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What changed in Venus Concept Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Venus Concept Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+317 added−280 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-01)

Top changes in Venus Concept Inc.'s 2024 10-K

317 paragraphs added · 280 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

82 edited+56 added−44 removed496 unchanged
Biggest changeIf we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products, or our suppliers may be forced to stop providing us with products. 50 Table of Contents The legal determinations relating to patent rights afforded to companies in the medical technology and aesthetic product fields can be uncertain and involve complex legal, factual, and scientific questions, sometimes involving important legal principles which remain uncertain or unresolved, and such uncertainty could affect the outcome or intellectual property related legal determinations in which we are involved.
Biggest changeIf we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products, or our suppliers may be forced to stop providing us with products. 50 Table of Contents We depend on certain technologies that are licensed to us.
Because a strip of the patient’s scalp is not removed, a FUE procedure avoids a long linear scar and reduces the post-operative pain and numbness associated with strip surgery. FUE can be performed with manual hand-held punches, automated hand-held devices (e.g., NeoGraft) ("Manual FUE") or robotically with the ARTAS System.
Because a strip of the patient’s scalp is not removed, a FUE procedure avoids a long linear scar and reduces the post-operative pain and numbness associated with strip surgery. FUE can be performed with manual hand-held punches ("Manual FUE"), automated hand-held devices (e.g., NeoGraft) or robotically with the ARTAS System.
Outside of the United States, likely due to less stringent regulatory requirements, there are more aesthetic products and procedures available in international markets than are cleared for use in the United States.
Outside of the United States, likely due to less stringent regulatory requirements, there are more aesthetic products and procedures available in international markets than are cleared for use in the United States.
Sometimes, there are also fewer limitations on the claims our competitors in international markets can make about the effectiveness of their products and the manner in which they can market them. As a result, we may face a greater number of competitors in markets outside of the United States.
Sometimes, there are also fewer limitations on the claims our competitors in international markets can make about the effectiveness of their products and the manner in which they can market them. As a result, we may face a greater number of competitors in markets outside of the United States.
On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s 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 Israeli population and industrial centers located along the Israeli border with the Gaza Strip.
On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s 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.
These provisions will include the following: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of the Board; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board; • the ability of the Board to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of the Board to alter its bylaws without obtaining stockholder approval; • the required approval of at least 66 2 ⁄ 3 % of the shares entitled to vote at an election of directors to adopt, amend or repeal its bylaws or repeal the provisions of the amended and restated certificate of incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of the stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of the Board, the chief executive officer, the president or the Board, which may delay the ability of the stockholders to force consideration of a proposal or to act, including the removal of directors; and 60 Table of Contents • advance notice procedures that stockholders must comply with in order to nominate candidates to the Board 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 the Company.
These provisions will include the following: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of the Board; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of the Board to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board; • the ability of the Board to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the ability of the Board to alter its bylaws without obtaining stockholder approval; • the required approval of at least 66 2 ⁄ 3 % of the shares entitled to vote at an election of directors to adopt, amend or repeal its bylaws or repeal the provisions of the amended and restated certificate of incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of the stockholders; • the requirement that a special meeting of stockholders may be called only by the chairman of the Board, the chief executive officer, the president or the Board, which may delay the ability of the stockholders to force consideration of a proposal or to act, including the removal of directors; and 59 Table of Contents • advance notice procedures that stockholders must comply with in order to nominate candidates to the Board 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 the Company.
Once the warranty expires, our customers have the option of purchasing an extended warranty service contract, which is typically for a term of one to three years. 23 Table of Contents We maintain a technical and clinical support team to field inquiries, troubleshoot product issues, facilitate sales activities and support the commercial activities of our direct offices and its international distributors.
Once the warranty expires, our customers have the option of purchasing an extended warranty service contract, which is typically for a term of one to three years. 23 Table of Contents We maintain a technical and clinical support team to field inquiries, troubleshoot product issues, facilitate sales activities and support the commercial activities of our direct offices and international distributors.
These provisions would apply even we were to receive an offer that some stockholders may consider beneficial. We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law (“Section 203”).
These provisions would apply even if we were to receive an offer that some stockholders may consider beneficial. We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law (“Section 203”).
However, certain foreign countries and the U.S. states also mandate implementation of commercial compliance programs, impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation and other remuneration to healthcare professionals and entities.
However, certain foreign countries and U.S. states also mandate implementation of commercial compliance programs, impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation and other remuneration to healthcare professionals and entities.
Each agreement sets forth the minimum quarterly purchase commitments and if the distributor fails to meet its minimum purchase commitments, we have the ability to either convert any exclusive distribution rights to non-exclusive rights during the then-remaining term or terminate the agreement.
Each agreement sets forth certain minimum quarterly purchase commitments and if the distributor fails to meet its minimum purchase commitments, we have the ability to either convert any exclusive distribution rights to non-exclusive rights during the then-remaining term or terminate the agreement.
For accounting purposes, these arrangements are considered to be sales-type finance leases, where the present value of all cash flows to be received under the subscription agreement is recognized as revenue upon shipment of the system to the customer.
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 agreement is recognized as revenue upon shipment of the system to the customer.
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. 57 Table of Contents Risks Related to Our Common Stock 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 .
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. 56 Table of Contents Risks Related to Our Common Stock 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 .
(“Venus Canada”), Venus Ltd., and the Madryn Noteholders (as defined below), entered into a Securities Exchange Agreement (the “Exchange Agreement”) dated as of December 8, 2020, pursuant to which the Company (i) repaid on December 9, 2020, $42.5 million aggregate principal amount owed under the Madryn Credit Agreement, and (ii) issued, on December 9, 2020, to Madryn Health Partners (Cayman Master), LP and Madryn Health Partners, LP (the “Madryn Noteholders”) secured subordinated convertible notes in the aggregate principal amount of $26.7 million (the “Notes”).
("Venus Ltd."), and the Madryn Noteholders (as defined below), entered into a Securities Exchange Agreement (the “Exchange Agreement”) dated as of December 8, 2020, pursuant to which the Company (i) repaid on December 9, 2020, $42.5 million aggregate principal amount owed under the Madryn Credit Agreement, and (ii) issued, on December 9, 2020, to Madryn Health Partners (Cayman Master), LP and Madryn Health Partners, LP (the “Madryn Noteholders”) secured subordinated convertible notes in the aggregate principal amount of $26.7 million (the “Notes”).
These broad market fluctuations may adversely affect the market price or liquidity of our common stock. 59 Table of Contents Under SEC rules, we are a smaller reporting company and we have taken advantage of certain exemptions from disclosure requirements available to smaller reporting companies; this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
These broad market fluctuations may adversely affect the market price or liquidity of our common stock. 58 Table of Contents Under SEC rules, we are a smaller reporting company and we have taken advantage of certain exemptions from disclosure requirements available to smaller reporting companies; this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
Recalls involving any of our systems could be particularly harmful to our business, financial condition, and results of operations because it is our only product. 54 Table of Contents If we or our distributors do not obtain and maintain international regulatory registrations or approvals for our systems, our ability to market and sell our systems outside of the United States will be diminished.
Recalls involving any of our systems could be particularly harmful to our business, financial condition, and results of operations because it is our only product. 53 Table of Contents If we or our distributors do not obtain and maintain international regulatory registrations or approvals for our systems, our ability to market and sell our systems outside of the United States will be diminished.
As of December 31, 2023, our trademark portfolio included the following trademark registrations, pending trademark applications or common law trademark rights, among others: MP2®, Tribella®, Vero Hair®, NANOFRACTIONAL RF®, Venus Viva®, Venus Legacy®, Venus Concept®, Venus Versa®, Venus Bliss™, Venus Bliss Max™, NeoGraft®, ARTAS®, ARTAS iX®, Aesthetic Intelligence™ and AI.ME™.
As of December 31, 2024, our trademark portfolio included the following trademark registrations, pending trademark applications or common law trademark rights, among others: MP2®, Tribella®, Vero Hair®, NANOFRACTIONAL RF®, Venus Viva®, Venus Legacy®, Venus Concept®, Venus Versa®, Venus Bliss™, Venus Bliss Max™, NeoGraft®, ARTAS®, ARTAS iX®, Aesthetic Intelligence™ and AI.ME™.
However, a failure or delay in obtaining regulatory clearance or approval in one country may have a negative effect on the regulatory process in others. 55 Table of Contents Our ability to continue manufacturing and supplying our products depends on our continued adherence to ongoing FDA and other foreign regulatory authority manufacturing requirements.
However, a failure or delay in obtaining regulatory clearance or approval in one country may have a negative effect on the regulatory process in others. 54 Table of Contents Our ability to continue manufacturing and supplying our products depends on our continued adherence to ongoing FDA and other foreign regulatory authority manufacturing requirements.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial condition and results of operations. 53 Table of Contents We must maintain regulatory approval in foreign jurisdictions in which we plan to market and sell our systems.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and harm our reputation, business, financial condition and results of operations. 52 Table of Contents We must maintain regulatory approval in foreign jurisdictions in which we plan to market and sell our systems.
As a result of our international business, we are subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval or otherwise free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • import and export restrictions, trade regulations, and non-U.S. tax laws; • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; 41 Table of Contents • customs clearance and shipping delays; • political, social, and economic instability abroad, terrorist attacks, and security concerns in general and uncertainties related to the coronavirus; • preference for locally manufactured products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
As a result of our international business, we are subject to a number of risks, including: • difficulties in staffing and managing our international operations; • increased competition as a result of more products and procedures receiving regulatory approval or otherwise free to market in international markets; • longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • reduced or varied protection for intellectual property rights in some countries; • import and export restrictions, trade regulations, and non-U.S. tax laws; • changes to import and export tariffs stemming from protectionist measures; • fluctuations in currency exchange rates; • foreign certification and regulatory clearance or approval requirements; 41 Table of Contents • customs clearance and shipping delays; • political, social, and economic instability abroad, terrorist attacks, and security concerns in general and uncertainties related to the coronavirus; • preference for locally manufactured products; • potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • the burdens of complying with a wide variety of foreign laws and different legal standards; and • increased financial accounting and reporting burdens and complexities.
We believe our marketing activities are both cost effective and critical in supporting the continued growth and development of our business. As of December 31, 2023, we had a Vice President of Global Marketing and Product Management, with regional marketing support in select countries.
We believe our marketing activities are both cost effective and critical in supporting the continued growth and development of our business. As of December 31, 2024, we had a Vice President of Global Marketing and Product Management, with regional marketing support in select countries.
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.
If the extent of such defaults are 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.
Our reliance on third-party contract manufacturers and suppliers involves a number of risks, including, among other things: • contract manufacturers or suppliers may fail to comply with regulatory requirements or make errors in manufacturing that could negatively affect the efficacy or safety of our systems or cause delays in shipments of our systems; • we or our contract manufacturers or suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, we or our contract manufactures may have excess or inadequate inventory of materials and components; • we or our contract manufacturers and suppliers may be subject to price fluctuations due to a lack of long-term supply arrangements for key components; • we or our contract manufacturers and suppliers may lose access to critical services and components, resulting in an interruption in the manufacture, assembly and shipment of our systems; • we may experience delays in delivery by our contract manufacturers and suppliers due to changes in demand from us or their other customers; • fluctuations in demand for systems that our contract manufacturers and suppliers manufacture for others may affect their ability or willingness to deliver components to us in a timely manner; • our suppliers or those of our contract manufacturers may wish to discontinue supplying components or services to us for risk management reasons; • we may not be able to find new or alternative components or reconfigure our system and manufacturing processes in a timely manner if the necessary components become unavailable; and • our contract manufacturers and suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill its orders and meet our requirements.
Our reliance on third-party contract manufacturers and suppliers involves a number of risks, including, among other things: • contract manufacturers or suppliers may fail to comply with regulatory requirements or make errors in manufacturing that could negatively affect the efficacy or safety of our systems or cause delays in shipments of our systems; • we or our contract manufacturers or suppliers may not be able to respond to unanticipated changes in customer orders, and if orders do not match forecasts, we or our contract manufactures may have excess or inadequate inventory of materials and components; • we or our contract manufacturers and suppliers may be subject to price fluctuations due to a lack of long-term supply arrangements for key components; • we or our contract manufacturers and suppliers may be subject to, directly and indirectly, import or export tariffs imposed under protectionist measures; • we or our contract manufacturers and suppliers may lose access to critical services and components, resulting in an interruption in the manufacture, assembly and shipment of our systems; • we may experience delays in delivery by our contract manufacturers and suppliers due to changes in demand from us or their other customers; • fluctuations in demand for systems that our contract manufacturers and suppliers manufacture for others may affect their ability or willingness to deliver components to us in a timely manner; • our suppliers or those of our contract manufacturers may wish to discontinue supplying components or services to us for risk management reasons; • we may not be able to find new or alternative components or reconfigure our system and manufacturing processes in a timely manner if the necessary components become unavailable; and • our contract manufacturers and suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill its orders and meet our requirements.
("Venus USA"), a wholly-owned subsidiary of the Company, executed a loan and security agreement (the “MSLP Loan Agreement”), a promissory note (the “MSLP Note”), and related documents for a loan in the aggregate amount of $50.0 million for which CNB will serve as lender pursuant to the Main Street Priority Loan Facility as established by the Board of Governors of the Federal Reserve System Section 13(3) of the Federal Reserve Act (the “MSLP Loan”).
("Venus USA"), a wholly-owned subsidiary of the Company, executed a loan and security agreement (the “MSLP Loan Agreement”), a promissory note (the “MSLP Note”), and related documents for a loan in the aggregate amount of $50.0 million for which City National Bank of Florida ("CNB") will serve as lender pursuant to the Main Street Priority Loan Facility as established by the Board of Governors of the Federal Reserve System Section 13(3) of the Federal Reserve Act (the “MSLP Loan”).
The new regulations will, among other things: • strengthen the rules on placing devices on the market and reinforce surveillance once they are available; • establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and • strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. 30 Table of Contents To the extent that our products have already been certified under the existing regulatory framework, the MDR allows us to market them provided that the requirements of the transitional provisions are fulfilled.
The new regulations will, among other things: • strengthen the rules on placing devices on the market and reinforce surveillance once they are available; • establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; • improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and • strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. 30 Table of Contents To the extent that our products have already been certified under the existing regulatory framework, the MDR (Regulation (EU) 2017/745) allows us to continue to market our CE-marked devices provided that the requirements of its transitional provisions are fulfilled.
We have incorporated EMS technology into Bliss Max and our upcoming LegacyMax device to create comprehensive multi-treatment body solutions. Micro-Coring Micro-coring employs a mechanical rotating needle assembly for fractional removal of portions of epidermal and dermal layers of the skin.
We have incorporated EMS technology into Bliss Max and our upcoming Venus Nova device to create comprehensive multi-treatment body solutions. Micro-Coring Micro-coring employs a mechanical rotating needle assembly for fractional removal of portions of epidermal and dermal layers of the skin.
These changes may require us to find alternative bases for the compliant transfer of personal data from the EEA to the United States to change vendors, or to arrange for local storage of personal data and we are monitoring developments in this area. Employees As of December 31, 2023, we had a total of 304 full-time employees.
