Note 12

Business Segments:

The Company has organized its business into two operating segments to present 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 usage of its equipment by dermatologists to perform XTRAC procedures. The Dermatology Procedures Equipment segment generates revenues from the sale of equipment, such as lasers and lamp products. 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, 2019

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			TOTAL
Revenues	$	5,991		$	1,489		$	7,480
Costs of revenues		1,966			889			2,855
Gross profit		4,025			600			4,625
Gross profit %		67.2	%		40.3	%		61.8	%

Allocated operating expenses:
Engineering and product development		226			23			249
Selling and marketing		2,762			125			2,887

Unallocated operating expenses		-			-			2,218
		2,988			148			5,354
Income (loss) from operations		1,037			452			(729	)

Interest expense, net		-			-			(153	)

Income (loss) before income taxes	$	1,037		$	452		$	(882	)

Nine Months Ended September 30, 2019

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			TOTAL
Revenues	$	17,142		$	5,546		$	22,688
Costs of revenues		5,492			3,052			8,544
Gross profit		11,650			2,494			14,144
Gross profit %		68.0	%		45.0	%		62.3	%

Allocated operating expenses:
Engineering and product development		666			122			788
Selling and marketing		8,301			610			8,911

Unallocated operating expenses		-			-			7,398
		8,967			732			17,097
Income (loss) from operations		2,683			1,762			(2,953	)


Interest expense, net		-			-			(433	)

Income (loss) before income taxes	$	2,683		$	1,762		$	(3,386	)

Three Months Ended September 30, 2018

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			TOTAL
Revenues	$	5,393		$	2,336		$	7,729
Costs of revenues		1,794			1,305			3,099
Gross profit		3,599			1,031			4,630
Gross profit %		66.7	%		44.1	%		59.9	%

Allocated operating expenses:
Engineering and product development		177			47			224
Selling and marketing		2,270			217			2,487

Unallocated operating expenses		-			-			2,289
		2,447			264			5,000
Income (loss) from operations		1,152			767			(370	)

Interest expense, net		-			-			(239	)
Change in fair value of warrant liability		-			-			(79	)
Income (loss) before income taxes	$	1,152		$	767		$	(688	)

Nine Months Ended September 30, 2018

	Dermatology Recurring Procedures			Dermatology Procedures Equipment			TOTAL
Revenues	$	15,186		$	6,670		$	21,856
Costs of revenues		5,702			4,290			9,992
Gross profit		9,484			2,380			11,864
Gross profit %		62.5	%		35.7	%		54.3	%

Allocated operating expenses:
Engineering and product development		661			170			831
Selling and marketing		6,655			1,082			7,737

Unallocated operating expenses		-			-			6,583
		7,316			1,252			15,151
Income (loss) from operations		2,168			1,128			(3,287	)

Interest expense, net		-			-			(930	)
Change in fair value of warrant liability		-			-			(101	)

Income (loss) before income taxes	$	2,168		$	1,128		$	(4,318	)