Venus Concept Inc.

ITEM 1A. RISK FACTORS 

Our operations and financial results are subject to various risk and uncertainties, including those described below and the risk factors described under Part I, Item 1A. Risk Factors in our latest Form 10-K for the year ended December 31, 2023, any of which could adversely affect our business, results of operations, financial condition and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. You should carefully consider the risks described below and the other information in this Quarterly Report on Form 10-Q, our unaudited condensed consolidated financial statements, and the related notes thereto, and Managements Discussion and Analysis of Financial Condition and Results of Operations, included herein, and the risk factors previously disclosed in Part I, Item 1A. Risk Factors in our Form 10-K for the year ended December 31, 2023 filed with the SEC and incorporated by reference herein.

Conditions in Israelthe Middle East, including the October 2023 attack by Hamas and other terrorist organizations from the Gaza Strip aon Israel and Israels war against them, may adversely affect our operations and limit our ability to manage and market our products, which could lead to a decrease in revenues.

Certain of our operations are conducted in Israel and a number of our employees, contract manufacturers and consultants, including employees of our service providers, are located in Israel. As such, our business and operations may be directly affected by economic, political, geopolitical and military conditions affecting Israel.

On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israels southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Thereafter, these terrorists launched extensive rocket attacks on the Israeli population and industrial centers located along the Israeli border with the Gaza Strip. Shortly following the attack, Israels security cabinet declared war against Hamas. The intensity, duration and impact of Israels current war against Hamas and the corresponding geopolitical instability in the region is difficult to predict, as are the wars economic implications on the Companys business and operations.

It is possible that Additionally, political uprisings, social unrest and violence in various other countries in the Middle East, including Israels neighboring countries Syria, Lebanon, Egypt and Jordan, are affecting the political stability of those countries. This instability may lead to deterioration of the political relationships that exist between Israel and certain countries and have raised concerns regarding security in the region and the potential for armed conflict in t. Iran is also believed to have a strong influence over various proxy militias across the region Middle East, and among the Syrian government, Hamas and Hezbollah, in addition to its readiness to engage in conflict with Israel directly. These situations may epotentially escalate.  in the future into more violent events which may affect Israel and us. These situations, including conflicts which involved missile strikes against civilian and military targets in various parts of Israel may negatively impact the Companys operations in Israel.

In recent months, we have seen the level of conflict in the region escalate. Our facilities are within the range of rockets that couldhave been launched from a number of surrounding territories, though none of our operations or those of our manufacturers have been impacted to date. In the event that our facilities in Israel, or the facilities of our vendors in Israel, are damaged as a result of the hostilities or hostilities otherwise disrupt the ongoing operation of our facilities, our ability to deliver products to customers in a timely manner to meet our contractual obligations with customers and vendors could be materially and adversely affected. Any losses or damages incurred by us could have a material adverse effect on our business.

Our opinsurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East or for any resulting disruption in our operations may . Although the Israeli government has in the past covered the reinstatement value of direct damages that were caused by terrorist attacks or acts of war, we cannot be disrupted becauassured that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred and the government may cease providing such coverage or the coverage might not suffice to cover potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.

Our operations may be disrupted because of the obligation of Israeli citizens to perform military service.

As a result of the Israeli security cabinets decision to declare war against Hamas, Israeli reservists have been drafted to perform immediate military service. Certain of our employees and consultants in Israel, in addition to employees of our service providers located in Israel, have been called for service in the current war with Hamas as of the date of this Quarterly Report on Form 10-Q, and such persons may be absent for an extended period of time. As a result, our operations may be disrupted by such absences, which may materially and adversely affect our business and results of operations. Additionally, the absence of employees of our Israeli suppliers and contract manufacturers due to their military service in the current war or future wars or other armed conflicts may disrupt their operations, in which event our ability to deliver products to customers may be materially and adversely affected.

We offer credit terms to some qualified customers and distributors. In the event that a customer or distributor defaults on the amounts payable to us, our financial results may be adversely affected.

For the sixnine months ended JuneSeptember 30, 2024 and 2023, approximately 3028% of our total system revenues were derived from our internal lease programs (Venus Prime and our legacy subscription-based model). Under our internal lease programs, we collect an up-front fee, combined with a monthly payment schedule typically over a period of 36 months, with approximately 40% to 45% of total contract payments collected in the first year. For accounting purposes, these arrangements are considered to be sales-type finance leases, where the present value of all cash flows to be received under the Venus Prime or subscription agreement is recognized as revenue upon shipment of the system to the customer. We cannot provide any assurance that the financial position of customers purchasing products and services under a Venus Prime or subscription agreement will not change adversely before we receive all the monthly installment payments due under the contract. In the event that there is a default by any of the customers to whom we have sold systems under our internal lease programs (Venus Prime or our legacy subscription-based model), we may recognize bad debt expenses in our general and administrative expenses. If the extent of such defaults is material, it could negatively affect our results of operations and operating cash flows.

