VENUS CONCEPT LTD. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of Venus Concept Ltd. s (Venus Concept) financial condition and results of op

VENUS CONCEPT LTD. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of Venus Concept Ltd. s (Venus Concept) financial condition and results of operations should be

read together with the consolidated financial statements of Venus Concept and the related notes and the unaudited pro forma financial information, each included elsewhere in this Current Report on

Form 8-K/A. This discussion of Venus Concept s financial condition and results of operations contains certain statements that are not strictly historical and are forward-looking

statements and involve a high degree of risk and uncertainty. Actual results may differ materially from those projected in the forward-looking statements due to other risks and uncertainties that exist in Venus Concept s operations, development

efforts and business environment. All forward-looking statements are based on information available to Venus Concept as of the date hereof, and Venus Concept assumes no obligation to update any such forward-looking statement.

Venus Concept is an innovative

global medical technology company that develops, commercializes, and delivers minimally invasive and non-invasive medical aesthetic technologies and related practice enhancement services. To address the

financial barriers faced by physicians and aesthetic service providers globally, Venus Concept focuses its product sale strategy on a subscription-based business model in North America and in Venus Concept s well established direct global

markets. Venus Concept has received FDA clearance for the combined use of multipolar RF and PEMF for non-invasive treatment of facial rhytides (wrinkles) in Fitzpatrick skin types I (ivory)-IV (light brown), and temporary reduction in the appearance of cellulite, among others. Venus Concept also received FDA clearance for the use of its diode laser system for

non-invasive fat reduction (lipolysis) in the abdomen and flanks for certain body types. In certain jurisdictions outside of the United States, Venus Concept s products have received marketing

authorizations for indications such as temporary increase of skin tightening, cellulite reduction and uses for certain soft tissue injuries, among others, and for vaginal treatment in the Israeli market. Venus Concept s proprietary multipolar

RF and PEMF technologies, also referred to as Venus Concept s (MP)2 technology, synergistically deliver consistent, homogenous treatments in a minimally invasive process. Venus Concept also uses in its systems IPL for treatment of benign

pigmented epidermal and cutaneous lesions, lasers for hair removal and fractional ablative RF modality for skin resurfacing. Venus Concept designs and sells a full-suite of medical aesthetic products and markets its current products primarily to

physicians interested in providing minimally invasive and non-invasive aesthetic procedures, and to aesthetic medical spas. Through its NeoGraft division, Venus Concept offers an automated hair restoration

system that facilitates the harvesting of follicles during an FUE process, improving the accuracy and speed over commonly used manual extraction instruments. Venus Concept s NeoGraft systems are sold primarily to plastic surgeons and

dermatologists, and in the United States, Venus Concept offers these doctors the services of a group of independently contracted technicians, who Venus Concept markets as NeoGrafters . These technicians are certified to assist the

physician during a NeoGraft hair restoration procedure.

Venus Concept has reported recurring net losses and negative cash flows from

operations. As of September 30, 2019 and December 31, 2018, Venus Concept had an accumulated deficit of $54.9 million and $35.1 million, respectively. Venus Concept expects to continue to incur significant expenses and increasing

operating losses for the foreseeable future in connection with our ongoing activities. As of September 30, 2019 and December 31, 2018, Venus Concept had cash and cash equivalents of $15.7 million and $6.8 million, respectively.

In order to continue its operations, Venus Concept must achieve profitable operations and/or obtain additional equity investment or debt financing. Venus Concept completed convertible note offerings in June 2019 and August 2019 as described in the

following paragraph and in more detail in the Convertible Note Financings section below and a private placement financing in November 2019 as described in the following paragraph and in more detail in the Concurrent Financing

section below. Until Venus Concept generates revenue at a level to support its cost structure, Venus Concept expects to continue to incur substantial operating losses and net cash outflows.

On June 25, 2019, Venus Concept sold $7.8 million of convertible notes. On

August 14, 2019, Venus Concept sold an additional $0.3 million of Venus Concept convertible notes to one investor and $7.0 million of Venus Concept convertible notes to certain investors. On August 21, 2019, Venus Concept sold an

additional $14.1 million to certain investors. Venus Concept s recurring net losses and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern within 12 months. Venus Concept based

this estimate on assumptions that may prove to be wrong, and it could exhaust our available capital resources sooner than it expects. See Liquidity and Capital Resources below.

