solar Agreement, which modified the compliance requirement for certain liquidity thresholds. As part of the Fourth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $150 to $1,110, and the Solar Agreement was also amended to include a new covenant covering certain equity financing milestones. In August 2019, the Company entered into a Fifth Amendment to the Solar Agreement, which modified the compliance requirement for certain revenue thresholds and included a new covenant covering certain equity financing milestones. As part of the Fifth Amendment, the Final Fee that is payable to the Lenders upon prepayment, default and maturity of the Solar Agreement, was amended and increased by $200 to $1,310. In October 2019, the Company entered into a Sixth Amendment to the Solar Agreement, which modified the drop dead date for the Merger from October 31, 2019 to November 15, 2019. As of September 30, 2019, the Company was in compliance with all covenants under the Solar Agreement, as amended.

The Company is also required to make mandatory prepayments of the Borrowings, subject to specified exceptions, upon defaulting on any payments of principal or interest on the Borrowings, the occurrence of certain specified defaults of the covenants in the Solar Agreement, the occurrence of a material adverse change in the business, operations or conditions of the Company and specified other events (each, an Event of Default). Upon the occurrence and continuation of an Event of Default, the Borrowings shall accrue at the Interest Rate plus 4.0%.

If all or any of the Borrowings are prepaid or required to be prepaid under the Solar Agreement, then the Company shall pay, in addition to such prepayment, a prepayment premium (the Prepayment Premium) equal to (i) with respect to any such prepayment paid on or prior to May 1, 2019, 3.0% of the principal amount of the Borrowings being prepaid, (ii) with respect to any prepayments paid after May 1, 2019 but on or prior to May 1, 2020, 2.0% of the principal amount of the Borrowings being prepaid and (iii) with respect to any prepayments paid after May 1, 2020 but on or prior to May 1, 2021, 1.0% of the principal amount of the Borrowings being prepaid. Notwithstanding the foregoing, if the Lenders each participate in a refinancing of the Borrowings, then the Prepayment Premium shall be 0%.

The scheduled principal payments on the outstanding borrowings as of September 30, 2019 are as follows:

	As of September 30, 2019
	Solar Debt			Related Party Convertible Promissory Notes			Unsecured Subordinated Promissory Notes			Total
2019 (remaining 3 months)	$	667		$	—		$	4,500		$	5,167
2020		8,000			7,000			—			15,000
2021		8,000			—			—			8,000
2022		4,643			—			—			4,643
2023		—			—			—			—
Total		21,310			7,000			4,500			32,810
Less: debt discount		(1,274	)		—			—			(1,274	)
Less: current portion		(5,878	)		(7,000	)		(4,500	)		(17,378	)
Non-current portion	$	14,158		$	—		$	—		$	14,158

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Net Loss per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Loss per Share

4. NET LOSS PER SHARE

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares 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 share equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, convertible preferred stock, preferred stock warrants and stock options are common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the common stock equivalents in the table below. The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	As of September 30,
	2019		2018
Options to purchase common stock		221,941		135,126
Restricted stock awards		6,000		—
Warrants for common stock		18,147		31,212
Total potential dilutive shares		246,088		166,338

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Outstanding Shares of Common Stock Equivalents Excluded from Calculation of Diluted Net Loss per Share Attributable to Common Stockholders

Effective November 7, 2019, a reverse stock split of 15-for-1 was retrospectively applied to the common stock equivalents in the table below. The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	As of September 30,
	2019		2018
Options to purchase common stock		221,941		135,126
Restricted stock awards		6,000		—
Warrants for common stock		18,147		31,212
Total potential dilutive shares		246,088		166,338

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

12. SUBSEQUENT EVENTS

Merger with Venus

The Company (formerly named Restoration Robotics, Inc.), completed its business combination with Venus, 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 (“Merger Agreement”), by and among the Company, Venus 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, with Venus surviving as a wholly owned subsidiary of the Company (“Merger”). The Merger became effective on November 7, 2019.

