| 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 leased equipment, radiation oncology
and physics oversight, including radiotherapy technologists for dermatology clinics. 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 considered necessary for a fair statement of the results have been included. Operating results for the three and six months
ended June 30, 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 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 for 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 of
the products promised to the customer or class of customer in exchange for the consideration. Our service
contracts include maintenance or repair service contracts for device purchases and personnel service contracts to assist the use and operation
of leased-out equipment under lessor agreements. The revenues
from maintenance or repair 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. There is no termination provision in the service contract or any penalties in practice for cancellation
of the service contract. The revenues from personnel service contracts
are recognized in the period the work is performed, as the Company has elected the practical expedient to recognize revenue in the amount
to which the entity has a right to invoice. The service contracts can be terminated by mutual written agreement.
The Company
has determined that in practice no significant discount is given on service contracts when offered with the device purchase or equipment
lease as compared to when 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 purchase or equipment lease. The Company may also incur preparation cost to ensure
the customer’s space meets the requirement and specifications for the operation of the equipment. The preparation cost is expensed
as incurred. The components of disaggregated revenue for the
three and six months ended June 30, 2024 and 2023 were as follows:
For the Three Months Ended For the Six Months Ended
June 30, June 30,
(in thousands) 2024 2023 2024 2023
Product Revenue - recognized at a point in time $ 8,074 $ 3,524 $ 17,566 $ 5,993
Service Revenue - recognized at a point in time 367 306 739 647
Service Revenue - recognized over time 798 697 1,597 1,301
Total Revenue $ 9,239 $ 4,527 $ 19,902 $ 7,941 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 June 30, 2024
was as follows:
(in thousands) Product Service Total
December 31, 2023 $ 36 $ 681 $ 717
Revenue recognized (270 ) (1,597 ) (1,867 )
Amounts invoiced 332 1,581 1,913
June 30, 2024 $ 98 $ 665 $ 763 Remaining performance obligations of deposits
for products 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 June 30, 2024 is as follows:
Year Service
2024 (July 1 - December 31, 2024) $ 439
2025 172
2026 44
2027 10
Total $ 665 For the six months ended June 30, 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. In addition, the Company incurs commissions associated
with equipment lease agreements, which are accounted as initial direct costs and recorded in other noncurrent assets in the condensed
consolidated balance sheets. The commission is capitalized at the commencement of the lease and recognized as an expense in selling and
marketing expenses over the lease term.
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 83% and
46% of revenue for the three months ended June 30, 2024 and 2023, respectively, 77% and 52% of revenue for the six months ended June 30,
2024 and 2023, respectively, and 92% and 85% of the accounts receivable as of June 30, 2024 and December 31, 2023, respectively. Geographical
Information The following table illustrates total revenue
for the three and six months ended June 30, 2024 and 2023 by country.
For the Three Months Ended
June 30,
(in thousands) 2024 2023
United States $ 8,667 94 % $ 3,892 86 %
China 572 6 % 300 7 %
Guatemala - 0 % 190 4 %
Ireland - 0 % 135 3 %
Other - 0 % 10 0 %
Total Revenue $ 9,239 100 % $ 4,527 100 %
For the Six Months Ended
June 30,
(in thousands) 2024 2023
United States $ 19,146 96 % $ 7,166 90 %
China 727 4 % 430 5 %
Guatemala - 0 % 190 2 %
Ireland - 0 % 135 2 %
Other 29 0 % 20 0 %
Total Revenue $ 19,902 100 % $ 7,941 100 % 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 $42 thousand and $0 as of June 30, 2024
and December 31, 2023, respectively. Credit loss expense was $42 thousand and $5 thousand for the three months ended June, 2024 and 2023,
respectively, and $42 thousand and $5 thousand for the six months ended June, 2024 and 2023, respectively. 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 For the Six Months Ended
June 30, June 30,
(in thousands) 2024 2023 2024 2023
Basic
Net income (loss) $ 1,612 $ (380 ) $ 3,886 $ (2,274 )
Weighted average number of shares used in computing net income (loss) per share – basic 16,298 16,250 16,297 16,248
Net income (loss) per share - basic $ 0.10 $ (0.02 ) $ 0.24 $ (0.14 )
Diluted
Net income (loss) $ 1,612 $ (380 ) $ 3,886 $ (2,274 )
Weighted average number of shares used in computing net income (loss) per share – basic 16,298 16,250 16,297 16,248
Dilutive effects of:
Restricted stock awards 35 - 29 -
Weighted average number of shares used in computing net income (loss) per share – diluted 16,333 16,250 16,326 16,248
Net income (loss) per share - diluted $ 0.10 $ (0.02 ) $ 0.24 $ (0.14 )
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 52,500 146,000 52,500 146,000
Stock options 86,550 89,550 86,550 89,550 Diluted net income per share for the three and
six months ended June 30, 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 and six months ended June
30, 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 and six months ended June 30, 2024 also excludes the 52,500 shares issued
under restricted stock awards in December 2022 to employees, as the average price of our shares of common stock during the three and six
months ended June 30, 2024 was less than average unrecognized compensation expense. Diluted net loss per share for the three and six months
ended June 30, 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. For leases in which the Company is the lessor,
the Company identifies the lease and non-lease components and allocates the contract consideration to the different components on a relative
standalone selling price basis at lease inception. The Company uses a residual approach for the components when the standalone selling
price is not directly observable or those for which the Company has not established a price. The Company elects the practical expedient to
combine lease and non-lease components when the components qualify to be combined. Continuous supporting services are the primary non-lease
components and are not predominant. As a result, the combined components are accounted for as a lease under ASC 842, Leases Revenue from Contracts with Customers
For operating leases where the Company is the
lessor, the Company recognizes the underlying assets and depreciates them over the estimated useful life which is based upon to estimate
the residual value expected at the end of the lease term. Lease income is recognized on a straight-line basis over the lease term. Leasing
revenue is not recognized when collection of all contractual rents over the term of the agreement is not probable. When collection is
not probable, the Company limits the lease revenue to the lesser of the revenue recognized on a straight-line basis or cash basis. The
lease income is included in revenues in the condensed consolidated statements of income (loss).
Variable lease payments associated with the leases
are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable
lease payments are presented within revenues in the condensed consolidated statements of income (loss).
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 In March
2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar
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