These changes may require us to find alternative bases for the compliant transfer of personal data from the EEA to the United States to change vendors, or to arrange for local storage of personal data and we are monitoring developments in this area. Employees As of December 31, 2024, we had a total of 292 full-time employees.
For the years ended December 31, 2023 and 2022, we generated 8% and 10%, respectively, of our systems revenues from sales made through third-party distributors. Our agreements with third-party distributors set forth minimum quarterly purchase commitments required for each distributor and provide the distributor the right to distribute our systems within a designated territory.
For the years ended December 31, 2024 and 2023, we generated 13% and 8%, respectively, of our systems revenues from sales made through third-party distributors. Our agreements with third-party distributors set forth minimum quarterly purchase commitments required for each distributor and provide the distributor the right to distribute our systems within a designated territory.
In the United States, we have obtained 510(k) clearance from the United States Food and Drug Administration ("FDA") for our Venus Viva, Venus Viva MD, Venus Legacy, Venus Versa, Venus Versa Pro, Venus Velocity, Venus Bliss, Venus Bliss Max, Venus Epileve, Venus Fiore, ARTAS, ARTAS iX and AI.ME systems.
In the United States, we have obtained 510(k) clearance from the FDA for our Venus Viva, Venus Viva MD, Venus Legacy, Venus Versa, Venus Versa Pro, Venus Velocity, Venus Bliss, Venus Bliss Max, Venus Epileve, Venus Fiore, ARTAS, ARTAS iX and AI.ME systems.
As of December 31, 2023, we had capital resources consisting of cash and cash equivalents of approximately $5.4 million. Further, in order to grow our business and increase revenues, we will need to introduce and commercialize new products, maintain an effective sales and marketing force, and implement new software systems.
As of December 31, 2024, we had capital resources consisting of cash and cash equivalents of approximately $4.3 million. Further, in order to grow our business and increase revenues, we will need to introduce and commercialize new products, maintain an effective sales and marketing force, and implement new software systems.
If our common stock ultimately is delisted, our shareholders could face significant adverse consequences, including: • limited availability or market quotations for our common stock; • reduced liquidity of our common stock; • determination that shares of our common stock are “penny stock”, which would require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stocks; • limited amount of news analysts’ coverage of us; and • decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future. 58 Table of Contents The market price of our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
If our common stock ultimately is delisted for failure to comply with the Minimum Bid Price or Minimum Equity Requirement, our shareholders could face significant adverse consequences, including: • limited availability or market quotations for our common stock; • reduced liquidity of our common stock; • determination that shares of our common stock are “penny stock”, which would require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our common stocks; • limited amount of news analysts’ coverage of us; and • decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future. 57 Table of Contents The market price of our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
In the years ended December 31, 2023 and 2022, 65% and 62%, respectively, of our global revenues were denominated in U.S. dollars and our reporting currency was the U.S. dollar. We pay a meaningful portion of our expenses in New Israeli Shekels (“NIS”), Canadian Dollars (“CAD”), and other foreign currencies.
In the years ended December 31, 2024 and 2023, 69% and 65%, respectively, of our global revenues were denominated in U.S. dollars and our reporting currency was the U.S. dollar. We pay a meaningful portion of our expenses in New Israeli Shekels (“NIS”), Canadian Dollars (“CAD”), and other foreign currencies.
On May 31, 2023, we received a notice (the “Notice”) from the Listing Qualifications Department of Nasdaq stating 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 Listing Rule 5550(b)(1) (“Minimum Equity Requirement”).
Minimum Stockholder Equity Requirement On May 31, 2023, we received a notice (the “Notice”) from Nasdaq stating 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”).
As of December 31, 2023, we had distribution agreements in over 60 c ountries. We enter into both exclusive and non-exclusive distribution agreements, which generally provide the distributor with a right to distribute certain of our products within a designated territory.
As of December 31, 2024, we had distribution agreements in over 40 c ountries. We enter into both exclusive and non-exclusive distribution agreements, which generally provide the distributor with a right to distribute certain of our products within a designated territory.
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. 33 Table of Contents We have initiated and intend to initiate several restructuring programs to improve our operating performance and achieve cost savings, but we may not be able to implement and/or administer these programs in the manner contemplated and these restructuring programs may not produce the desired results.
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. 33 Table of Contents We have initiated a review of strategic alternatives to improve our operating performance and achieve cost savings, but we may not be able to implement and/or administer these programs in the manner contemplated and these restructuring programs may not produce the desired results.
Our competitive prices and subscription model also allow our customers the ability to offer more affordable treatment options to patients. Our Competitive Advantages for the Aesthetic Market • Expands potential market.
Our competitive prices and internal lease model also allow our customers the ability to offer more affordable treatment options to patients. Our Competitive Advantages for the Aesthetic Market • Expands potential market.
As of December 31, 2023, we had a direct sales and marketing team of approximat ely 92 employees, managed by one Executive Vice President, Global Sales and Marketing, three Vice Presidents of Sales for various international markets and one Vice President of Global Marketing and Product Management.
As of December 31, 2024, we had a direct sales and marketing team of approximat ely 86 employees, managed by one Executive Vice President, Global Sales and Marketing, three Vice Presidents of Sales for various international markets and one Vice President of Global Marketing and Product Management.
Of the total number of full-time employees as of December 31, 2023, approximately 79 were direct sales representatives and sales management. 31 Table of Contents Corporate Information We were founded on November 22, 2002 as a Delaware corporation.
Of the total number of full-time employees as of December 31, 2024, approximately 75 were direct sales representatives and sales management. 31 Table of Contents Corporate Information We were founded on November 22, 2002 as a Delaware corporation.
Sales in markets outside of the United States accounted for approximately 43% of our revenue for the year ended December 31, 2023 and 48% of our revenue for the year ended December 31, 2022. In addition, the majority of our research and development activities and the manufacture of our systems are located outside of the United States.
Sales in markets outside of the United States accounted for approximately 41% of our revenue for the year ended December 31, 2024 and 43% of our revenue for the year ended December 31, 2023. In addition, the majority of our research and development activities and the manufacture of our systems are located outside of the United States.
We had an Adjusted EBITDA loss of $20.3 million and $25.4 million for the year ended December 31, 2023, and 2022, respectively. 4 Table of Contents Market Overview Aesthetic Procedures The market for aesthetic procedures is large, growing, global in scale, and comprised of both surgical and non-surgical procedures.
We had an Adjusted EBITDA loss of $21.2 million and $20.3 million for the year ended December 31, 2024, and 2023, respectively. 4 Table of Contents Market Overview Aesthetic Procedures The market for aesthetic procedures is large, growing, global in scale, and comprised of both surgical and non-surgical procedures.
To ensure that each monthly payment is made on time and that the customer’s system is serviced in accordance with the terms of the warranty, every product purchased under a subscription agreement requires a monthly activation code, which we provide to the customer upon receipt of the required monthly payment.
To ensure that each monthly payment is made on time and that the customer’s system is serviced in accordance with the terms of the warranty, every product purchased under Venus Prime requires a monthly activation code, which we provide to the customer upon receipt of the monthly payment.
As of December 31, 2023, our executive officers, directors and certain of our shareholders who are affiliated with our directors, in the aggregate, beneficially own approximately 45% of our outstanding shares of common stock.
As of December 31, 2024, our executive officers, directors and certain of our shareholders who are affiliated with our directors, in the aggregate, beneficially own approximately 25% of our outstanding shares of common stock.
By spreading payments over a 36-month period, our subscription-based model is designed to help our customers achieve positive cash-flow from their investment in our systems, thus reducing a portion of implementation risk and concerns associated with large initial capital outlays. • Expansion of services. Our aesthetic systems allows customers to expand the services offered within their practices.
By spreading payments over a 36-month period, our internal financing programs are designed to help our customers achieve positive cash-flow from their investment in our systems, thus reducing a portion of implementation risk and concerns associated with large initial capital outlays. • Expansion of services. Our aesthetic systems allows customers to expand the services offered within their practices.
The Company has recurring net operating losses and negative cash flows from operations. As of December 31, 2023 and December 31, 2022, the Company had an accumulated deficit of $261,903 and $224,105, respectively, though, the Company was in compliance with all required covenants as of December 31, 2023, and December 31, 2022.
The Company has recurring net operating losses and negative cash flows from operations. As of December 31, 2024 and December 31, 2023, the Company had an accumulated deficit of $308,899 and $261,903, respectively, though, the Company was in compliance with all required covenants as of December 31, 2024, and December 31, 2023.
Under our legacy subscription model, 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.
Under our internal financing 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.
As of December 31, 2023, our patent portfolio is comprise d of: • 16 issued U.S. patents which cover ou r (MP) 2 , fractional RF and Ai.ME, Directional Skin Tightening technology (including cellulite treatments) that are associated with six different patent families (the earliest of which will expire in 2028), 4 pending U.S. patent applications, 27 issued foreign counterpart patents, and 15 pending foreign counterpart patent applications (including PCT pending applications); • 5 issued foreign patents covering the NeoGraft system and its methods of use (the earliest of which expired in 2022); and • 91 issued U.S. patents primarily covering the ARTAS System and methods of use (the earliest of which expire in 2025, 1 pending U.S. patent applications, 159 issued foreign counterpart patents, and 5 pending foreign counterpart patent applications.
As of December 31, 2024, our patent portfolio is comprise d of: • 16 issued U.S. patents which cover ou r (MP) 2 , fractional RF and Ai.ME, Directional Skin Tightening technology (including cellulite treatments) that are associated with six different patent families (the earliest of which will expire in 2028), 4 pending U.S. patent applications, 31 issued foreign counterpart patents, and 12 pending foreign counterpart patent applications; • 4 issued foreign patents covering the NeoGraft system and its methods of use (the earliest of which expired in 2022); and • 92 issued U.S. patents primarily covering the ARTAS System and methods of use (the earliest of which expire in 2025, 176 issued foreign counterpart patents, and 4 pending foreign counterpart patent applications.
Expenses in NIS and CAD accounted for 26% and 16%, respectively, of our expenses for the year ended December 31, 2023, and 27% and 15%, respectively, of our expenses for the year ended December 31, 2022. Salaries paid to our employees, general and administrative expenses and general sales and related expenses are paid in many different currencies.
Expenses in NIS and CAD accounted for 20% and 18%, respectively, of our expenses for the year ended December 31, 2024, and 26% and 16%, respectively, of our expenses for the year ended December 31, 2023. Salaries paid to our employees, general and administrative expenses and general sales and related expenses are paid in many different currencies.
In the event that there is a default by any of the customers to whom we have sold systems under the Venus Prime or 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 the event that there is a default by any of the customers to whom we have sold systems under our internal financing programs, we may recognize bad debt expenses in our general and administrative expenses. If the extent of such defaults are material, it could negatively affect our results of operations and operating cash flows.
In addition to Venus Prime and our legacy subscription-based model, 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.
In addition to our internal financing 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.
The disruptions to the global economy in 2022 and 2023 impeded global supply chains and resulted in longer lead times and increased component costs and freight expenses.
The disruptions to the global economy in 2022 which continued through 2024 impeded global supply chains and resulted in longer lead times and increased component costs and freight expenses.
Contemporaneously with the MSLP Loan Agreement, the Company, Venus USA, Venus Concept Canada Corp.
Contemporaneously with the MSLP Loan Agreement, the Company, Venus USA, Venus Concept Canada Corp. (“Venus Canada”), Venus Concept Ltd.
In the event that a customer or distributor defaults on the amounts payable to us, our financial results may be adversely affected. For the year ended December 31, 2023 and 2022, approximately 33% and 42% of our system revenues were derived from our subscription-based model.
In the event that a customer or distributor defaults on the amounts payable to us, our financial results may be adversely affected. For the year ended December 31, 2024 and 2023, approximately 26% and 33% of our system revenues were derived from our internal financing programs (Venus Prime and our legacy subscription-based model).
Total non-surgical procedures worldwide in 2022 included approximately 13.3 million injectable procedures – primarily neurotoxin and hyaluronic acid fillers – with the remaining 5.5 million non-surgical, non-injectable procedures worldwide in 2022 representing annual addressable procedure opportunity for our minimally invasive and non-invasive medical aesthetic technologies.
Total non-surgical procedures worldwide in 2023 included approximately 14.8 million injectable procedures – primarily neurotoxin and hyaluronic acid fillers – with the remaining 4.4 million non-surgical, non-injectable procedures worldwide in 2023 representing annual addressable procedure opportunity for our minimally invasive and non-invasive medical aesthetic technologies.
For additional information regarding the Madryn Credit Agreement, the Exchange Agreement, the Notes and related agreements, see Note 11 “Madryn Long-Term Debt and Convertible Notes” to our consolidated financial statements included elsewhere in this report. 36 Table of Contents We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization and other operations or efforts.
For additional information regarding the Madryn Loan and Security Agreement, see Note 13 “ EW Convertible Notes ” to our consolidated financial statements included elsewhere in this report. 36 Table of Contents We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization and other operations or efforts.
Changes to management or the inability to recruit, hire, train and retain qualified personnel, could harm our ability to successfully manage, develop and expand our business, which could impair our future revenue and profitability .
We depend on senior management and key employees to operate our business. Changes to management or the inability to recruit, hire, train and retain qualified personnel, could harm our ability to successfully manage, develop and expand our business, which could impair our future revenue and profitability .
We had a net loss attributable to Venus Concept of $37.2 million and $43.7 million for the year ended December 31, 2023, and 2022, respectively.
We had a net loss attributable to Venus Concept of $47.0 million and $37.2 million for the year ended December 31, 2024, and 2023, respectively.
As of December 31, 2023, the Company’s patent portfolio was comprised of 16 issued U.S. patents, 4 pending U.S. patent applications, 27 issued foreign counterpart patents, and 15 pending foreign counterpart patent applications relating to the (MP)2, fractional RF and Ai.ME, and Directional Skin Tightening technology (including cellulite treatments), 5 issued foreign patents covering the NeoGraft system and its methods of use, and 91 issued U.S. patents, 1 pending U.S. patent applications, 159 issued foreign counterpart patents, and 5 pending foreign counterpart patent applications relating to the ARTAS System and methods of use.
As of December 31, 2024, the Company’s patent portfolio was comprised of 16 issued U.S. patents, 8 pending U.S. patent applications, 31 issued foreign counterpart patents, and 12 pending foreign counterpart patent applications relating to the (MP)2, fractional RF and Ai.ME, and Directional Skin Tightening technology (including cellulite treatments), 4 issued foreign patents covering the NeoGraft system and its methods of use, and 92 issued U.S. patents, 176 issued foreign counterpart patents, and 4 pending foreign counterpart patent applications relating to the ARTAS System and methods of use.
As of December 31, 2023, we operated directly in 14 international markets through our 11 direct offices in the United States, Canada, United Kingdom, Japan, Mexico, Spain, Germany, Australia, China, Hong Kong, and Israel. Our revenues for the year ended December 31, 2023, and 2022 were $76.4 million and $99.5 million, respectively.
As of December 31, 2024, we operated directly in 12 international markets through our 10 direct offices in the United States, Canada, Japan, Mexico, Spain, Germany, Australia, China, Hong Kong, and Israel. Our revenues for the year ended December 31, 2024, and 2023 were $64.8 million and $76.4 million, respectively.
Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East, such as damages to our facilities resulting in disruption of our operations. Any losses or damages incurred by us could have a material adverse effect on our business, financial condition and results of operations.
Any losses or damages incurred by us could have a material adverse effect on our business. Our insurance 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.
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.
We cannot provide any assurance that the financial position of customers purchasing products and services under our internal financing programs will not change adversely before we receive all the monthly installment payments due under the contract.
Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s 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.
Conditions in the Middle East, including the October 2023 attack by Hamas and other terrorist organizations on Israel and Israel ’ s 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.
In addition, our technology pipeline is focused on bringing the next generation of our successful energy-based device portfolio to market and the development of robotically assisted minimally invasive solutions for aesthetic procedures that are primarily treated by surgical intervention, including the AI.ME platform for which we received FDA 510(k) clearance for fractional skin resurfacing in December 2022.
In addition, our technology pipeline is heavily focused on improving and enhancing our current technologies, products, and services and the development of robotically assisted minimally invasive solutions for aesthetic procedures that are primarily treated by surgical intervention, including the AI.ME platform for which we received FDA 510(k) clearance for fractional skin resurfacing in December 2022.
Item 1. Business – Subscription-Based Business Model. As of December 31, 2023, our subscription model included an up-front fee and 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.
Like our legacy subscription model, Venus Prime includes an up-front fee and 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.
We believe our ARTAS and NeoGraft systems are complementary and give us a hair restoration product offering that can serve a broad segment of the market.
We have developed and received regulatory clearance for twelve novel aesthetic technology platforms, including our ARTAS and NeoGraft systems. We believe our ARTAS and NeoGraft systems are complementary and give us a hair restoration product offering that can serve a broad segment of the market.
The International Society of Aesthetic Plastic Surgery reported approximately 33.7 million cosmetic procedures worldwide in 2022. Total cosmetic procedures worldwide in 2022 was comprised of approximately 14.9 million surgical cosmetic procedures and approximately 18.8 million non-surgical cosmetic procedures.
The International Society of Aesthetic Plastic Surgery reported approximately 35 million cosmetic procedures worldwide in 2023. Total cosmetic procedures worldwide in 2023 was comprised of approximately 15.8 million surgical cosmetic procedures and approximately 19.2 million non-surgical cosmetic procedures.
Of the total number of employees, 130 were based in the United States, 65 based in Canada, 37 based in Israel, and 72 in the rest of the world.
Of the total number of employees, 128 were based in the United States, 69 based in Canada, 33 based in Israel, and 62 in the rest of the world.
Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in the failure to produce our devices on a timely basis and in the required quantities, if at all. 56 Table of Contents We may be affected by healthcare policy changes and evolving regulations.
Furthermore, our key component suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in the failure to produce our devices on a timely basis and in the required quantities, if at all. 55 Table of Contents Risks Related to Our Operations in Israel We conduct a significant portion of our operations in Israel and therefore our business, financial condition and results of operations may be adversely affected by political, economic and military conditions in Israel.
We provide immediate response technical support to our physician customers and distributors year-round. In the event that an issue arises, our technical support personnel will work with our customers to determine if a technical issue may be resolved over the telephone or requires a service visit.
In the event that an issue arises, our technical support personnel will work with our customers to determine if a technical issue may be resolved over the telephone or requires a service visit. In markets where we do not have our own service engineers, the service and support of our products is managed by our independent distributors.
We are restricted by covenants in the MSLP Loan, the Amended CNB Loan Agreement, and the Madryn Security Agreement.
We are restricted by covenants in the MSLP Loan, the Loan and the Security Agreement (as defined below), the Madryn Security Agreement and the EW Convertible Note.
Despite the actions the Company has undertaken to minimize the impacts from disruptions to the global economy, there can be no assurances that unforeseen future events in the global supply chain, and inflationary pressures, will not have a material adverse effect on its business, financial condition, and results of operations. 34 Table of Contents Our loan and security agreements contain restrictions that may limit our flexibility to effectively operate our business.
Despite the actions the Company has undertaken to minimize the impacts from disruptions to the global economy, there can be no assurances that unforeseen future events in the global supply chain, and inflationary pressures, will not have a material adverse effect on its business, financial condition, and results of operations. 34 Table of Contents Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, may adversely impact costs related to the production, manufacturing and transportation of our products.
Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations. 48 Table of Contents Risks Related to Intellectual Property If we are unable to obtain, maintain, retain and enforce adequate intellectual property rights covering our products and any future products we develop, others may be able to make, use, or sell products that are substantially the same as ours, which could adversely affect our ability to compete in the market.
In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of a clinical trial may also ultimately lead to the denial of regulatory approval of the subject product. 48 Table of Contents Risks Related to Intellectual Property If we are unable to obtain, maintain, retain and enforce adequate intellectual property rights covering our products and any future products we develop, others may be able to make, use, or sell products that are substantially the same as ours, which could adversely affect our ability to compete in the market.
We source a number of components used in the manufacture of our systems from China and given the lingering effects on global supply chain caused by the COVID-19 pandemic, access to our existing supply chain may be become impaired, which could result in manufacturing delays and inventory shortages.
We source a number of components used in the manufacture of our systems from China and given the uncertainty with respect to the tariffs, if any, the new US Federal administration will levy on goods imported from China and other international jurisdictions, access to our existing supply chain may be become impaired, which could result in manufacturing delays and inventory shortages.
We cannot be certain that drafting and/or prosecution of the licensed patents and patent applications by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. 51 Table of Contents Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.
We cannot be certain that drafting and/or prosecution of the licensed patents and patent applications by the licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. 51 Table of Contents Risks Related to Government Regulation Our devices and our operations are subject to extensive government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could harm our business.
Manufacturing and Quality Assurance We have our own research and development centers in Yokneam, Israel, and San Jose, California and use two ISO-certified contract manufacturers in Karmiel, Israel, and Mazet, France. We assemble the ARTAS System in San Jose, California, while reusable and disposable kits are assembled exclusively for us by NPI Solutions, Inc. (“NPI”) based in Morgan Hill, California.
We assemble the ARTAS System in San Jose, California, while reusable and disposable kits are assembled exclusively for us by NPI Solutions, Inc. (“NPI”) based in Morgan Hill, California. We work closely with our manufacturers and perform final quality control testing using our own employees stationed in the manufacturing facilities around the world.
Under our Venus Prime program, select customers can qualify for competitive financing rates and continue to benefit from the payment flexibility afforded by our previous subscription financing program, inclusive of a seamless upgrade program. Under Venus Prime prospective customers are screened for credit worthiness utilizing standard commercial lending practices.
Under our Venus Prime program, select customers can qualify for competitive financing rates and continue to benefit from the payment flexibility afforded by our previous subscription financing program when purchasing our aesthetic medical devices, as well as a seamless technology upgrade program made available to our customers in years 2 and 3 of ownership.
Shortly following the attack, Israel’s security cabinet declared war against Hamas. The intensity, duration and impact of Israel’s current war against Hamas and the corresponding geopolitical instability in the region is difficult to predict, as are the war’s economic implications on the Company’s business and operations. It is possible that the conflict in the region may escalate.
While a proposed armistice and hostages/prisoners exchange to end the Israel-Hamas war was agreed to by Israel and Hamas on January 15, 2025, and came into effect on January 19, 2025, the intensity, duration and impact of Israel’s current war against Hamas and the corresponding geopolitical instability in the region is difficult to predict, as are the war’s economic implications on the Company’s business and operations.
Additionally, the implementation of restructuring programs may result in additional costs, some of which could be material. Failure to successfully implement our restructuring initiatives may negatively affect our financial performance. Our recurring losses from operations and negative cash flows raise substantial doubt about our ability to continue as a going concern.
Our recurring losses from operations and negative cash flows raise substantial doubt about our ability to continue as a going concern.
These recurring monthly payments provide our customers with enhanced financial transparency and predictability. If economic circumstances are appropriate, we provide customers in good standing with the opportunity to “upgrade” into our newest available or alternative Venus Concept technology throughout the subscription period. This structure can provide greater flexibility than traditional equipment leases secured through financing companies.
These recurring monthly payments provide our customers with enhanced financial transparency and predictability. This structure can provide greater flexibility than traditional equipment leases secured through financing companies. We work closely with our customers to provide business recommendations that improve the quality-of-service outcomes, build patient traffic and improve financial returns for the customer’s business.
Upon the occurrence, and during the continuance of, an event of default under the CNB Loan Agreement, if we are unable to repay all outstanding amounts, CNB may foreclose on the collateral granted to it to collateralize the indebtedness, which would significantly affect our ability to operate our business.
Pursuant to the Security Agreement, during the continuance of an event of default under the Notes, if the Company is unable to repay all outstanding amounts under the EW Notes, the EW Investors may, subject to the terms of the CNB Subordination Agreement (as defined therein), foreclose on the collateral to collateralize such indebtedness.
In particular, the certificate in question must still be valid. Under article 120(2) MDR, certificates issued by notified bodies before May 25, 2017 will remain valid until their indicated expiry dates. By contrast, certificates issued after May 25, 2017 will be void at the latest by May 27, 2024.
Under Article 120 of the MDR, certificates issued by Notified Bodies to the MDD (93/42/EEC) prior to May 25, 2017 remain valid until their indicated expiry dates. Following expiration, an agreement must be made between manufacturers and their Notified Body to extend the validity of the MDD issued EC certificates until, at the latest, 31 December 2028.
In markets where we do not have our own service engineers, the service and support of our products is managed by our independent distributors. In order to maximize customer “up time,” we proactively deploy replacement systems, modules, and components to strategic hubs worldwide.
In order to maximize customer “up time,” we proactively deploy replacement systems, modules, and components to strategic hubs worldwide. Manufacturing and Quality Assurance We have our own research and development centers in Yokneam, Israel, and San Jose, California and use two ISO-certified contract manufacturers in Karmiel, Israel, and Mazet, France.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor accounting purposes, these minority partners are referred to as non-controlling interests, and we record the non-controlling interests’ share of earnings in our subsidiaries as a separate balance within stockholders’ equity in the consolidated balance sheets and consolidated statements of stockholders’ equity. 74 Table of Contents Results of Operations The following tables set forth our consolidated results of operations in U.S. dollars and as a percentage of revenues for the years indicated: Year Ended December 31, 2023 2022 Consolidated Statements of Loss: (dollars in thousands) Revenues: Leases $ 20,504 $ 35,267 Products and services 55,850 64,230 Total revenue 76,354 99,497 Cost of goods sold 24,187 33,526 Gross profit 52,167 65,971 Operating expenses: Sales and marketing 31,231 40,276 General and administrative 41,048 49,618 Research and development 8,197 10,953 Total operating expenses 80,476 100,847 Loss from operations (28,309 ) (34,876 ) Other expenses: Foreign exchange (gain) loss (295 ) 3,387 Finance expenses 6,893 4,561 Loss on disposal of subsidiaries 174 1,482 Loss on debt extinguishment 2,040 — Loss before income taxes (37,121 ) (44,306 ) Income tax benefit (71 ) (722 ) Net loss $ (37,050 ) $ (43,584 ) Net loss attributable to the Company (37,250 ) (43,700 ) Net income attributable to noncontrolling interest 200 116 As a % of revenue: Revenues 100 % 100 % Cost of goods sold 31.7 33.7 Gross profit 68.3 66.3 Operating expenses: Selling and marketing 40.9 40.5 General and administrative 53.8 49.9 Research and development 10.7 11.0 Total operating expenses 105.4 101.4 Loss from operations (37.1 ) (35.1 ) Foreign exchange (gain) loss (0.4 ) 3.4 Finance expenses 8.9 4.6 Loss on disposal of subsidiaries 0.1 1.5 Loss on debt extinguishment 2.7 — Loss before income taxes (48.6 ) (44.5 ) 75 Table of Contents The following tables set forth our revenue by region and by product type for the years indicated: Year Ended December 31, Revenues by region: 2023 2022 United States $ 43,454 $ 52,101 International 32,900 47,396 Total revenue $ 76,354 $ 99,497 Year Ended December 31, 2023 2022 Revenues by product: (in thousands) Subscription—Systems $ 20,504 $ 35,267 Products—Systems 41,874 47,906 Products—Other(1) 10,563 13,316 Services (2) 3,413 3,008 Total revenue $ 76,354 $ 99,497 (1) Products-Other include ARTAS procedure kits, Viva tips, Glide and other consumables.
Biggest changeFor accounting purposes, these minority partners are referred to as non-controlling interests, and we record the non-controlling interests’ share of earnings in our subsidiaries as a separate balance within stockholders’ equity in the consolidated balance sheets and consolidated statements of stockholders’ equity (deficit). 73 Table of Contents Results of Operations The following tables set forth our consolidated results of operations in U.S. dollars and as a percentage of revenues for the years indicated: Year Ended December 31, 2024 2023 Consolidated Statements of Loss: (dollars in thousands) Revenues: Leases $ 13,265 $ 20,504 Products and services 51,568 55,850 Total revenue 64,833 76,354 Cost of goods sold 20,527 24,187 Gross profit 44,306 52,167 Operating expenses: Sales and marketing 28,332 31,231 General and administrative 36,470 41,048 Research and development 6,688 8,197 Total operating expenses 71,490 80,476 Loss from operations (27,184 ) (28,309 ) Other expenses: Foreign exchange (gain) loss 2,135 (295 ) Finance expenses 6,885 6,893 Loss on disposal of subsidiaries 23 174 Loss on debt extinguishment 11,355 2,040 Loss before income taxes (47,582 ) (37,121 ) Income tax benefit (611 ) (71 ) Net loss $ (46,971 ) $ (37,050 ) Net loss attributable to the Company (46,996 ) (37,250 ) Net income attributable to noncontrolling interest 25 200 As a % of revenue: Revenues 100 % 100 % Cost of goods sold 31.7 31.7 Gross profit 68.3 68.3 Operating expenses: Selling and marketing 43.7 40.9 General and administrative 56.3 53.8 Research and development 10.3 10.7 Total operating expenses 110.3 105.4 Loss from operations (41.9 ) (37.1 ) Foreign exchange (gain) loss 3.3 (0.4 ) Finance expenses 10.6 9.0 Loss on disposal of subsidiaries 0.0 0.2 Loss on debt extinguishment 17.5 2.7 Loss before income taxes (73.4 ) (48.6 ) 74 Table of Contents The following tables set forth our revenue by region and by product type for the years indicated: Year Ended December 31, Revenues by region: 2024 2023 United States $ 38,176 $ 43,454 International 26,657 32,900 Total revenue $ 64,833 $ 76,354 Year Ended December 31, 2024 2023 Revenues by product: (in thousands) Venus Prime / Subscription—Systems $ 13,265 $ 20,504 Products—Systems 38,020 41,874 Products—Other (1) 10,469 10,563 Services (2) 3,079 3,413 Total revenue $ 64,833 $ 76,354 (1) Products-Other include ARTAS procedure kits, Viva tips, Glide and other consumables.
The non-cash operating expenses consisted of provision for bad debts of $1.4 million, loss on debt extinguishment of $2.0 million, depreciation and amortization of $4.1 million, finance expenses and accretion of $2.2, stock-based compensation expense of $1.6 million, provision for inventory obsolescence of $1.2 million, partially offset by a deferred tax recovery of $0.1 million.
