| Organization and Summary of Significant Accounting Policies | Note
1 — Organization and Summary of Significant Accounting Policies Description
of the Business Sensus Healthcare, Inc. (together, with its subsidiaries,
unless the context otherwise indicates, “Sensus” or the “Company”) is a manufacturer of radiation therapy devices
sold to healthcare providers globally through its distribution and marketing network. The Company operates from its corporate headquarters
located in Boca Raton, Florida. In February 2024, the Company formed Sensus Healthcare
Services, LLC, a wholly-owned subsidiary that provides operational healthcare services in the form of radiation oncology and physics oversight,
including radiotherapy technologists for dermatology clinics. The Company has signed contracts that have not commenced as of March 31,
2024, and expenses incurred related to these contracts are de minimis. Basis
of Presentation and Principles of Consolidation These condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include
the accounts of the Company and its subsidiaries. Accounts and transactions between condensed consolidated entities have been eliminated. These financial statements have been prepared
in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. They do not include all of the information and notes required by GAAP. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results have been included.
Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2024 or for any other period. The condensed consolidated balance sheet as of
December 31, 2023 has been derived from the audited financial statements at that date but does not include all of the information and
notes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and
notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual
Report”). Use
of Estimates The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense
during the reporting periods. Actual results could differ from those estimates. Reclassification
of Prior Year Presentation Certain prior period amounts have been reclassified
for consistency with the current period presentation. The reclassifications are limited to the condensed consolidated balance sheets
and statements of cash flow and have no impact on the reported results of operations. Revenue
Recognition The Company derives revenue from sales of the
Company’s devices and services related to maintaining and repairing the devices as part of a service contract or on an ad-hoc basis
without a service contract. The Company provides warranties, generally for
one year, in conjunction with the sale of its products. These warranties entitle the customer to repair, replacement, or modification
of the defective product, subject to the terms of the relevant warranty. The Company has determined that these warranties do not represent
separate performance obligations, as the customer does not have the option to purchase the warranty separately and the warranty does
not provide the customer with a service in addition to the assurance that the product complies with agreed-upon specifications. The Company
records an estimate of future warranty claims at the time it recognizes revenue from the sale of the device based upon management’s
estimate of the future claims rate. Revenue is recognized upon transfer of control
of promised goods or services to customers when the product is shipped or the service is rendered, based on the amount the Company expects
to receive in exchange for those goods or services. The Company enters into contracts that can include multiple services, which are accounted
for separately if they are determined to be distinct. To determine the transaction price for contracts in
which a customer promises consideration in a form other than cash, the Company measures the estimated fair value of the
noncash consideration at contract inception. If the Company cannot reasonably estimate the fair value of the noncash consideration, the
Company measures the consideration indirectly by reference to the standalone selling price of the products promised to the
customer or class of customer in exchange for the consideration. The revenues from service contracts are recognized
over the service contract period on a straight-line basis. In the event that a customer does not sign a service contract, but requests
maintenance or repair services after the warranty expires, the Company recognizes revenue when the service is rendered. The Company has determined that in practice no
significant discount is given on the service contract when it is offered with the device purchase as compared to when it is sold on a
stand-alone basis. The service level provided is identical whether the service contract is purchased on a stand-alone basis or together
with the device. There is no termination provision in the service contract or any penalties in practice for cancellation of the service
contract. The components of disaggregated revenue for the
three months ended March 31, 2024 and 2023 were as follows:
For the Three Months Ended
March 31,
(in thousands) 2024 2023
Product Revenue - recognized at a point in time $ 9,493 $ 2,469
Service Revenue - recognized at a point in time 371 341
Service Revenue - recognized over time 799 604
Total Revenue $ 10,663 $ 3,414 The Company operates in a highly regulated environment,
primarily in the U.S. dermatology market, in which state regulatory approval is sometimes required prior to the customer being able to
use the product. In cases where such regulatory approval is pending, revenue is deferred until such time as regulatory approval is obtained. Deferred revenue activity as of March 31, 2024
was as follows:
(in thousands) Product Service Total
December 31, 2023 $ 36 $ 681 $ 717
Revenue recognized - (799 ) (799 )
Amounts invoiced 315 755 1,070
March 31, 2024 $ 351 $ 637 $ 988 The Company does not disclose information about
remaining performance obligations of deposits for products that have original expected durations of one year or less. Estimated service
revenue to be recognized in the future related to the performance obligations that are unsatisfied (or partially unsatisfied) as of March
31, 2024 is as follows:
Year Service
2024 (April 1 - December 31, 2024) $ 560
2025 57
2026 20
Total $ 637 For the three months ended March 31, 2024 and
2023, the Company paid commissions for certain equipment sales. Because the recovery of commissions is expected to occur from product
revenue within one year, the Company charges commissions to expense as incurred. Shipping and handling costs are expensed as incurred
and are included in cost of sales. Concentration Financial instruments that potentially subject
the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. One customer in the U.S. accounted for approximately
71% and 60% of revenue for the three months ended March 31, 2024 and 2023, respectively, and 86% and 85% of the accounts receivable as
of March 31, 2024 and December 31, 2023, respectively. Segment
and Geographical Information The following table illustrates total revenue
for the three months ended March 31, 2024 and 2023 by country.
For the Three Months Ended
March 31,
(in thousands) 2024 2023
United States $ 10,479 98 % $ 3,274 96 %
China 155 2 % 130 4 %
Other 29 0 % 10 0 %
Total Revenue $ 10,663 100 % $ 3,414 100 % Fair
Value of Financial Instruments Carrying amounts of cash equivalents, accounts
receivable, accounts payable and the revolving credit facility approximate fair value due to their relative short maturities. Fair
Value Measurements The Company uses a fair value hierarchy that
prioritizes inputs to valuation approaches used to measure fair value. The fair value hierarchy gives the highest priority to quoted
prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Assets and
liabilities measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 Inputs: Quoted prices (unadjusted) in active
markets for identical assets or liabilities at the reporting date.
