Note 13

Business Segments:

In 2018, the Company organized its business into two operating segments to better align its organization based upon the Company's management structure, products and services offered, markets served and types of customers, as follows: The Dermatology Recurring Procedures segment derives its revenues from the XTRAC procedures performed by dermatologists. The Dermatology Procedures Equipment segment generates revenues from the sale of equipment, such as lasers and lamp products. The Dermatology Imaging segment generated revenues from the sale and usage of imaging devices. The Company announced that it will no longer support the imaging devices effective September 30, 2017 thus there will be minimal, if any, continuing revenues for this segment. This is no longer a reportable segment in 2018. Management reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance.

Unallocated operating expenses include costs that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses. Interest expense and other income (expense), net are also not allocated to the operating segments.

The following tables reflect results of operations from our business segments for the periods indicated below:

Three Months Ended September 30, 2018

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			TOTAL
Revenues	$	5,556		$	2,336		$	7,892
Costs of revenues		1,757			1,292			3,049
Gross profit		3,799			1,044			4,843
Gross profit %		68.4	%		44.7	%		61.4	%

Allocated operating expenses:
Engineering and product development		178			46			224
Selling and marketing		2,276			211			2,487

Unallocated operating expenses		-			-			2,184
		2,454			257			4,895
Income (loss) from operations		1,345			787			(52	)

Interest expense, net		-			-			(239	)
Change in fair value of warranty liability		-			-			(79	)
Income (loss) before income taxes	$	1,345		$	787		$	(370	)

Three Months Ended September 30, 2017

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			Dermatology Imaging			TOTAL
Revenues	$	5,525		$	1,751		$	9		$	7,285
Costs of revenues		2,084			967			225			3,276
Gross profit		3,441			784			(216	)		4,009
Gross profit %		62.3	%		44.8	%		(2400.0	%)		55.0	%

Allocated operating expenses:
Engineering and product development		348			63			-			411
Selling and marketing expenses		2,043			449			-			2,492

Unallocated operating expenses		-			-			-			1,678
		2,391			512			-			4,581
Income (loss) from operations		1,050			272			(216	)		(572	)

Interest expense, net		-			-			-			(1,343	)
Change in fair value of warrant liability		-			-			-			81
Loss on extinguishment of debt		-			-			-			(11,799	)

Income (loss) before income taxes	$	1,050		$	272		$	(216	)	$	(13,633	)

The following tables reflect results of operations from our business segments for the periods indicated below:

Nine Months Ended September 30, 2018

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			TOTAL
Revenues	$	15,221		$	6,671		$	21,892
Costs of revenues		5,587			4,255			9,842
Gross profit		9,634			2,416			12,050
Gross profit %		63.3	%		36.2	%		55.0	%

Allocated operating expenses:
Engineering and product development		663			168			831
Selling and marketing		6,663			1,074			7,737

Unallocated operating expenses		-			-			6,319
		7,326			1,242			14,887
Income (loss) from operations		2,308			1,174			(2,837	)

Interest expense, net		-			-			(930	)

Change in fair value of warrant liability		-			-			(101	)

Income (loss) before income taxes	$	2,308		$	1,174		$	(3,868	)

Nine Months Ended September 30, 2017

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			Dermatology Imaging			TOTAL
Revenues	$	17,051		$	5,784		$	17		$	22,852
Costs of revenues		5,969			2,988			225			9,182
Gross profit		11,082			2,796			( 208	)		13,670
Gross profit %		65.0	%		48.3	%		(1,223.5	%)		59.8	%

Allocated operating expenses:
Engineering and product development		1,104			204			1			1,309
Selling and marketing expenses		7,145			1,167			-			8,312

Unallocated operating expenses		-			-			-			4,999
		8,249			1,371			1			14,620
Income (loss) from operations		2,833			1,425			(209	)		(950	)

Interest expense, net		-			-			-			(4,264	)
Change in fair value of warrant liability		-			-			-			77
Loss on extinguishment of debt		-			-			-			(11,799	)
Other income (expense), net		-			-			-			6

Income (loss) before income taxes	$	2,833		$	1,425		$	(209	)	$	(16,930	)