The non-cash operating expenses consisted of provision for bad debts of $1.4 million, loss on debt extinguishment of $2.0 million, depreciation and amortization of $4.1 million, finance expenses and accretion of $2.2 million, stock-based compensation expense of $1.6 million, and provision for inventory obsolescence of $1.2 million, partially offset by a deferred tax recovery of $0.1 million.
For accounting purposes, these arrangements are considered to be sales-type finance leases, where the present value of all cash flows to be received under the subscription agreement is recognized as revenue upon shipment to the customer and achievement of the required revenue recognition criteria.
For 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 agreement is recognized as revenue upon shipment to the customer and achievement of the required revenue recognition criteria.
In connection with the Exchange Agreement, we also entered into (i) the Madryn Security Agreement, pursuant to which we agreed to grant Madryn a security interest, in substantially all of our assets, to secure the obligations under the Notes and (ii) the CNB Subordination Agreement.
In connection with the Exchange Agreement, we also entered into (i) the Madryn Loan and Security Agreement, pursuant to which we agreed to grant Madryn a security interest, in substantially all of our assets, to secure the obligations under the Notes and (ii) the CNB Subordination Agreement.
For additional information regarding the Notes, Exchange Agreement, Madryn Security Agreement and CNB Subordination Agreement, see Note 11 “ Madryn Long-Term Debt and Convertible Notes ” to our consolidated financial statements included elsewhere in this report.
For additional information regarding the Notes, Exchange Agreement, Madryn Loan and Security Agreement and CNB Subordination Agreement, see Note 11 “ Madryn Long-Term Debt and Convertible Notes ” to our consolidated financial statements included elsewhere in this report.
Our failure to comply with the covenants contained in our credit facilities, including financial covenants, could result in an event of default, which could materially and adversely affect our results of operations and financial condition. 81 Table of Contents We have based our projections on the amount of time through which our financial resources will be adequate to support our operations on assumptions that may prove to be incorrect, and we may use all our available capital resources sooner than we expect.
Our failure to comply with the covenants contained in our credit facilities, including financial covenants, could result in an event of default, which could materially and adversely affect our results of operations and financial condition. 80 Table of Contents We have based our projections on the amount of time through which our financial resources will be adequate to support our operations on assumptions that may prove to be incorrect, and we may use all our available capital resources sooner than we expect.
Revenue is recognized based on the following five steps: (1) identification of the contract(s) with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the separate performance obligations in the contract; and (5) recognition of revenue when (or as) the entity satisfies a performance obligation. 84 Table of Contents We record our revenue net of sales tax and shipping and handling costs.
Revenue is recognized based on the following five steps: (1) identification of the contract(s) with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the separate performance obligations in the contract; and (5) recognition of revenue when (or as) the entity satisfies a performance obligation. 83 Table of Contents We record our revenue net of sales tax and shipping and handling costs.
These sales are non-refundable, non-returnable and without any rights of price protection or stock rotation. Accordingly, we consider distributors as end customers, and are accounted for using the sell-in method. 72 Table of Contents Procedure Based Revenue We generate revenue from the harvesting, site making, and implantation procedures performed with our ARTAS system.
These sales are non-refundable, non-returnable and without any rights of price protection or stock rotation. Accordingly, we consider distributors as end customers, and are accounted for using the sell-in method. 71 Table of Contents Procedure Based Revenue We generate revenue from the harvesting, site making, and implantation procedures performed with our ARTAS system.
General global economic downturns and macroeconomic trends, including heightened inflation, capital markets volatility, interest rate and currency rate fluctuations, and economic slowdowns, have resulted and may continue to result in unfavorable conditions that negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.
General global economic downturns and macroeconomic trends, including heightened inflation, capital markets volatility, interest rate and currency rate fluctuations, the threat of tariffs, and economic slowdowns, have resulted and may continue to result in unfavorable conditions that negatively affect demand for our products and exacerbate some of the other risks that affect our business, financial condition and results of operations.
We believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. Income tax benefit is recognized based on the actual taxable income or loss incurred during the year ended December 31, 2023.
We believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. Income tax benefit is recognized based on the actual taxable income or loss incurred during the year ended December 31, 2024.
The New Notes accrued interest, payable in kind on a quarterly basis, at an annual rate of 90-day Adjusted SOFR + 8.5% and are convertible at any time into shares of our common stock at an initial conversion price of $24 per share, subject to adjustment.
The New Notes accrued interest, payable in kind on a quarterly basis, at an annual rate of 90-day Adjusted SOFR + 8.5% and are convertible at any time into shares of our common stock at an initial conversion price of $264 per share, subject to adjustment.
We anticipate some supply challenges in 2024, due to geopolitical disruption in the middle east impacting shipping lanes, deliveries of materials and component parts, impacting production lead times that may impact our ability to manufacture the number of systems required to meet customer demand.
We anticipate some supply challenges in 2025, due to geopolitical disruption in the middle east impacting shipping lanes, deliveries of materials and component parts, impacting production lead times that may impact our ability to manufacture the number of systems required to meet customer demand.
The aggregate number of shares that we can sell to Lincoln Park under the Equity Purchase Agreement may in no case exceed the Exchange Cap, unless (i) stockholder approval is obtained to issue shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds $59.6325 per share (subject to adjustment) (which represents the minimum price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the Equity Purchase Agreement, such that the transactions contemplated by the Equity Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq Listing Rules).
The aggregate number of shares that we can sell to Lincoln Park under the Equity Purchase Agreement may in no case exceed the Exchange Cap, unless (i) stockholder approval is obtained to issue shares above the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds $655.9575 per share (subject to adjustment) (which represents the minimum price, as defined under Nasdaq Listing Rule 5635(d), on the Nasdaq Global Market immediately preceding the signing of the Equity Purchase Agreement, such that the transactions contemplated by the Equity Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq Listing Rules).
On July 12, 2022, we entered into the 2022 LPC Purchase Agreement with Lincoln Park, and we issued and sold to Lincoln Park 0.05 million shares of our common stock as a commitment fee in connection with entering into the 2022 LPC Purchase Agreement, with the total value of $0.3 million.
On July 12, 2022, we entered into the 2022 LPC Purchase Agreement with Lincoln Park, and we issued and sold to Lincoln Park 0.004 million shares of our common stock as a commitment fee in connection with entering into the 2022 LPC Purchase Agreement, with the total value of $0.3 million.
We expect our research and development expenses to increase in absolute dollars as we continue to invest in research, clinical studies, and development activities, but to decline as a percentage of revenue as our revenue increases over time. Finance Expenses Finance expenses consists of interest income, interest expense and other banking charges.
We expect our research and development expenses to increase in absolute dollars as we continue to invest in research, clinical studies, and development activities, but to decline as a percentage of revenue as our revenue increases over time. Finance Expenses Finance expenses consist of interest income, interest expense and other banking charges.
The accounting effects of the 2022 Private Placement transaction are discussed in Note 14 " Stockholders Equity " in the notes to our consolidated financial statements included elsewhere in this report. 80 Table of Contents The 2023 Multi-Tranche Private Placement In May 2023, we entered into the 2023 Multi-Tranche Private Placement Stock Purchase Agreement, with the 2023 Investors pursuant to which the Company may issue and sell to the 2023 Investors up to $9.0 million in shares of Senior Preferred Stock, in multiple tranches from time to time until December 31, 2025, subject to a minimum aggregate purchase amount of $0.5 million in each tranche.
The accounting effects of the 2022 Private Placement transaction are discussed in Note 15 " Stockholders Equity " in the notes to our consolidated financial statements included elsewhere in this report. 79 Table of Contents The 2023 Multi-Tranche Private Placement In May 2023, we entered into the 2023 Multi-Tranche Private Placement Stock Purchase Agreement, with the 2023 Investors pursuant to which the Company may issue and sell to the 2023 Investors up to $9.0 million in shares of Senior Preferred Stock, in multiple tranches from time to time until December 31, 2025, subject to a minimum aggregate purchase amount of $0.5 million in each tranche.
We did not experience significant supply issues during the year ended December 31, 2023 as we continue to actively work with our suppliers and third-party manufacturers to mitigate supply issues and build inventory of key component parts.
We did not experience significant supply issues during the year ended December 31, 2024 as we continue to actively work with our suppliers and third-party manufacturers to mitigate supply issues and build inventory of key component parts.
These receivables have been discounted based on the implicit interest rate in the subscription lease which range between 8% to 10% for the year ended December 31, 2023, and 8% to 10% for the year ended December 31, 2022.
These receivables have been discounted based on the implicit interest rate in the subscription lease which range between 8% to 10% for the year ended December 31, 2024, and 8% to 10% for the year ended December 31, 2023.
These were offset by an decrease in unearned interest income of $1.2 million, a decrease in current operating lease liabilities of $0.2 million, a decrease in other long-term operating lease liabilities of $1.1 million, and a decrease in accrued expenses and other current liabilities of $5.1 million.
These were partially offset by a decrease in unearned interest income of $1.2 million, a decrease in current operating lease liabilities of $0.2 million, a decrease in other long-term operating lease liabilities of $1.1 million, and a decrease in accrued expenses and other current liabilities of $5.1 million.
The use of cash in net operating assets was attributable to a decrease in accounts receivable of $14.9 million, a decrease in other current assets of $1.6 million, a decrease in operating right-of-use assets of $1.3 million.
The decreased use of cash in net operating assets was attributable to a decrease in accounts receivable of $14.9 million, a decrease in other current assets of $1.6 million, and a decrease in operating right-of-use assets net of $1.3 million.
The Notes accrued interest at a rate of 8.0% per annum from the date of original issuance of the Notes to the third anniversary date of the original issuance and thereafter interest would accrue at a rate of 6.0% per annum.
The Notes accrued interest at a rate of 8.0% per annum from the date of original issuance of the Notes to the third anniversary date of the original issuance and thereafter interest accrued at a rate of 6.0% per annum.
We expect inventory to remain relatively flat in the short term but increase at a lower rate than the rate of revenue growth over the longer term. 78 Table of Contents We also require modest funding for capital expenditures. Our capital expenditures relate primarily to our research and development facilities in Yokneam, Israel and San Jose, California.
We expect inventory to remain relatively flat in the short term but increase at a lower rate than the rate of revenue growth over the longer term. 77 Table of Contents We also require modest funding for capital expenditures. Our capital expenditures relate primarily to our research and development facilities in Yokneam, Isarael and San Jose, California.
For the years ended December 31, 2023 and 2022, approximately 8% and 10% of our total system revenues were derived from distributor sales. Under the traditional distributor relationship, we do not sell directly to the end customer and, accordingly, achieve a lower overall margin on each system sold compared to our direct sales.
For the years ended December 31, 2024 and 2023, approximately 13% and 8% of our total system revenues were derived from distributor sales. Under the traditional distributor relationship, we do not sell directly to the end customer and, accordingly, achieve a lower overall margin on each system sold compared to our direct sales.
We are restricted by covenants in the MSLP Loan, the Amended CNB Loan Agreement, and the Madryn Security Agreement. These covenants restrict, among other things, our ability to incur additional indebtedness, which may limit our ability to obtain additional debt financing.
We are restricted by covenants in the MSLP Loan, EW Security Agreement, and the Madryn Loan and Security Agreement. These covenants restrict, among other things, our ability to incur additional indebtedness, which may limit our ability to obtain additional debt financing.
Revenue Recognition We generate revenue from (1) sales of systems through our subscription model, in accordance with ASC 842, "Leases" ("ASC 842"), traditional system sales to customers and distributors, (2) other product revenues from the sale of ARTAS procedure kits, marketing supplies and kits, consumables and (3) our extended warranty service contracts provided to existing customers.
Revenue Recognition We generate revenue from (1) sales of systems through our internal financing programs, in accordance with ASC 842, "Leases" ("ASC 842"), traditional system sales to customers and distributors, (2) other product revenues from the sale of ARTAS procedure kits, marketing supplies and kits, consumables and (3) our extended warranty service contracts provided to existing customers.
Capital Resources As of December 31, 2023, we had capital resources consisting of cash and cash equivalents of approximately $5.4 million. We have financed our operations principally through the issuance and sale of our common stock and preferred stock, debt financing, and payments from customers.
Capital Resources As of December 31, 2024, we had capital resources consisting of cash and cash equivalents of approximately $4.3 million. We have financed our operations principally through the issuance and sale of our common stock and preferred stock, debt financing, and payments from customers.
Unearned interest revenue represents the interest only portion of the respective subscription payments and will be recognized in income over the respective payment term as it is earned.
Unearned interest revenue represents the interest only portion of the respective lease program payments and will be recognized in income over the respective payment term as it is earned.
Long-term receivables Long-term receivables relate to our subscription revenue or contracts which stipulate payment terms which exceed one year. They are comprised of the unpaid principal balance, net of the allowance for expected credit losses.
Long-term receivables Long-term receivables relate to our internal financing programs revenue or contracts which stipulate payment terms which exceed one year. They are comprised of the unpaid principal balance, net of the allowance for expected credit losses.
Liquidity and Capital Resources We had $5.4 million and $11.6 million of cash and cash equivalents as of December 31, 2023 and December 31, 2022 , respectively. We have funded our operations with cash generated from operating activities, through the sale of equity securities and through debt financing.
Liquidity and Capital Resources We had $4.3 million and $5.4 million of cash and cash equivalents as of December 31, 2024 and December 31, 2023 , respectively. We have funded our operations with cash generated from operating activities, through the sale of equity securities and through debt financing.
Income Tax Benefit We had an income tax benefit of $0.07 million in the year ended December 31, 2023, compared to $0.7 million income tax benefit in the year ended December 31, 2022. In 2023, geographic sales mix, true up to tax return, and changes in timing of deductible expenses, resulted in a $0.07 million income tax benefit.
Income Tax Benefit We had an income tax benefit of $0.443 million in the year ended December 31, 2024, compared to $0.07 million income tax benefit in the year ended December 31, 2023. In 2024, geographic sales mix, true up to tax return, and changes in timing of deductible expenses, resulted in the income tax benefit.
We do not grant rights of return or early termination rights to our customers under either our traditional sales or subscription models. These traditional sales are generally made through our sales team in the countries in which the team operates.
We do not grant rights of return or early termination rights to our customers under either our traditional sales or internal financing programs. These traditional sales are generally made through our sales team in the countries in which the team operates.
The Notes were convertible at any time into shares of our common stock at an initial conversion price of $48.75 per share, subject to adjustment.
The Notes were convertible at any time into shares of our common stock at an initial conversion price of $536.25 per share, subject to adjustment.
For the years ended December 31, 2023 and 2022, approximately 59% and 47%, respectively, of our total system revenues were derived from traditional sales. The increased focus on traditional sales is in line with our strategy to prioritize cash deals over subscription deals in order to improve cash generation and preserve liquidity.
For the years ended December 31, 2024 and 2023, approximately 61% and 59%, respectively, of our total system revenues were derived from traditional sales. The increased focus on traditional sales is in line with our strategy to prioritize cash deals over internal lease program deals in order to improve cash generation and preserve liquidity.