At the effective time of the Merger, each outstanding ordinary and preferred share of Venus, nominal value of New Israeli Shekels 0.001 each (a “Venus Share”), other than shares held by Venus as treasury stock or held by the Company or Merger Sub, were converted into the right to receive 8.6506 (the “Exchange Ratio”) validly issued, fully paid and non-assessable shares of Common Stock (a “Company Share”), and (ii) each outstanding Venus stock option and warrant was assumed by the Company and converted into and become an option or warrant (as applicable) exercisable for Company Shares with the number and exercise price adjusted by the Exchange Ratio. An aggregate of approximately 212.5 million shares of Common Stock was issued to the Venus shareholders in the Merger on a pre-split basis, which does not include approximately 49.6 million shares underlying outstanding options and warrants. Immediately after the effective time of the Merger, and after giving effect to the conversion of all Venus convertible notes and Restoration Robotics convertible notes and the issuance of Common Stock and Warrants in the Concurrent Financing (defined below), there were approximately 29,667,622 million shares of Common Stock outstanding.

Immediately following the effective time of the Merger, the Company effected a 15-for-1 reverse stock split of the common stock (“Reverse Stock Split”) and the Company changed its corporate name from “Restoration Robotics, Inc.” to “Venus Concept Inc.” (“Name Change”), and the business conducted by Venus became the primary business conducted by the Company. The Merger, the Reverse Stock Split and the Name Change were approved by the Company’s stockholders at an annual meeting of its stockholders held on October 4, 2019.

The issuance of the shares of Common Stock to the former shareholders of Venus was registered with the SEC on a registration statement on Form S-4 (Reg. No. 333-232000), which was declared effective on September 10, 2019. The Merger and additional related proposals were submitted to a vote of the Company’s stockholders pursuant to a proxy statement/prospectus statement dated September 10, 2019.

The shares of Common Stock listed on the Nasdaq Global Market traded through the close of business on November 7, 2019 under the ticker symbol “HAIR” and commenced trading on the Nasdaq Global Market under the ticker symbol “VERO” on a post-Reverse Stock Split basis on November 8, 2019.This acquisition will be accounted for as a business combination, and the assets and liabilities will be recorded as of the acquisition date at their respective fair values.

On November 3, 2019, Venus Concept Inc., a Delaware corporation, (formerly known as Restoration Robotics, Inc.) and Venus Concept Ltd., a company organized under the laws of Israel, entered into a securities purchase agreement with certain investors named therein (collectively, the “Investors”) pursuant to which the Company agreed to issue and sell to the Investors in a private placement an aggregate of approximately 112,000 shares of the Company’s common stock, par value $0.0001 per share and warrants to purchase up to an aggregate of approximately 56,000 shares of the Company’s common stock at an exercise price of $6.00 per share immediately following the closing of the Merger (the Concurrent Financing).

The impact of the business combination is not reflected in our unaudited condensed consolidated financial statements as of and for the period ended September 30, 2019, or in these corresponding notes, except for recapitalization of the Company’s common stock. Through September 30, 2019, merger-related expenses associated with this transaction were $4.1 million. We are in the process of completing the allocation of fair value to the assets and liabilities and pro-forma results of operations for this business combination.

Loan and Security Agreement

On November 5, 2019, the Company entered into a Sixth Amendment to the Loan and Security Agreement (the “Sixth Amendment”), which amended its Loan and Security Agreement entered into as of May 10, 2018 (the “Loan Agreement”) with Solar Capital Ltd. (Solar) and certain other lenders (together, the “Lenders”) under the Loan Agreement.

Pursuant to the terms of the Sixth Amendment, the Loan Agreement was amended to modify the date by when the Company shall provide evidence of aggregate unrestricted net cash proceeds from a sale of stock or pursuant to equity financings or issuance of debt, and the date upon which the Company should maintain a certain level of liquidity, to the earlier of (i) November 15, 2019 or (ii) the termination of the Agreement and Plan of Merger, by and between the Company and Venus Concept Ltd., dated March 15, 2019, as amended, prior to the consummation of the merger described therein.