In addition to our internal lease programs, we generally offer credit terms of 30 to 90 days to qualified customers and distributors. In the event that there is a default by any of the customers or distributors to whom we have provided credit terms, we may recognize bad debt expenses in our general and administrative expenses. If the extent of such defaults is material, it could negatively affect our future results of operations and cash flows.

We may also be adversely affected by bankruptcies or other business failures of our customers, distributors, and potential customers. A significant delay in the collection of accounts receivable or a reduction of accounts receivables collected may impact our liquidity or result in bad debt expenses.

We may not be able to maintain our listing on The Nasdaq Capital Market and it may become more difficult to sell our stock in the public market.

Minimum Stockholder Equity Requirement

On May 31, 2023, we received a notice (the Notice) from the Listing Qualifications Department of Nasdaq ("Nasdaq") sstating that our stockholders equity as reported in our Quarterly Report on Form 10-Q for the period ended March 31, 2023 was below the minimum $2,500,000 required for continued listing under Nasdaq Listing Rule 5550(b)(1) (Minimum Equity Requirement).

The Notice had no immediate effect on the listing of our common stock. On July 17, 2023, we submitted to Nasdaq a plan to regain compliance with the Minimum Equity Requirement (the "Plan"). On July 28, 2023, Nasdaq granted us an extension until November 27, 2023 to evidence compliance with the Minimum Equity Requirement, conditioned upon our achievement of certain milestones as set forth in the Plan. On November 28, 2023, the Company received a written notice from the Nasdaq Staff which described its determination that the Company had not regained compliance with the Minimum Equity Requirement within the Plan period. As a result, the Nasdaq Staff advised the Company that its securities will be delisted at the opening of business on December 7, 2023, unless the Company timely requests a hearing before a Nasdaq Hearings Panel (the "Panel).

On December 5, 2023, the Company timely requested a hearing before the Panel. The hearing was held on March 5, 2024, staying any delisting pending the issuance of the Panels decision.

On March 20, 2024, the Company received a decision from the Panel granting its request for continued listing on the Nasdaq Capital Market, subject to the Company demonstrating compliance with Nasdaq Listing Rule 5550(b) on or before May 28, 2024, and certain other conditions.

On June 4, 2024, the Company was formally notified by Nasdaq that the Company had regained compliance with the stockholders equity Minimum Equity Requirement.

The Company is subject to a Mandatory Panel Monitor, as defined in Nasdaq Listing Rule 5815(d)(4)(B), through June 4, 2025. If the Company is found to be noncompliant with the Minimum Equity Requirement within the monitoring period, the Company would not be allowed to provide the Nasdaq Listing Qualifications Staff with a plan to regain compliance with the Minimum Equity Requirement; rather, the Nasdaq Listing Qualifications Staff would be required to issue a delist determination. In such case, the Company would have the opportunity to request a new hearing before the Panel, which request would stay any further action by the Nasdaq Listing Qualifications Staff until the time of the hearing.

Minimum Bid Price Requirement

On April 11, 2024, the Company received a notice from Nasdaq stating that for 32 consecutive business days the Companys common stock did not maintain a minimum closing bid price of $1.00 per share (Minimum Bid Price Requirement) as required for continued listing under Listing Rule 5550(a)(2).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days, or until October 8, 2024, the Initial Compliance Date, to regain compliance with the Minimum Bid Price Requirement. To he Company did not regain compliance, the closing bid pri with the Bid Price Requirement by the Initial Compliance ofDate.

On October 17, 2024, Nasdaq notified the Companys common stock must be at least  that it is eligible for an additional 180 calendar day period, or until the Extended Compliance Date, to regain compliance with the Bid Price Requirement. If, at any time before the Extended Compliance Date, the bid price for the Companys common stock closes at $1.00 per shaor more for a minimum of ten10 consecutive business days before Octobas required under 8, 2024, at which time Nasdaqthe Compliance Period Rule, the Staff will provide written notification to the Company that it complies with the Minimum Bid Price Requirement, unless Nasdaqthe Staff exercises its discretion to extend this ten-10 day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H).

If we dothe Company does not achieveregain compliance by October 8, 2024,with the Bid Price Requirement by the Extended Company may be eligible for an addiliance Date, the Staff will provide written notificational 180-day period to regain to the Company that its compliance, provided tmon stock will be delisted. At that it meetstime, the continued Company may appeal the Staffs delisting requirement for market value of publicly held shares and all other initialdetermination to the Panel. The Company expects that its common stock would remain listing standards ofed on the Nasdaq Capital Market, with pending the exception of the Minimum Bid Price Requirement, and provides written notice to Nasdaq of its intenPanels decision. There can be no assurance that, if the Company does appeal a delisting determination to cure the deficiency during the second compliance period, for example, by effecting a reverse stock split, if nePanel, such appeal would be successary.ful

If our common stock ultimately is delisted for failure to comply with either the Minimum Equity Requirement or Minimum Bid Price Requirement, our shareholders could face significant adverse consequences, including:

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