We experienced some cost savings through the consolidation of activities between our Israel and San Jose sites, partially offset by a reinvestment of research and development efforts directed at scaling our robotic technology across other aesthetic platforms.
We experienced significant cost savings through the consolidation of activities between our Israel and United States sites, partially offset by a reinvestment in research and development efforts directed at scaling our robotic technology across other aesthetic platforms.
Our recent shift to prioritize traditional cash sales over subscription sales is designed to improve liquidity and reduce working capital requirements over time. Our expanding product portfolio also requires higher inventory levels to meet demand and to accommodate the increased number of technology platforms offered.
Our recent shift to prioritize traditional cash sales over internal lease program sales is designed to improve liquidity and reduce working capital requirements over time. Our expanding product portfolio may require higher inventory levels to meet demand and to accommodate the increased number of technology platforms offered.
The non-cash operating expenses consisted of provision for bad debts of $7.3 million, depreciation and amortization of $4.5 million, finance expenses and accretion of $0.4 million, stock-based compensation expense of $2.1 million, provision for inventory obsolescence of $2.4 million, partially offset by a deferred tax recovery of $0.7 million.
The non-cash operating expenses consisted of provision for bad debts of $1.4 million, loss on debt extinguishment of $11.4 million, depreciation and amortization of $3.9 million, finance expenses and accretion of $5.4 million, stock-based compensation expense of $1.0 million, and provision for inventory obsolescence of $1.0 million, partially offset by a deferred tax recovery of $0.4 million.
Our subscription model is designed to provide a low barrier to ownership of our systems and includes an up-front fee followed by monthly payments, typically over a 36-month period. The up-front fee serves as a down payment.
Our internal financing programs are designed to provide a low barrier to ownership of our systems and includes an up-front fee followed by monthly payments, typically over a 36-month period. The up-front fee serves as a down payment.
We believe that the net proceeds from the 2023 Multi-Tranche Private Placement, the 2022 Private Placement, the proceeds from issuance of our common stock to Lincoln Park, the proceeds from the MSLP Loan, our continued availability under the 2022 LPC Purchase Agreement, our strategic cash flow enhancement initiatives, our initiatives to pursue strategic alternatives, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
We believe that the net proceeds from the Madryn Loan and Security Agreement, the Registered Direct Offering, the 2024 Note, the 2023 Multi-Tranche Private Placement, the 2022 Private Placement, the proceeds from issuance of our common stock to Lincoln Park, the proceeds from the MSLP Loan, our strategic cash flow enhancement initiatives, our initiatives to pursue strategic alternatives, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
As a percentage of total revenues, our research and development expenses decreased by 0.3%, from 11.0% in the year ended December 31, 2022 , to 10.7% in the year ended December 31, 2023. 77 Table of Contents Foreign Exchange (Gain) Loss We had a foreign exchange gain of $0.3 million in the year ended December 31, 2023 and a foreign exchange loss of $3.4 million in the year ended December 31, 2022.
As a percentage of total revenues, our research and development expenses decreased by 0.4%, from 10.7% in the year ended December 31, 2023 , to 10.3% in the year ended December 31, 2024. 76 Table of Contents Foreign Exchange (Gain) Loss We had a foreign exchange loss of $2.1 million in the year ended December 31, 2024 and a foreign exchange gain of $0.3 million in the year ended December 31, 2023, a variance of $2.4 million year over year.
As of December 31, 2023, our allowance for expected credit losses stands at $7.4 million, which represents 15.5% of the gross outstanding accounts receivable as of that date. This represents a decrease of $6.2 million from our December 31, 2022 allowance for expected credit losses balance of $13.6 million. Foreign Exchange fluctuations .
As of December 31, 2024, our allowance for expected credit losses stands at $3.8 million, which represents 12.2% of the gross outstanding accounts receivable as of that date. This represents a significant decrease of $3.6 million from our December 31, 2023 allowance for expected credit losses balance of $7.4 million. Foreign exchange fluctuations .
Cash Flows from Investing Activities In the year ended December 31, 2023, cash used in investing activities consisted of $0.1 million for the purchase of property and equipment. In the year ended December 31, 2022, cash used in investing activities consis ted of $0.3 million for the purch ase of property and equipment.
Cash Flows from Investing Activities In the years ended December 31, 2024, and December 31, 2023, cash used in investing activities consis ted of $0.1 million for the purch ase of property and equipment.
In the year ended December 31, 2022, cash provided by financing activities consisted primarily of net proceeds from the 2022 Private Placement of $6.5 million and proceeds from the issuance of common stock of $2.1 million, partially offset by the $0.5 million repayment of government assistance loans. 83 Table of Contents Contractual Obligations and Other Commitments Our premises and those of our subsidiaries are leased under various operating lease agreements, which expire on various dates.
In the year ended December 31, 2023, cash provided by financing activities consisted primarily of net proceeds from the 2023 Private Placement of $6.3 million and proceeds from the issuance of common stock of $0.8 million. 82 Table of Contents Contractual Obligations and Other Commitments Our premises and those of our subsidiaries are leased under various operating lease agreements, which expire on various dates.
For additional information regarding the 2022 LPC Purchase Agreement, see Note 14 “ Stockholders Equity ” in the notes to our audited condensed consolidated financial statements included elsewhere in this report.
The 2022 LPC Purchase Agreement expired on August 1, 2024. For additional information regarding the 2022 LPC Purchase Agreement, see Note 15 “ Stockholders Equity ” in the notes to our consolidated financial statements included elsewhere in this report.
These Non-Voting Preferred Stock shares were subsequently converted to common stock upon issuance of the 2022 Private Placement described below The 2022 Private Placement On November 18, 2022, we consummated the 2022 Private Placement whereby we entered into a securities purchase agreement pursuant to which we issued and sold to the 2022 Investors an aggregate of 116,668 shares of our common stock and 3,185,000 shares of our Voting Preferred Stock.
The 2022 Private Placement On November 18, 2022, we consummated the 2022 Private Placement whereby we entered into a securities purchase agreement pursuant to which we issued and sold to the 2022 Investors an aggregate of 10,608 shares of our common stock and 3,185,000 shares of our Voting Preferred Stock.
Cash flows The following table summarizes our cash flows for the years indicated: Year Ended December 31, 2023 2022 (in thousands) Cash used in operating activities $ (12,859 ) $ (26,980 ) Cash used in investing activities (116 ) (336 ) Cash provided by financing activities 6,802 8,009 Net decrease in cash, cash equivalents and restricted cash $ (6,173 ) $ (19,307 ) 82 Table of Contents Cash Flows from Operating Activities For the year ended December 31, 2023 , cash used in operating activities consisted of a net loss of $37.0 million, partially offset by a decrease in net operating assets of $11.6 million and non-cash operating expenses of $12.6 million.
Cash flows The following table summarizes our cash flows for the years indicated: Year Ended December 31, 2024 2023 (in thousands) Cash used in operating activities $ (11,066 ) $ (12,859 ) Cash used in investing activities (123 ) (116 ) Cash provided by financing activities 10,064 6,802 Net decrease in cash, cash equivalents and restricted cash $ (1,125 ) $ (6,173 ) 81 Table of Contents Cash Flows from Operating Activities For the year ended December 31, 2024 , cash used in operating activities consisted of a net loss of $47.0 million, partially offset by a decrease in net operating assets of $10.8 million and non-cash operating expenses of $25.1 million.
The interest rates on our long-term debt were 8.71 % for the MSLP Loan and 14.03% for the Notes as of December 31, 2023 and 7.39% for the MSLP Loan and 8.0% for the Notes as of December 31, 2022.
The interest rates on our long-term debt were 7.7 % for the MSLP Loan (now owned by Madryn), 13.5% for the Madryn Notes, and 12.0% for the 2024 Notes as of December 31, 2024 and 8.71% for the MSLP Loan and 14.03% for the Madryn Notes as of December 31, 2023.
In the year ended December 31, 2022, cash used in operating activities consisted of a net loss of $43.6 million, partially offset by a decrease in net operating assets of $0.4 million and non-cash operating expenses of $16.2 million.
In the year ended December 31, 2023, cash used in operating activities consisted of a net loss of $37.0 million, partially offset by a decrease in net operating assets of $10.3 million and non-cash operating expenses of $13.9 million.
As a percentage of total revenues, our general and administrative expenses increased by 3.9%, from 49.9% in the year ended December 31, 2022 , to 53.8% in the year ended December 31, 2023 , primarily due to lower revenues when compared to the prior year period.
As a percentage of total revenues, our general and administrative expenses increased by 2.5%, from 53.8% in the year ended December 31, 2023, to 56.3% in the year ended December 31, 2024, primarily due to the decrease in year over year total revenues.
Research and Development Research and development expenses decreased by $2.8 million or 25.2% in the year ended December 31, 2023 compared to the year ended December 31, 2022 .
Research and Development Research and development expenses decreased by $1.5 million or 18.4% in the year ended December 31, 2024 compared to the year ended December 31, 2023 .
The CNB Note expired at its maturity date. 79 Table of Contents Equity Purchase Agreement with Lincoln Park On June 16, 2020, we entered into the Equity Purchase Agreement with Lincoln Park, which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock pursuant to our shelf registration statement.
The transaction is discussed in Note 11 "Madryn Debt and Convertible Notes" in the notes to our consolidated financial statements included elsewhere in this report. 78 Table of Contents Equity Purchase Agreement with Lincoln Park On June 16, 2020, we entered into the Equity Purchase Agreement with Lincoln Park, which provides that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock pursuant to our shelf registration statement.
We had a split of subscription sales revenue to traditional sales revenue at a ratio of approximately 64:36 in the year ended December 31, 2023, compared to 47:53 in 2022. We expect a slight increase in the ratio of traditional sales to subscription sales in 2024 and beyond.
We had a split of lease program revenue to traditional sales revenue at a ratio of approximately 26:74 in the year ended December 31, 2024, compared to 36:64 in the year ended December 31, 2023. We expect the ratio of lease program sales to traditional sales in 2025 and beyond to approximate a 30:70 split.
On October 4, 2023, the Company entered into the 2023 Exchange Agreement with the Madryn Noteholders, pursuant to which the Madryn Noteholders agreed to exchange $26,695,110.58 in aggregate principal amount outstanding under the Notes for (i) $22,791,748.32 in aggregate principal amount of new secured convertible notes of the Company (the “New Notes”), and (ii) 248,755 shares of newly-created convertible preferred stock of the Company, par value $0.0001 per share designated as "Series X Convertible Preferred Stock".
On October 4, 2023, the Company entered into the 2023 Exchange Agreement with the Madryn Noteholders, pursuant to which the Madryn Noteholders agreed to exchange $26.7 million in aggregate principal amount outstanding under the Notes for (i) $22.8 million in the New Notes, and (ii) 248,755 shares of Series X Convertible Preferred Stock.
CNB Loan Agreement We had a revolving credit facility with CNB pursuant to which CNB agreed to provide a revolving credit facility to us and certain of our subsidiaries to be used to finance working capital requirements.
See Note 11 "Madryn Debt and Convertible Notes" to our consolidated financial statements included elsewhere in this report. CNB Loan Agreement We had a revolving credit facility with CNB pursuant to which CNB agreed to provide a revolving credit facility to us and certain of our subsidiaries to be used to finance working capital requirements.
Comparison of the Years Ended December 31, 2023 and 2022 Revenues Year Ended December 31, 2023 2022 Change (in thousands, except percentages) $ % of Total $ % of Total $ % Revenues: Subscription—Systems $ 20,504 26.9 $ 35,267 35.5 $ (14,763 ) (41.9 ) Products—Systems 41,874 54.8 47,906 48.1 (6,032 ) (12.6 ) Products—Other 10,563 13.8 13,316 13.4 (2,753 ) (20.7 ) Services 3,413 4.5 3,008 3.0 405 13.5 Total $ 76,354 100.0 $ 99,497 100.0 $ (23,143 ) (23.3 ) Total revenue decreased by $23.1 million, or 23.3%, to $76.4 million for the year ended December 31, 2023 from $99.5 million for the year ended December 31, 2022 .
Comparison of the Years Ended December 31, 2024 and 2023 Revenues Year Ended December 31, 2024 2023 Change (in thousands, except percentages) $ % of Total $ % of Total $ % Revenues: Subscription—Systems $ 13,265 20.6 $ 20,504 26.9 $ (7,239 ) (35.3 ) Products—Systems 38,020 58.6 41,874 54.8 (3,854 ) (9.2 ) Products—Other 10,469 16.1 10,563 13.8 (94 ) (0.9 ) Services 3,079 4.7 3,413 4.5 (334 ) (9.8 ) Total $ 64,833 100.0 $ 76,354 100.0 $ (11,521 ) (15.1 ) Total revenue decreased by $11.5 million, or 15.1%, to $64.8 million for the year ended December 31, 2024 from $76.4 million for the year ended December 31, 2023 .
Foreign Exchange (Gain) Loss Foreign currency exchange (gain) loss changes reflect foreign exchange gains or losses related to the change in value of assets and liabilities denominated in currencies other than the U.S. dollar. 73 Table of Contents Income Tax Benefit We estimate our current and deferred tax liabilities based on current tax laws in the statutory jurisdictions in which we operate.
Foreign Exchange (Gain) Loss Foreign currency exchange (gain) loss changes reflect foreign exchange gains or losses related to the change in value of assets and liabilities denominated in currencies other than the U.S. dollar.
The decrease in revenue is primarily attributed to an acceleration in exiting unprofitable direct markets, and an initiative to reduce our reliance on system sales sold under subscription agreements, and the effects of tighter third party lending practices which negatively impacted capital equipment sales.
The decrease in revenue is primarily attributed to the effects of tighter third-party lending practices which negatively impacted capital equipment sales in both the U.S. and international markets, and an acceleration in exiting unprofitable direct markets, partially offset by an improvement in third party international distributor revenues.
Payments Due by Period Less than 1 Year 2 to 3 Years 4 to 5 Years More than 5 Years Total (dollars in thousands) Debt obligations, including interest $ 8,438 $ 82,867 $ — $ — $ 91,305 Operating leases 1,589 2,011 598 554 4,752 Purchase commitments 10,006 — — — 10,006 Total contractual obligations $ 20,033 $ 84,878 $ 598 $ 554 $ 106,063 For an additional description of our commitments see Note 9, “Commitments and Contingencies” to the consolidated financial statements included elsewhere in this Annual Report.
Payments Due by Period Less than 1 Year 2 to 3 Years 4 to 5 Years More than 5 Years Total (dollars in thousands) Debt obligations, including interest $ 8,271 $ 41,165 $ — $ — $ 49,436 Operating leases 1,322 1,485 192 320 3,319 Purchase commitments 14,110 — — — 14,110 Total contractual obligations $ 23,703 $ 42,650 $ 192 $ 320 $ 66,865 For an additional description of our commitments see Note 9, “Commitments and Contingencies” to the consolidated financial statements included elsewhere in this Annual Report.
As the business environment improves we expect sales and marketing expenses to increase in absolute terms, but at a rate slightly below our rate of revenue growth.
As a percentage of total revenues, our selling and marketing expenses increased by 2.8%, from 40.9% in the year ended December 31, 2023 to 43.7% in the year ended December 31, 2024. As the business environment improves, we expect sales and marketing expenses to increase in absolute terms, but at a rate slightly below our rate of revenue growth.