On November 7, 2019, in connection with the Merger, the Company paid off and terminated its obligations under its Loan Agreement with Solar and the Lenders. The payoff to Solar and the Lenders pursuant to the Loan Agreement consisted of cash and warrants to purchase up to 50,000 shares of Common Stock, post Reverse Stock Split, at an exercise price of $6.00 per share.

Reverse Stock Split

Immediately following the Merger, the Company effected a reverse stock split of 15-for-1 of its common stock. The reverse stock split was retrospectively applied to the number of shares outstanding and used to calculate loss per share in the condensed consolidated balance sheets, statements of operations, statements of stockholders’ equity (deficit) and accompanying notes.

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule Principal Payments on Outstanding Borrowings

The scheduled principal payments on the outstanding borrowings as of September 30, 2019 are as follows:

	As of September 30, 2019
	Solar Debt			Related Party Convertible Promissory Notes			Unsecured Subordinated Promissory Notes			Total
2019 (remaining 3 months)	$	667		$	—		$	4,500		$	5,167
2020		8,000			7,000			—			15,000
2021		8,000			—			—			8,000
2022		4,643			—			—			4,643
2023		—			—			—			—
Total		21,310			7,000			4,500			32,810
Less: debt discount		(1,274	)		—			—			(1,274	)
Less: current portion		(5,878	)		(7,000	)		(4,500	)		(17,378	)
Non-current portion	$	14,158		$	—		$	—		$	14,158

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Commitments and Contingencies - Additional Information (Details) $ in Thousands	1 Months Ended		3 Months Ended			9 Months Ended
	Feb. 29, 2012 USD ($)	Jul. 31, 2006 USD ($) shares	Sep. 30, 2019 USD ($) ft²	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) ft² Agreement Complaint	Sep. 30, 2018 USD ($)
Commitment And Contingencies [Line Items]
Rent expense			$ 161		$ 163	$ 481	$ 401
Charge related to excess purchase commitments				$ 188
Loss contingency accrual						$ 473
Number of complaints filed | Complaint						2
Rassman Licensing, LLC
Commitment And Contingencies [Line Items]
License agreement termination date		May 09, 2020
Rassman Licensing, LLC | License Agreement
Commitment And Contingencies [Line Items]
One time payment of royalty related to license	$ 400	$ 1,000
HSC Development, LLC
Commitment And Contingencies [Line Items]
License agreement termination date		Jul. 27, 2024
HSC Development, LLC | License Agreement
Commitment And Contingencies [Line Items]
One time payment of royalty related to license		$ 25
Number of common stock shares issued | shares		2,500
Evolve Manufacturing Technologies, Inc. | ARTAS Systems
Commitment And Contingencies [Line Items]
Number of master agreements | Agreement						2
Master agreement for purchase of robotic device, effective date						Apr. 01, 2016
Master agreement for purchase of kits used with robotic device, effective date						Mar. 01, 2016
Initial term of master agreements						2 years
Master agreements, renewal term						12 months
Master agreements, term description						Both agreements are 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.
Future purchase commitments			$ 285			$ 285
San Jose, California
Commitment And Contingencies [Line Items]
Operating lease office space area | ft²			23,000			23,000
Operating lease manufacturing space area | ft²			2,500			2,500
Operating lease expiration date of office space area						2022-04

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Revenue - Disaggregation of Revenue Geographic Regions (Parenthetical) (Details) - Geographic Concentration Risk - Revenue - Country	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Number of individual country	0	0	0	0
Concentration Risk, Percentage	10.00%	10.00%	10.00%	10.00%

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Fair Value Measurements - Schedule for Levels of Fair Value Measurements of Cash Equivalents - (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	$ 8,131	$ 14,051
Quoted Prices in Active Markets using Identical Assets (Level 1)
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Total assets	8,131	14,051
Money Market Account
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash Equivalents	8,048	13,968
Restricted cash	83	83
Money Market Account | Quoted Prices in Active Markets using Identical Assets (Level 1)
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Cash Equivalents	8,048	13,968
Restricted cash	$ 83	$ 83