● Level
1 assets may include listed mutual funds, ETFs and listed equities Level 2 Inputs: Quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing
services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used
to arrive at the price are observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies.
● Level
2 assets may include debt securities and foreign currency exchange contracts that have inputs to the valuations that generally can
be corroborated by observable market data. Level 3 Inputs: Unobservable inputs for the valuation
of the asset or liability, which may include nonbinding broker quotes.
● Level
3 assets include investments for which there is little, if any, market activity. These inputs require significant management judgment
or estimation. Significance of Inputs: The Company’s assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific
to the financial instrument. Cash
and Cash Equivalents Cash and cash equivalents primarily consist of
cash, money market funds and short-term, highly liquid investments with original maturities of three months or less. Accounts
Receivable The Company does business and extends credit
based on an evaluation of each customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables
is expected to vary by customer due to the financial condition of each customer. The Company estimates future credit losses based on
the age of customer receivable balances, collection history and forecasted economic trends. Future collections can be significantly different
from historical collection trends or current estimates. The Company monitors exposure to credit losses and maintains allowances for anticipated
losses considered necessary under the circumstances. The allowance for expected credit losses was $0 as of both March 31, 2024 and December
31, 2023. No credit loss expense was incurred for the three months ended March 31, 2024 or 2023. Inventories Inventories consist of finished product and components
and are stated at the lower of cost and net realizable value, determined using the first-in-first-out method. Earnings
Per Share Basic net income (loss) per share is calculated
by dividing the net income by the weighted-average number of common shares outstanding for the period using the treasury stock method
for options, restricted stocks and warrants. Diluted net income (loss) per share is computed by giving effect to all potential dilutive
common share equivalents outstanding for the period. The factors used in the net income (loss) per
share computation are as follows:
For the Three Months Ended
March 31,
(in thousands) 2024 2023
Basic
Net income (loss) $ 2,274 $ (1,894 )
Weighted average number of shares used in computing net income (loss) per share – basic 16,295 16,245
Net income (loss) per share - basic $ 0.14 $ (0.12 )
Diluted
Net income (loss) $ 2,274 $ (1,894 )
Weighted average number of shares used in computing net income (loss) per share – basic 16,295 16,245
Dilutive effects of:
Restricted stock awards 23 -
Weighted average number of shares used in computing net income (loss) per share – diluted 16,318 16,245
Net income (loss) per share - diluted $ 0.14 $ (0.12 )
The shares listed below were not included in the computation of diluted net income (loss) per share because to do so would have been antidilutive for the periods presented:
Restricted stock awards 53,250 54,122
Stock options 89,550 20,933 Diluted net income per share for the three months
ended March 31, 2024 includes the dilutive effect of restricted stock awards that were issued in July 2021 and January 2024 to our directors,
officers, and employees. Diluted weighted average common shares outstanding for the three months ended March 31, 2024 excludes stock
options whose exercise prices were higher than the average price of our shares of common stock during the period. Diluted weighted average
common shares outstanding for the three months ended March 31, 2024 also excludes the 53,250 shares issued under restricted stock awards
in December 2022 to employees, as the average price of our shares of common stock during the three months ended March 31, 2024 was less
than average unrecognized compensation expense. Diluted net loss per share for the three months ended March 31, 2023 excludes the dilutive
effect of stock options and restricted stock awards as they are antidilutive during a period of net loss. The assumed proceeds of stock
options and the restricted stock awards for the treasury stock method is the sum of proceeds from exercise and the average amount of
unrecognized compensation expense. Leases The Company evaluates arrangements at inception
to determine if an arrangement is or contains a lease. Operating lease assets represent the Company’s right to control an underlying
asset for the lease term, and operating lease liability represents the Company’s obligation to make lease payments arising from
the lease. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain
substantially all of the economic benefits from using the underlying asset. Operating lease assets and liabilities are recognized at
the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term,
the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
The Company uses an incremental borrowing rate that the Company would expect to incur for a fully collateralized loan over a similar
term under similar economic conditions to determine the present value of the lease payments. The Company has lease agreements which include
lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying
assets. The lease payments used to determine the Company’s
operating lease assets may include lease incentives, and stated rent increases are recognized in the Company’s operating lease
assets in the Company’s condensed consolidated balance sheets. Operating lease assets are amortized to rent expense over the lease
term and included in operating expenses in the condensed consolidated statements of income. Income Taxes The Company recognizes deferred tax assets and
liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements
or tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement
carrying amounts and the tax bases of the assets and liabilities using the enacted tax rates in effect in the years in which the differences
are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence,
it is more likely than not that some or all of the deferred tax assets will not be realized. Uncertain tax positions are recognized in the
financial statements only if that position is more likely than not to be sustained upon examination by taxing authorities, based on the
technical merits of the position. The Company’s practice is to recognize interest and/or penalties related to income tax matters
in income tax expense. Recent
Accounting Pronouncements In March 2020,
the Financial Accounting Standard Board (“FASB”) issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of
the Effects of Reference Rate Reform on Financial Reporting Deferral of the Sunset Date of Topic 848 consolidated financial statements. In November 2023,
the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, consolidated financial
statements and related disclosures. In
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures consolidated financial statements
and related disclosures. In March
2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar
Awards, |