Operating Expenses Year Ended December 31, 2023 2022 Change (in thousands, except percentages) $ % of Revenues $ % of Revenues $ % Operating expenses: Selling and marketing $ 31,231 40.9 $ 40,276 40.5 $ (9,045 ) (22.5 ) General and administrative 41,048 53.8 49,618 49.9 (8,570 ) (17.3 ) Research and development 8,197 10.7 10,953 11.0 (2,756 ) (25.2 ) Total operating expenses $ 80,476 105.4 $ 100,847 101.4 $ (20,371 ) (20.2 ) Selling and Marketing Selling and marketing expenses decreased by $9.0 million or 22.5% in the year ended December 31, 2023 compared to the year ended December 31, 2022 .
Operating Expenses Year Ended December 31, 2024 2023 Change (in thousands, except percentages) $ % of Revenues $ % of Revenues $ % Operating expenses: Selling and marketing $ 28,332 43.7 $ 31,231 40.9 $ (2,899 ) (9.3 ) General and administrative 36,470 56.3 41,048 53.8 (4,578 ) (11.2 ) Research and development 6,688 10.3 8,197 10.7 (1,509 ) (18.4 ) Total operating expenses $ 71,490 110.3 $ 80,476 105.4 $ (8,986 ) (11.2 ) Selling and Marketing Selling and marketing expenses decreased by $2.9 million or 9.3% in the year ended December 31, 2024 compared to the year ended December 31, 2023 .
Cost of Goods Sold and Gross Profit Cost of goods sold decreased by $9.3 million, or 28%, to $24.2 million in the year ended December 31, 2023 from $33.5 million in the year ended December 31, 2022 .
The decrease is primarily due to the overall decline in device sales. Cost of Goods Sold and Gross Profit Cost of goods sold decreased by $3.7 million, or 15.1%, to $20.5 million in the year ended December 31, 2024 compared to $24.2 million in the year ended December 31, 2023 .
The use of cash in net operating assets was attributable to a decrease in accounts receivable of $9.9 million, a decrease in prepaid expenses of $1.0 million, an increase in current operating lease liabilities of $1.8 million, and an increase in other long-term operating lease liabilities of $4.2 million.
The decreased use of cash in net operating assets was attributable to a decrease in accounts receivable of $12.5 million, a decrease in inventories of $4.5 million, and a decrease in operating right-of-use assets net of $1.2 million.
As of December 31, 2023, we had non-cancellable purchase orders placed with our contract manufacturers in the amount of $10.0 million.
As of December 31, 2024, we had non-cancellable purchase orders placed with our contract manufacturers in the amount of $14.1 million. In addition, as of December 31, 2024, we had $2.1 milli on of open purchase orders that can be cancelled with 270 days’ notice.
Other product revenue decreased by $2.8 million, or 20.7%, to $10.6 million in the year ended December 31, 2023 from $13.3 million in the year ended December 31, 2022 .
Other product revenue decreased by $0.1 million, or 0.9%, to $10.5 million in the year ended December 31, 2024 from $10.6 million in the year ended December 31, 2023. 75 Table of Contents Services revenue was $3.1 million in the year ended December 31, 2024 compared to $3.4 million in the year ended December 31, 2023 .
Cash Flows from Financing Activities In the year ended December 31, 2023, cash provided by financing activities consisted primarily of net proceeds from the 2023 Private Placement of $6.3 million and proceeds from the issuance of common stock of $0.8 million.
Cash Flows from Financing Activities In the year ended December 31, 2024, cash provided by financing activities consisted primarily of net proceeds from the 2024 Convertible Notes issued to EW of $1.6 million and proceeds from Short-term Bridge Financing by Madryn of $7.6 million.
Both domestic and international markets experienced significant inflationary pressures in fiscal year 2023. While inflation rates in the U.S., as well as in other countries in which we operate, are showing signs of moderation, they are expected to continue at elevated levels for the near-term, impacting our cost of sales as well as selling, general and administrative expenses.
Both domestic and international markets experienced significant inflationary pressures in fiscal year 2024. While inflation rates in the U.S., as well as in other countries in which we operate, are showing signs of moderation, the impact of such successive increases on cost structures remains, affecting governments, corporations and small businesses alike.
We had total debt obligations of approximately $74.9 million as of December 31, 2023 , including the MSLP Loan of $51.3 million, and convertible notes of $23.6 million, compared to total debt obligations of approximately $77.7 million as of December 31, 2022 . Working capital is primarily impacted by the ratio of subscription sales to traditional cash sales.
We had total debt obligations of approximately $39.7 million as of December 31, 2024 , including the MSLP Loan of $2.7 million, convertible notes of $28.7 million, and a note payable (bridge financing) of $8.3 million compared to total debt obligations of approximately $74.9 million as of December 31, 2023 .
General and Administrative General and administrative expenses decreased by $8.6 million or 17.3% in the year ended December 31, 2023 compared to the year ended December 31, 2022 , primarily due to lower bad debt expenses and the exit of certain unprofitable direct markets.
General and Administrative General and administrative expenses decreased by $4.6 million or 11.2% in the year ended December 31, 2024 compared to the year ended December 31, 2023 , primarily due to savings from exiting certain unprofitable direct markets and lower restructuring costs, partially offset by inflationary pressures associated with salaries and other cost elements.
Through December 31, 2023 we issued an additional 0.78 million shares of common stock to Lincoln Park at an average price of $3.97 per share, for a total proceeds value of $3.1 million since entering into the Purchase Agreement.
Through December 31, 2023 we issued an additional 70.6 thousand shares of common stock to Lincoln Park at an average price of $43.67 per share. During the twelve months ended December 31, 2024, the Company issued an additional 758 shares of common stock to Lincoln Park at an average price of $12.76 per share, for a total value of $10.
The percentage of systems revenue derived from our subscription model was approximately 33% in the year ended December 31, 2023 compared to 42% in the year ended December 31, 2022 . The relative decrease in subscription revenues is in line with our strategy to prioritize cash deals over subscription deals in order to improve cash generation and preserve liquidity.
The relative decrease in internal financing program revenues in 2024 is in line with our strategy to prioritize cash deals over internal financing program deals in order to improve cash generation and preserve liquidity.
Financial market and currency volatility may limit our ability to cost-effectively hedge these exposures. 71 Table of Contents Basis of Presentation Revenues We generate revenue from (1) sales of systems through our subscription model, traditional system sales to customers and distributors, (2) other product revenues from the sale of ARTAS kits, Viva tips, other consumables, marketing supplies, and (3) service revenue from our extended warranty service contracts provided to existing customers.
Post the U.S. federal election in November of 2024, most currencies depreciated versus the U.S. dollar, resulting in a $1 million foreign exchange loss in the fourth quarter alone. 70 Table of Contents Basis of Presentation Revenues We generate revenue from sales of systems through our internal financing programs, traditional system sales to customers and distributors, other product revenues from the sale of ARTAS kits, Viva tips, other consumables, marketing supplies, and service revenue from our extended warranty service contracts provided to existing customers.
System Revenue For the years ended December 31, 2023 and 2022, approximately 33% and 42%, respectively, of our total system revenues were derived from our subscription model. The relative decrease in subscription revenues in 2023 is in line with our strategy to prioritize cash deals over subscription deals in order to improve cash generation and preserve liquidity.
The relative decrease in internal financing programs revenue is in line with our strategy to prioritize cash deals over internal financing program deals in order to improve cash generation and preserve liquidity.
In addition, since the second quarter of 2021 we have experienced significant inflationary pressures throughout our supply chain, which we expect to continue into 2024. We expect to mitigate such pressures, where possible, through price increases and margin management. Global Economic conditions .
We expect to mitigate such pressures, where possible, through price increases and margin management. Global economic conditions .
The accounting effects of the 2021 Private Placement transaction are discussed in Note 14 " Stockholders Equity " in the notes to our consolidated financial statements included elsewhere in this report.
The Placement Agent Warrants are similar to the 2024 Investor Warrants, except that the initial exercise price of the Placement Agent Warrants is $20.1438 per share. The transaction is discussed in Note 15 "Stockholders' Equity" in the notes to our consolidated financial statements included elsewhere in this report.
These were offset by an increase in inventories of $5.8 million, an increase in operating right-of-use assets of $5.9 million, and a decrease in accrued expenses and other current liabilities of $3.7 million.
These were partially offset by a decrease in unearned interest income of $0.9 million, a decrease in current operating lease liabilities of $0.3 million, a decrease in other long-term operating lease liabilities of $1.2 million, a decrease in trade payables of $2.2 million, and a decrease in accrued expenses and other current liabilities of $1.6 million.
Item 1A. Risk Factors – Our operations may be disrupted because of the obligation of Israeli citizens to perform military service of this Annual Report.
Item 1A. Risk Factors – Risks Related to Our Operations in Israel of this Annual Report.
On October 4, 2023, the Company, Venus USA, Venus Canada, and Venus Ltd. entered into the MSLP Loan Modification, which modified certain terms of the MSLP Loan Agreement. For additional information regarding this loan, see Note 10 “ Main Street Term Loan ” to our consolidated financial statements included elsewhere in this report.
On October 4, 2023, the Company, Venus USA, Venus Canada, and Venus Ltd. entered into the MSLP Loan Modification, which modified certain terms of the MSLP Loan Agreement. On April 23, 2024, the MSLP Loan was purchased by Madryn for an undisclosed amount from CNB with the consent of the Company.
Higher interest and inflation rates have resulted in recessionary pressures in many parts of the world and have had and may continue to have the effect of further increasing economic uncertainty and heightening these risks. Sales markets. We are a global business, having established a commercial presence in more than 60 countries during our history.
As noted above, the Federal Reserve in the U.S. and other central banks in various countries have commenced a cycle of interest rate reductions in response to concerns about inflation and stagnant growth. Sales markets. We are a global business, having established a commercial presence in more than 60 countries during our history.
Despite the reduction in systems sales sold under subscription agreements, our cash generation in the second half of 2023 improved due to a higher percentage of system sales sold on a cash basis. We sold an aggregate of 1,170 systems in the year ended December 31, 2023 compared to 1,572 in the year ended December 31, 2022 .
We sold an aggregate of 1,049 systems in the year ended December 31, 2024 compared to 1,170 in the year ended December 31, 2023 . Despite comparable system unit sales, revenues during 2024 were below 2023 revenues due to higher international distributor sales, which are sold at lower average selling prices.
The decrease in gross profit is primarily attributed to an acceleration in exiting unprofitable direct markets, and an initiative to reduce our reliance on system sales sold under subscription agreements. Gross margin was 68.3% of revenue in the year ended December 31, 2023 compared to 66.3% of revenue in the year ended December 31, 2022 .
The decrease in revenue in our international markets was also driven by the accelerated exit from unprofitable direct markets, partially offset by an improvement in third party international distributor revenues. Gross margin was 68.3% of revenue in the year ended December 31, 2024, compared to 68.3% of revenue in the year ended December 31, 2023.
Changes in foreign are driven mainly by the effect of foreign exchange on accounts receivable and accounts payable balances denominated in currencies other than the US dollar. For the year ended December 31, 2023, most currencies were relatively flat relative to the U.S. dollar. We do not currently hedge against foreign currency risk.
Post the U.S. federal election in November of 2024, most currencies depreciated versus the U.S. dollar, resulting in a $1 million foreign exchange loss in the fourth quarter alone. Changes in foreign exchange are driven mainly by the effect of foreign exchange on accounts receivable balances denominated in currencies other than the U.S. dollar.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity program focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks. Our cybersecurity program is designed to be aligned with applicable industry standards and is assessed periodically by independent third-party auditors. We have processes in place to assess, identify, manage, and address material cybersecurity threats and cybersecurity incidents.
Biggest changeOur cybersecurity program is designed to be aligned with applicable industry standards and is assessed periodically by independent third -party auditors. We have processes in place to assess, identify, manage, and address material cybersecurity threats and cybersecurity incidents.
Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, which could subject us to additional liability and reputational harm. 61 Table of Contents We aim to incorporate industry best practices throughout our cybersecurity program.
Further, there is increasing regulation regarding responses to cybersecurity incidents, including reporting to regulators, which could subject us to additional liability and reputational harm. 60 Table of Contents We aim to incorporate industry best practices throughout our cybersecurity program.
Cybersecurity Governance Management's Role Our Director, Information Technology (the “DIT”) and General Counsel have primary responsibility for assessing and managing material cybersecurity risks and are members of management’s IT Steering Committee, which is comprised of a cross-functional team that consists, in part, of the executive team and certain members of the senior leadership team (the “Steering Committee”), which is a committee that drives alignment on information technology security decisions across the Company.
Cybersecurity Governance Management's Role Our Director, Information Technology (the “DIT”) and Chief Legal Officer have primary responsibility for assessing and managing material cybersecurity risks and are members of management’s IT steering committee, which is comprised of a cross-functional team that consists, in part, of the executive team and certain members of the senior leadership team (the “Steering Committee”), which is a committee that drives alignment on information technology security decisions across the Company.
Otherwise, management reports cybersecurity risks and developments to the Board quarterly. 62 Table of Contents
Otherwise, management reports cybersecurity risks and developments to the Board quarterly. 61 Table of Contents
Our General Counsel has over 13 years of experience managing risks, including risks arising from cybersecurity threats, at other publicly traded companies. Board Oversight Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management.
Our Chief Legal Officer has over 14 years of experience managing risks, including risks arising from cybersecurity threats, at other publicly traded companies. Board Oversight Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management.
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To this end, the Company has recently implemented a series of upgrades to its firewalls, improved its network configuration, augmented its managed detection and response services, and implemented the use of new logging tools to network connected devices. Our cybersecurity program focuses on implementing effective and efficient controls, technologies, and other processes to assess, identify, and manage material cybersecurity risks.
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In addition to the Steering Committee, the Company has formed a cybersecurity subcommittee of the Steering Committee, whose mission is to enhance the reporting, governance and where-necessary, response to cybersecurity incidents and thereby reduce the prevalence and potential harm to the Company and its investors caused by a cybersecurity incident.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also have offices and a research and development center located at 1 Hamelacha Street, Yokne’am Illit 2069200, Israel. We lease these facilities pursuant to a lease agreement that expires on September 30, 2024, with an option to extend the term for an additional 24 months. These facilities consist of approximately 530 square meters of total space.
Biggest changeWe also have offices and a research and development center located at 1 Hamelacha Street, Yokne’am Illit 2069200, Israel. We lease these facilities pursuant to a lease agreement that expires on September 30, 2025, with an option to extend the term for an additional 12 months. These facilities consist of approximately 530 square meters of total space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. As of December 31, 2023, the Company was not party to any material active or pending legal proceedings. 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.
Biggest changeItem 3. Legal Proceedings. As of December 31, 2024, the Company was not party to any material active or pending legal proceedings. 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant ’ s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed for trading on the Nasdaq Capital Market under the symbol “VERO”. Holders As of March 27, 2024, there were 88 holders of record of our common stock.