Merger with Restoration Robotics

Venus Concept completed its business combination with Restoration Robotics, Inc. ( Restoration Robotics ), in accordance with the

terms of the Agreement and Plan of Merger and Reorganization, dated as of March 15, 2019, as amended from time to time (the Merger Agreement ), by and among Venus Concept, Restoration Robotics and Radiant Merger Sub Ltd., a company

organized under the laws of Israel and a direct, wholly-owned subsidiary of Venus Concept ( Merger Sub ). Under the Merger Agreement, Merger Sub merged with and into Venus Concept, with Venus Concept surviving as a wholly owned subsidiary

of Restoration Robotics (the Merger ). The Merger became effective on November 7, 2019. Following the completion of the Merger, Restoration Robotics changed its corporate name to Venus Concept Inc. , and the business

conducted by Venus Concept became the primary business conducted by Venus Concept Inc.

At the effective time of the Merger, each

outstanding ordinary and preferred share of Venus Concept, nominal value of New Israeli Shekels 0.001 each, other than shares held by Venus Concept as treasury stock or held by Venus Concept Inc. or the Merger Sub, were converted into the right to

receive 8.6506 (the pre-split Exchange Ratio ) validly issued, fully paid and non-assessable Venus Concept Inc. common stock ( Venus Concept Inc. Common Stock ), and each

outstanding the Company stock option and warrant was assumed by Venus Concept Inc. and converted into and become an option or warrant (as applicable) exercisable for Venus Concept Inc. Common Stock with the number and exercise price adjusted by the

Immediately following completion of the Merger, Venus Concept effected a 15-for-1 reverse stock split of Venus Concept Inc. Common Stock (the Reverse Stock Split ). The Merger and the Reverse Stock Split were approved by Venus Concept Inc. stockholders on

October 4, 2019. All share and per share amounts of Venus Concept Inc. (formerly Restoration Robotics) have been adjusted to reflect the reverse stock split, unless otherwise noted.

Products and Services

Concept derives revenue from the sale of products and services. Product revenue includes revenue from the following:

Service revenue includes revenue derived from Venus Concept s NeoGrafter technician services, practice enhancement services, Venus

Concept s 2two5 internal advertising agency, and Venus Concept s extended warranty service contracts provided to Venus Concept s existing customer base.

Systems are sold through Venus Concept s subscription model, or through traditional sales contracts directly and through distributors.

Venus Concept s subscription model includes an up-front fee and a monthly payment schedule,

typically over a period of 36 months, with approximately 40% of total contract payments collected in the first year. To ensure that each monthly product payment is made on time and that the customer s system is serviced in accordance with the

terms of the warranty, every product purchased under a subscription agreement requires a monthly activation code, which Venus Concept provides to the customer upon receipt of the monthly payment. These recurring monthly payments provide Venus

Concept s customers with enhanced financial transparency and predictability. If economic circumstances are appropriate, Venus Concept provides customers in good standing with the opportunity to upgrade to new agreements for the

newest available or alternative Venus Concept technology throughout the subscription period. This structure can provide greater flexibility than traditional equipment leases secured through finance companies. Through Venus Concept s practice

enhancement services, Venus Concept works closely with its customers and physicians to provide business recommendations that improve the quality of service outcomes, build patient traffic and improve financial returns for the customer s

Venus Concept has developed and commercialized nine technology platforms, including the NeoGraft platform. Venus Concept s

medical aesthetic technology platforms have received regulatory clearance for indications such as treatment of facial wrinkles in certain skin types, temporary reduction of appearance of cellulite and relief of minor muscle aches and pains, as well

as other indications, that are cleared for marketing in overseas markets but not in the United States, including treatment of certain soft tissue injuries, temporary increase of skin tightening, temporary body contouring, and vaginal treatments in

the Israeli market only. In 2018 Venus Concept purchased the NeoGraft business to penetrate the hair restoration market.

States, Venus Concept has obtained 510(k) clearance from FDA for Venus Concept s Venus Freeze and Venus Freeze Plus, Venus Viva, Venus Legacy, Venus Versa, Venus Velocity, Venus Heal and Venus Bliss systems. The Venus Glow and NeoGraft systems

are listed as class I devices under FDA classification system. Outside the United States, Venus Concept markets its technologies in over 60 countries across Europe, Asia-Pacific and Latin America. Because each country has its own regulatory scheme

and approval process, not every device is authorized for the same indications in each market in which a particular system is marketed.