Biggest changeItem 5. Market for Registrant ’ s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed for trading on the Nasdaq Capital Market under the symbol “VERO”. Holders As of March 26, 2025, there were 71 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliation of Net loss to Non-GAAP Adjusted EBITDA Year Ended, December 31, 2023 2022 Reconciliation of net loss to adjusted EBITDA (in thousands) Net loss $ (37,050 ) $ (43,584 ) Foreign exchange (gain) loss (295 ) 3,387 Loss on disposal of subsidiaries 174 1,482 Loss on debt extinguishment 2,040 — Finance expenses 6,893 4,561 Income tax benefit (71 ) (722 ) Depreciation and amortization 4,115 4,463 Stock-based compensation expense 1,569 2,104 Inventory provision (1) — 1,388 Other adjustments (2) 2,362 1,544 Adjusted EBITDA $ (20,263 ) $ (25,377 ) (1) For the year ended December 31, 2022, the inventory provision represents a strategic review of our product offerings which culminated in a decision to discontinue production and sale of certain models and component parts, resulting in an inventory adjustment of $1.4 million.
Biggest changeReconciliation of Net loss to Non-GAAP Adjusted EBITDA Year Ended, December 31, 2024 2023 Reconciliation of net loss to adjusted EBITDA (in thousands) Net loss $ (46,971 ) $ (37,050 ) Foreign exchange (gain) loss 2,135 (295 ) Loss on disposal of subsidiaries 23 174 Loss on debt extinguishment 11,355 2,040 Finance expenses 6,885 6,893 Income tax benefit (611 ) (71 ) Depreciation and amortization 3,889 4,115 Stock-based compensation expense 1,043 1,569 Other adjustments (1) 1,020 2,362 Adjusted EBITDA $ (21,232 ) $ (20,263 ) (1) For the years ended December 31, 2024 and December 31, 2023, the other adjustments are represented by restructuring activities designed to improve the Company's operations and cost structure. 68 Table of Contents Key Factors Impacting Our Results of Operations Our results of operations are impacted by several factors, but we consider the following to be particularly significant to our business: Number of systems delivered.
On July 12, 2023, the Company and the 2023 Investors consummated the Second Placement under the 2023 Multi-Tranche Private Placement, under which the Company sold the 2023 Investors 500,000 shares of Senior Preferred Stock for an aggregate purchase price of $2.0 million.
On July 12, 2023, the Company and the 2023 Investors consummated the second tranche in the 2023 Multi-Tranche Private Placement, under which the Company sold the 2023 Investors 500,000 shares of Senior Preferred Stock for an aggregate purchase price of $2.0 million (the "Second Placement").
On September 8, 2023, the Company and the 2023 Investors consummated the Third Placement under the 2023 Multi-Tranche Private Placement, under which the Company sold the 2023 Investors 292,398 shares of Senior Preferred Stock for an aggregate purchase price of $1.0 million.
On September 8, 2023, the Company and the 2023 Investors consummated the third tranche in the 2023 Multi-Tranche Private Placement, under which the Company sold the 2023 Investors 292,398 shares of Senior Preferred Stock for an aggregate purchase price of $1.0 million (the "Third Placement").
Our systems have been designed on cost-effective, proprietary and flexible platforms that enable us to expand beyond the aesthetic industry’s traditional markets of dermatology and plastic surgery, and into non-traditional markets, including family medicine, general practitioners and aesthetic medical spas. In 2023 and 2022, respectively, a substantial majority of our systems delivered in North America were in non-traditional markets.
Our systems have been designed on cost-effective, proprietary and flexible platforms that enable us to expand beyond the aesthetic industry’s traditional markets of dermatology and plastic surgery, and into non-traditional markets, including family medicine, general practitioners and aesthetic medical spas. In 2024 and 2023, respectively, a substantial majority of our systems delivered in North America were in non-traditional markets.
Outside the United States, we market our technologies in over 60 countries across Europe, the Middle East, Africa, Asia-Pacific and Latin America. Because each country has its own regulatory scheme and clearance process, not every device is cleared or authorized for the same indications in each market in which a particular system is marketed.
Outside the United States, we market our technologies in over 40 countries across Europe, the Middle East, Africa, Asia-Pacific and Latin America. Because each country has its own regulatory scheme and clearance process, not every device is cleared or authorized for the same indications in each market in which a particular system is marketed.
There is no set timetable for the strategic review process and there can be no assurance that such review will result in any transaction or other alternative or the terms and conditions of any transaction or other alternative. 65 Table of Contents Equity Purchase Agreement with Lincoln Park On June 16, 2020, we entered into a purchase agreement (the "Equity Purchase Agreement") with Lincoln Park Capital Fund LLC ("Lincoln Park") which provided that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock pursuant to our shelf registration statement.
There is no set timetable for the strategic review process and there can be no assurance that such review will result in any transaction or other alternative or the terms and conditions of any transaction or other alternative. 64 Table of Contents Equity Purchase Agreement with Lincoln Park On June 16, 2020, we entered into the Equity Purchase Agreement with Lincoln Park Capital Fund LLC ("Lincoln Park") which provided that, upon the terms and subject to the conditions and limitations set forth therein, we may sell to Lincoln Park up to $31.0 million of shares of our common stock pursuant to our shelf registration statement.
Since June 2020 we have ceased direct sales operations in 13 countries across Europe, Asia Pacific, Latin America and Africa and have increased our investment and focus in the United States market. In the years ended December 31, 2023 and 2022, respectively, we did not open any direct sales offices. Bad Debt Expense.
Since June 2020 we have ceased direct sales operations in 13 countries across Europe, Asia Pacific, Latin America and Africa and have increased our investment and focus in the United States market. In the years ended December 31, 2024 and 2023, respectively, we did not open any direct sales offices. Bad Debt Expense.
During the year ended December 31, 2022, we sold to Lincoln Park 0.03 million shares of our common stock under the Equity Purchase Agreement, at which point this agreement expired. The net cash proceeds from shares issuance as of December 31, 2022 were $0.3 million. The Equity Purchase Agreement expired on July 1, 2022.
During the year ended December 31, 2022, we sold to Lincoln Park 0.003 million shares of our common stock under the Equity Purchase Agreement, at which point this agreement expired. The net cash proceeds from shares issuance as of December 31, 2022 were $0.3 million. The Equity Purchase Agreement expired on July 1, 2022.
On July 12, 2022, we entered into the 2022 LPC Purchase Agreement with Lincoln Park, and we issued and sold to Lincoln Park 0.05 million shares of our common stock as a commitment fee in connection with entering into the 2022 LPC Purchase Agreement, with the total value of $0.3 million.
On July 12, 2022, we entered into the 2022 LPC Purchase Agreement with Lincoln Park, and we issued and sold to Lincoln Park 0.004 million shares of our common stock as a commitment fee in connection with entering into the 2022 LPC Purchase Agreement, with the total value of $0.3 million.
We have developed and received regulatory clearance for 12 novel aesthetic technology platforms, including our ARTAS and NeoGraft systems. We believe our ARTAS and NeoGraft systems are complementary and give us a hair restoration product offering that can serve a broad segment of the market.
We have developed and received regulatory clearance for twelve novel aesthetic technology platforms, including our ARTAS and NeoGraft systems. We believe our ARTAS and NeoGraft systems are complementary and give us a hair restoration product offering that can serve a broad segment of the market.
Following the October 7, 2023 attack by Hamas on Israeli citizens and the declaration of war that followed, we have taken steps to mitigate exposure to risks related to our Israeli operations, the risks of which are further described in Item 1A.
Following the October 7, 2023 attack by Hamas on Israeli citizens and the declaration of war that followed, we have taken steps to mitigate exposure to risks related to our Israeli operations, the risks of which are further described in
As of December 31, 2023 and 2022, we had cash and cash equivalents of $5.4 million and $11.6 million, respectively. The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruption, including increases to inflation rates, rising interest rates, foreign currency impacts and declines in consumer confidence, and declines in economic growth.
As of December 31, 2024 and 2023, we had cash and cash equivalents of $4.3 million and $5.4 million, respectively. The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruption, including increases to inflation rates, rising interest rates, foreign currency impacts and declines in consumer confidence, and declines in economic growth.
Service revenue includes revenue derived from our extended warranty service contracts provided to our existing customers. Systems are sold through traditional sales contracts directly, through our subscription model, and through distributors. In the third quarter of 2022 we commenced an initiative to reduce our reliance on system sales sold under subscription agreements in the United States.
Service revenue includes revenue derived from our extended warranty service contracts provided to our existing customers. Systems are sold through contracts directly, through our internal financing programs and through distributors. In the third quarter of 2022 we commenced an initiative to reduce our reliance on system sales sold under subscription agreements in the United States.
As of December 31, 2023 and 2022, we had an accumulated deficit of $261.9 million and $224.1 million, respectively. Until we generate revenue at a level to support our cost structure, we expect to continue to incur substantial operating losses and negative cash flows from operations.
As of December 31, 2024 and 2023, we had an accumulated deficit of $308.9 million and $261.9 million, respectively. Until we generate revenue at a level to support our cost structure, we expect to continue to incur substantial operating losses and negative cash flows from operations.
The gross proceeds from the securities sold in the 2022 Private Placement totaled $6.7 million before offering expenses. The costs incurred with respect to the 2022 Private Placement totaled $0.2 million and were recorded as a reduction of the 2022 Private Placement proceeds in the consolidated statements of stockholders’ equity.
The 2022 Private Placement was completed on November 18, 2022. The gross proceeds from the securities sold in the 2022 Private Placement totaled $6.7 million before offering expenses. The costs incurred with respect to the 2022 Private Placement totaled $0.2 million and were recorded as a reduction of the 2022 Private Placement proceeds in the consolidated statements of stockholders’ equity.
We had an Adjusted EBITDA loss of $20.3 million and $25.4 million for the year ended December 31, 2023, and 2022, respectively. 68 Table of Contents Use of Non-GAAP Financial Measures Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before foreign exchange loss (gain), financial expenses, income tax expense (benefit), depreciation and amortization, stock-based compensation and non-recurring items for a given period.
We had an Adjusted EBITDA loss of $21.2 million and $20.3 million for the year ended December 31, 2024, and 2023, respectively. 67 Table of Contents Use of Non-GAAP Financial Measures Adjusted EBITDA is a non-GAAP measure defined as net income (loss) before foreign exchange loss (gain), financial expenses, income tax expense (benefit), depreciation and amortization, stock-based compensation and non-recurring items for a given period.
Series X Convertible Preferred Stock On October 4, 2023, the Company entered into an Exchange Agreement (the "2023 Exchange Agreement") with the Madryn Noteholders, pursuant to which the Madryn Noteholders agreed to exchange $26,695,110.58 in aggregate principal amount outstanding under the Notes for (i) $22,791,748.32 in aggregate principal amount of new secured convertible notes of the Company and (ii) 248,755 shares of newly-created convertible preferred stock of the Company, par value $0.0001 per share designated as "Series X Convertible Preferred Stock." The transaction is discussed in Note 14 "Stockholders Equity" in the notes to our consolidated financial statements included elsewhere in this report. 67 Table of Contents Products and Services We derive revenue from the sale of products and services.
Series X Convertible Preferred Stock On October 4, 2023, the Company entered into an Exchange Agreement (the "2023 Exchange Agreement") with the Madryn Noteholders, pursuant to which the Madryn Noteholders agreed to exchange $26,695,110.58 in aggregate principal amount outstanding under the Notes for (i) $22,791,748.32 in aggregate principal amount of new secured convertible notes of the Company and (ii) 248,755 shares of newly-created convertible preferred stock of the Company, par value $0.0001 per share designated as "Series X Convertible Preferred Stock." The transaction is discussed in Note 15 "Stockholders Equity" in the notes to our consolidated financial statements included elsewhere in this report.
The Company expects to use the proceeds of the Placements, after the payment of transaction expenses, for general working capital purposes. The accounting effects of the 2023 Multi-Tranche Private Placement transaction are discussed in Note 14 "Stockholders Equity" in the notes to our consolidated financial statements included elsewhere in this report.
The Company used the proceeds of the Placements, after the payment of transaction expenses, for general working capital purposes. The accounting effects of the 2023 Multi-Tranche Private Placement transaction are discussed in Note 15 "Stockholders' Equity" in the notes to our consolidated financial statements included elsewhere in this report.
All these factors point to uncertainty about economic stability, and the severity and duration of these conditions on our business cannot be predicted. See ‘‘— Liquidity and Capital Resources ’’ for additional information. On January 24, 2024, the Company announced that the Board has authorized the review of the strategic alternatives with a goal of enhancing stockholder value.
All these factors point to uncertainty about economic stability, and the severity and duration of these conditions on our business cannot be predicted. On January 24, 2024, the Company announced that the Board has authorized the review of the strategic alternatives with a goal of enhancing stockholder value.
For additional information regarding the 2022 LPC Purchase Agreement, see Note 14 “ Stockholders Equity ” in the notes to our audited consolidated financial statements included elsewhere in this report.
For additional information regarding the 2022 LPC Purchase Agreement, see Note 15 “ Stockholders' Equity ” in the notes to our consolidated financial statements included elsewhere in this report.
We deliver systems through (1) traditional direct system sales contracts to customers, (2) our subscription model, and (3) system sales through distribution agreements. Unit deliveries under direct system sales contracts and subscription agreements have higher per unit revenues and gross margins, while revenues and gross margins on systems sold through distributors are lower.
We deliver systems through (1) traditional direct system sales contracts to customers, (2) our internal financing programs, and (3) system sales through distribution agreements. Unit deliveries under direct system sales contracts and internally financed sales have higher per unit revenues and gross margins, while revenues and gross margins on systems sold through distributors are lower.
On October 20, 2023, the Company and the 2023 Investors consummated the Fourth Placement under the 2023 Multi-Tranche Private Placement, under which the Company sold the 2023 Investors 502,513 shares of Senior Preferred Stock for an aggregate purchase price of $2.0 million.
On October 20, 2023, the Company and the 2023 Investors consummated the fourth tranche in the 2023 Multi-Tranche Private Placement, under which the Company sold the 2023 Investors 502,513 shares of Senior Preferred Stock for an aggregate purchase price of $2.0 million (the "Fourth Placement", and together with the First Placement, Second Placement and Third Placement, the "Placements").
As of December 31, 2023, our allowance for expected credit losses stands at $7.4 million which represents 15.5% of the gross outstanding accounts receivable as of this date. 70 Table of Contents Outlook The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruption, including increases to inflation rates, rising interest rates, foreign currency impacts, declines in consumer confidence, and a challenging growth environment.
As of December 31, 2024, our allowance for expected credit losses stands at $3.8 million which represents 12.2% of the gross outstanding accounts receivable as of this date. 69 Table of Contents Outlook The global economy, including the financial and credit markets, has recently experienced extreme volatility and disruption, including increases to inflation rates, rising interest rates, foreign currency impacts, declines in consumer confidence, and a challenging growth environment.
During the twelve months ended December 31, 2023, the Company issued an additional 0.34 million shares of common stock to Lincoln Park at an average price of $3.23 per share, for a total value of $1.1 million.
During the twelve months ended December 31, 2023, the Company issued an additional 31.1 thousand shares of common stock to Lincoln Park at an average price of $35.53 per share, for a total value of $1.1 million.
In the third quarter of 2022 we commenced an initiative to reduce our reliance on system sales sold under subscription agreements in the United States.
In the third quarter of 2022 we commenced an initiative to reduce our reliance on system sales sold under our internal financing programs in the United States.
In addition, while traditional system sales and subscription agreements have similar gross margins, cash collections on subscription agreements generally occur over a three-year period, with approximately 40% to 45% collected in the first year and the balance collected evenly over the remaining two years of the subscription agreement.
In addition, while traditional system sales and internally financed sales have similar gross margins, cash collections on sales financed under our internal financing programs generally occur over a three-year period, with approximately 40% to 45% collected in the first year and the balance collected evenly over the remaining two years of the agreement.
As of December 31, 2023, we operated directly in 14 international markets through our 11 direct offices in the United States, Canada, United Kingdom, Japan, Mexico, Spain, Germany, Australia, China, Hong Kong, and Israel. Our revenues for the year ended December 31, 2023, and 2022 were $76.4 million and $99.5 million, respectively.
As of December 31, 2024, we operated directly in 12 international markets through our 10 direct offices in the United States, Canada, Japan, Mexico, Spain, Germany, Australia, China, Hong Kong, and Israel. Our revenues for the year ended December 31, 2024, and 2023 were $64.8 million and $76.4 million, respectively.
The Initial Placement occurred on May 15, 2023, under which the Company sold the 2023 Investors 280,899 shares of Senior Preferred Stock for an aggregate purchase price of $2.0 million. On July 6, 2023, the Company and the 2023 Investors entered into the Multi-Tranche Amendment.
The initial sale in the 2023 Multi-Tranche Private Placement occurred on May 15, 2023, under which the Company sold the 2023 Investors 280,899 shares of Senior Preferred Stock for an aggregate purchase price of $2.0 million (the "Initial Placement").
Subsequent to execution of the 2022 LPC Purchase Agreement the Company issued 0.43 million shares of common stock to Lincoln Park at an average price of $4.54 per share, for a total value of $1.97 million through December 31, 2022.
Subsequent to execution of the 2022 LPC Purchase Agreement the Company issued approximately 39.5 thousand shares of common stock to Lincoln Park at an average price of $49.94 per share, for a total value of $1.97 million through December 31, 2022.
The majority of our revenue is generated from the delivery of systems, both under traditional sales contracts and subscription agreements.
The majority of our revenue is generated from the delivery of systems, both under traditional sales contracts and internal financing programs.
The accounting effects of the 2022 Private Placement transaction are discussed in Note 14 "Stockholders'Equity" in the notes to our consolidated financial statements included elsewhere in this report. 66 Table of Contents The 2023 Multi-Tranche Private Placement In May 2023, the Company entered into the 2023 Multi-Tranche Private Placement Stock Purchase Agreement with the 2023 Investors pursuant to which the Company may issue and sell to the 2023 Investors up to $9.0 million in shares of the Senior Preferred Stock in multiple tranches from time to time until December 31, 2025, subject to a minimum aggregate purchase amount of $0.5 million in each tranche.
The accounting effects of the 2022 Private Placement transaction are discussed in Note 15 "Stockholders' Equity" in the notes to our consolidated financial statements included elsewhere in this report. 65 Table of Contents The 2023 Multi-Tranche Private Placement In May 2023, we entered into a securities purchase agreement (the "2023 Multi-Tranche Private Placement Stock Purchase Agreement") with certain investors (collectively, the "2023 Investors") pursuant to which the Company may issue and sell to the 2023 Investors up to $9,000,000 in shares (the "2023 Multi-Tranche Private Placement") of newly-created senior convertible preferred stock, par value $0.0001 per share (the "Senior Preferred Stock"), in multiple tranches from time to time until December 31, 2025, subject to a minimum aggregate purchase amount of $0.5 million in each tranche.
We had a net loss attributable to the Company of $37.2 million and $43.7 million in the year ended December 31, 2023, and 2022, respectively.
We had a net loss attributable to the Company of $47.0 million and $37.1 million in the year ended December 31, 2024, and 2023, respectively.
We generate revenue from traditional system sales and from sales under our subscription-based business model, which is available to customers in North America and select international markets. Approximately 33% and 42% of our aesthetic revenues were derived from our subscription model in the year ended December 31, 2023 and 2022, respectively.
We generate revenue from traditional system sales and from sales under our internal financing programs, which are available to customers in North America and select international markets. Approximately 26% and 33% of our system revenues were derived from our internal financing programs in the year ended December 31, 2024 and 2023, respectively.
In January 2024, the Company launched its new Venus Prime program which is a structured in-house financing program replacing its legacy subscription program for customers in North America.
We currently do not offer the ARTAS iX system under our internal financing programs. In January 2024, the Company launched its new Venus Prime program which is a structured in-house financing program replacing its legacy subscription program for customers in North America.
The following table sets forth the number of systems we have delivered in the geographic regions indicated: Year Ended December 31, 2023 2022 United States 412 438 International 758 1,134 Total systems delivered 1,170 1,572 Mix between traditional sales, subscription model sales and distributor sales.
The following table sets forth the number of systems we have delivered in the geographic regions indicated: Year Ended December 31, 2024 2023 United States 435 448 International 614 722 Total systems delivered 1,049 1,170 Mix between traditional sales, distributor sales, and sales made under our internal financing programs.
We maintain an allowance for expected credit losses for estimated losses that may primarily arise from subscription customers that are unable to make the remaining payments required under their subscription agreements. We continue to focus our selling efforts on cash sales and subscription customers with a stronger credit profile, thereby reducing our exposure to credit losses.
We maintain an allowance for expected credit losses for estimated losses that may primarily arise from customers who purchased our products under our internal financing programs who are unable to make the remaining payments required under their agreements.
All these factors point to uncertainty about economic stability, and the severity and duration of these conditions on our business cannot be predicted.
In addition, we face uncertainty with respect to the tariffs, if any, the new U.S. Federal administration will levy on goods imported from China, Mexico, Canada and other international jurisdictions. All these factors point to uncertainty about economic stability, and the severity and duration of these conditions on our business cannot be predicted.
In the year ended December 31, 2023, we incurred bad debt expense of $1.4 million compared to a bad debt expense of $7.3 milli on in the year ended December 31, 2022.
We continue to focus our selling efforts on cash sales and internal financing customers with a stronger credit profile, thereby reducing our exposure to credit losses. In the year ended December 31, 2024, we incurred bad debt expense of $1.4 million consistent to a bad debt expense of $1.4 milli on in the year ended December 31, 2023.
The 2022 Private Placement On November 18, 2022, we entered into a securities purchase agreement pursuant to which we issued and sold to the 2022 Investors an aggregate of 116,668 shares of our common stock and 3,185,000 shares of our Voting Preferred Stock.
The 2022 Private Placement In November 2022, we entered into a securities purchase agreement with certain investors (collectively, the "2022 Investors") pursuant to which the Company issued and sold to the 2022 Investors an aggregate of 10,608 shares of common stock, par value $0.0001 per share, and 3,185,000 shares of voting convertible preferred stock, par value $0.0001 per share (the "Voting Preferred Stock"), which are convertible into 193,014 shares of common stock upon receipt of a valid conversion notice from a 2022 Investor or at the option of the Company within 30 days following the occurrence of certain events (the "2022 Private Placement").
The bulk of the revenue decline in the year ended December 31, 2023 was due to an acceleration of our international strategy to wind down underperforming countries as we transition to third party distributors and our shift to prioritize cash deals over subscription deals in order to improve cash generation.
In addition, our international results were negatively affected by an acceleration of our international strategy to wind down underperforming countries as we continued to transition to third party distributors. We continue to focus on quality of revenue and despite the revenue decline, our cash used in operations was $1.8 million lower, or 13.9% than the same period in 2023.
We continue to focus on quality of revenue and despite the revenue decline, our cash used in operations was $14.1 million lower than the same period in 2022. We remain focused on adapting to the challenges presented by the current macro-economic environment. Israel – Hamas conflict.
We remain focused on adapting to the challenges presented by the current macro-economic environment, as well as the opportunities presented by an easing of monetary policy. Israel – Hamas conflict.
Removed
The 2021 Private Placement On December 15, 2021, we entered into a securities purchase agreement pursuant to which we issued and sold to certain investors an aggregate of 653,894 shares of our common stock and 252,717 shares of our Non-Voting Preferred Stock (the “2021 Private Placement”).
Added
During 2024, the Company issued an additional 758 shares of common stock to Lincoln Park at an average price of $12.76 per share, for a total value of $10. The 2022 LPC Purchase Agreement expired on August 1, 2024.
Removed
The gross proceeds from the securities sold in the 2021 Private Placement was $17.0 million. The costs incurred with respect to the 2021 Private Placement totaled $0.3 million and were recorded as a reduction of the 2021 Private Placement proceeds in the consolidated statements of stockholders’ equity.
Added
On July 6, 2023, the Company and the 2023 Investors entered into an amendment to the 2023 Multi-Tranche Private Placement Stock Purchase Agreement (the "Multi-Tranche Amendment").
Removed
The accounting effects of the 2021 Private Placement transaction are discussed in Note 14 "Stockholders Equity" in the notes to our consolidated financial statements included elsewhere in this report. These Non-Voting Preferred Stock shares were subsequently converted to common stock upon issuance of the 2022 Private Placement described below.
Added
Registered Direct Offering On February 22, 2024, the Company, entered into a securities purchase agreement (the "SPA") with certain institutional investors (each, a "2024 Investor"), pursuant to which the Company agreed to issue and sell to the 2024 Investors (i) in a registered direct offering, an aggregate of 74,342 shares of the Company’s common stock, at a price of $16.115 per share and (ii) in a concurrent private placement, warrants to acquire up to an aggregate of 74,342 shares of Common Stock (the "2024 Investor Warrants"), at an initial exercise price of $14.74 per share (the "Offering").
Removed
We currently do not offer the ARTAS iX system under the subscription model. For additional details related to our subscription model, see Item 1. Business – Subscription-Based Business Model and as included elsewhere in this report.
Added
The transaction is discussed in Note 15 "Stockholders' Equity" in the notes to our consolidated financial statements included elsewhere in this report. Madryn Loan and Security Agreement On April 23, 2024, the Company entered into a Loan and Security Agreement (the "Loan and Security Agreement"), by and among Venus USA (the "Bridge Borrower"), Venus Canada, Venus Ltd.
Removed
(2) For the year ended December 31, 2023, the other adjustments of $2.4 million primarily represent restructuring activities designed to improve the Company's operations and cost structure.
Added
(Venus Ltd., together with the Company and Venus Canada, the "2024 Guarantors", and together with the Bridge Borrower, the "Bridge Financing Loan Parties") and, each lender party thereto (collectively, the "2024 Lenders") and Madryn Health Partners, LP, as administrative agent.
Removed
For the year ended December 31, 2022, the other adjustments are represented by severance payments associated with a workforce reduction in Venus Spain and Venus Canada of $0.8 million and restructuring plan payments of $0.7 million. 69 Table of Contents Key Factors Impacting Our Results of Operations Our results of operations are impacted by several factors, but we consider the following to be particularly significant to our business: Number of systems delivered.
Added
Pursuant to the Loan and Security Agreement, the 2024 Lenders agreed to provide the Bridge Borrower with bridge financing in the form of a term loan in the original principal amount of $2.2 million and one or more delayed draw term loans of up to an additional principal amount of $2.8 million (the "Bridge Financing").
Removed
During the year ended December 31, 2023, our collections results were favorably impacted by the above noted changes, resulting in a significant reduction in bad debt expenses by $5.9 million when compared to the year ended December 31, 2022.
Added
The Bridge Financing originally had a maturity date of May 26, 2024. Pursuant to the Loan and Security Agreement, each of the 2024 Guarantors, jointly and severally, guarantee, that the Obligations (as defined in the Loan and Security Agreement) will be performed and paid in full when due and payable.
Removed
In addition, we decreased the allowance for expected credit losses as a percentage of gross outstanding accounts receivable from the period ended December 31, 2022 to the period ended December 31, 2023.
Added
On July 26, 2024, September 11, 2024, and November 1, 2024 additional delayed draws in the amounts of $1.0 million were made, respectively.
Removed
Risk Factors – Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel ’ s 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 and
Added
On November 26, 2024, an additional delayed draw of $1.2 million was made, and on December 9, 2024, an additional delayed draw of $1.5 million was made, for a total drawdown as of December 31, 2024 of $7.9 million.
Added
From May 24, 2024 through December 31, 2024 the Loan Parties entered into Bridge Financing Amendments Two through Ten, which among other things, extended the maturity date to January 31, 2025, increased the delayed draw commitment from $2.8 million to $6.0 million, made interest payments payable-in-kind, deleted the net loss covenant, and granted relief from minimum liquidity requirements.
Added
These amendments are discussed in Note 11 "Madryn Debt and Convertible Notes" in the notes to our consolidated financial statements included elsewhere in this report. 2024 Exchange Agreements and Series Y Convertible Preferred Stock Issuance On May 24, 2024, the Company entered into an exchange agreement, by and among the Company, Venus USA, and Madryn (the "2024 Exchange Agreement") whereby the Company exchanged $52,142 in aggregate principal amount outstanding under the MSLP Loan Agreement for $17,142 in aggregate principal of new secured notes (“New Secured Notes”) and 576,986 shares of newly-created convertible preferred stock of the Company, designated as "Series Y Convertible Preferred Stock." The Series Y Convertible Preferred Stock is priced at $667.26 per share, being equal to the product of (i) the average closing price (as reflected on Nasdaq.com) of the Company's common stock for the five trading days immediately preceding date of the 2024 Exchange Agreement, multiplied by (ii) 9.0909.
Added
The New Secured Notes follow the same terms as the MSLP Loan Agreement. As part of the extinguishment of principal, the Company recognized a $10.9 million non-cash loss.
Added
On September 26, 2024, the Company entered into an Exchange Agreement, by and among the Company, Venus USA, and Madryn (the "Second 2024 Exchange Agreement") whereby the Company exchanged $17,662 of the balance outstanding under the MSLP Loan Agreement for $2,662 in aggregate principal amount outstanding under the MSLP Loan Agreement and 203,583 shares of Series Y Convertible Preferred Stock.
Added
As part of the extinguishment of principal, the Company recognized a $0.5 million non-cash loss. Also, on September 26, 2024 the Loan Parties entered into a Third Loan Amendment which, among other things, (i) modify the October 2024 interest payment to be payable-in-kind, (ii) delete the net loss covenant, and (iii) grant relief from minimum liquidity requirements.
Added
The transactions are discussed in Note 15 "Stockholders' Equity" in the notes to our consolidated financial statements included elsewhere in this report. 66 Table of Contents Products and Services We derive revenue from the sale of products and services.
Added
The bulk of the revenue decline in the year ended December 31, 2024 was due to a significant tightening in credit markets in the U.S. and international markets due to higher interest rates, impacting our customers' ability and/or desire to secure capital equipment financing.
Added
On a positive note, the Federal Reserve Board (Fed), the European Central Bank, the Swiss National Bank and the Bank of Canada all recently reduced interest rates in an effort to reduce the degree of restrictiveness in monetary policy, and signaling future rate cuts over the near term.

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