Venus Concept generates recurring monthly revenue under its subscription model and traditional system sales. Venus Concept commenced its

subscription model in North America in 2011 and, for the year ended December 31, 2018, approximately 75% of system revenues were derived from its subscription model. For the three and nine months ended September 30, 2019, approximately 70%

of system revenues were derived from its subscription model. For the three and nine months ended September 30, 2018, approximately 75% and 77%, respectively, of system revenues were derived from its subscription model. Venus Concept operates

directly in 29 international markets through its 24 direct offices, including wholly-owned subsidiaries in the United States, Canada, United Kingdom, Japan, South Korea, Mexico, Argentina, Colombia, Spain, France, Germany, Israel and Australia, and

majority-owned subsidiaries in China, Hong Kong, Singapore, Indonesia, Vietnam, India, Italy, Bulgaria, Russia, Kazakhstan and South Africa.

Venus Concept s revenues were $26.2 million and $78.6 million for the three

and nine months ended September 30, 2019 respectively as compared to $25.6 million and $74.0 million for the three and nine months ended September 30, 2018 respectively. Venus Concept had a net loss attributable to Venus Concept

of $8.6 million and $19.8 million for the three and nine months ended September 30, 2019 respectively as compared to net loss of $1.4 million and $1.7 million for the three and nine months ended September 30, 2018,

respectively. Venus Concept had an Adjusted EBITDA income of $28 thousand and Adjusted EBITDA loss of $1.0 million for the three and nine months ended September 30, 2019, respectively, as compared to Adjusted EBITDA income of

$1.7 million and $7.4 million for the three and nine months ended September 30, 2018, respectively.

Use of Non-GAAP Financial Measures

Adjusted EBITDA is a

non-GAAP measure defined as net loss income before foreign exchange loss, financial expenses, income tax expense, depreciation and amortization, stock-based compensation and

non-recurring items for a given period. Adjusted EBITDA is not a measure of Venus Concept s financial performance under U.S. GAAP and should not be considered an alternative to net income or any other

performance measures derived in accordance with U.S. GAAP. Accordingly, you should consider Adjusted EBITDA along with other financial performance measures, including net income, and Venus Concept s financial results presented in accordance

with U.S. GAAP. Other companies, including companies in Venus Concept s industry, may calculate Adjusted EBITDA differently or not at all, which reduces its usefulness as a comparative measure. Venus Concept understands that although Adjusted

EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of Venus

Concept s results as reported under U.S. GAAP. Some of these limitations are: Adjusted EBITDA does not reflect Venus Concept s cash expenditures or future requirements for capital expenditures or contractual commitments; Adjusted EBITDA

does not reflect changes in, or cash requirements for, Venus Concept s working capital needs; and although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in

the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Venus Concept believes that Adjusted EBITDA

is a useful measure for analyzing the performance of Venus Concept s core business because it facilitates operating performance comparisons from period to period and company to company by backing out potential differences caused by changes in

foreign exchange rates that impact financial assets and liabilities denominated in currencies other than the U.S. dollar, tax positions (such as the impact on periods or companies of changes in effective tax rates), the age and book depreciation of

fixed assets (affecting relative depreciation expense), stock-based compensation expense (because it is a non-cash expense) and non-recurring items as explained below.

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

Reconciliation of Net Income to Non-GAAP Adjusted EBITDA

Key Factors Impacting Venus Concept s Results of Operations

Venus Concept s results of operations are impacted by several factors, but it considers the following to be particularly significant to

Basis of Presentation

Venus Concept generates

revenue from (1) sales of systems through Venus Concept s subscription model, traditional system sales to customers and distributors, (2) other product revenues from the sale of marketing supplies and kits, consumables and Venus

skincare and hair products and (3) service revenue from the sale of Venus Concept s NeoGrafter technician services, Venus Concept s 2two5 internal advertising agency and Venus Concept s extended warranty service contracts

provided to existing customers.

For the year ended December 31, 2018 and the three and nine months ended September 30, 2019, approximately 75%, 70% and 70%,

respectively, of Venus Concept s system revenues were derived from subscription contracts. Venus Concept s subscription model is designed to provide a low barrier to ownership of Venus Concept s systems and includes an up-front fee followed by monthly payments, typically over a 36-month period. The up-front fee serves as a deposit. The significantly

reduced up-front financial commitment, coupled with less onerous credit and disclosure requirements, is intended to make the sales program more appealing and affordable to physicians, including larger non-traditional providers of aesthetic services such as family practice, general practice, and medical spas. For accounting purposes, these arrangements are considered to be sales-type finance equipment leases,

where the present value of all cash flows to be received under the subscription agreement is recognized as revenue upon shipment to the customer and achievement of the required revenue recognition criteria.

For the year ended December 31, 2018 and the three and nine months ended September 30, 2019, approximately 20%, 22% and 24%,

respectively, of Venus Concept s system revenues were derived from traditional sales. Customers generally demand higher discounts in connection with these types of sales. Venus Concept recognizes revenues from products sold to end customers