Sensus Healthcare(US:SRTS)2025-08-12 18:05markdown [Introductory Note](index=3&type=section&id=Introductory%20Note) This section outlines forward-looking statements, their inherent risks, and uncertainties that could cause actual results to differ [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements, their inherent risks, and uncertainties that could cause actual results to differ - Forward-looking statements involve risks and uncertainties related to Sensus Healthcare, Inc., its industry, and general economic conditions, which may cause actual results to differ materially from expectations[9](index=9&type=chunk) - Key risk factors include inflationary pressures, government/third-party payor reimbursement levels, customer concentration (U.S. and China), development of new technologies, regulatory requirements, manufacturing management, international business risks, IT system performance, and intellectual property protection[9](index=9&type=chunk) - Geopolitical uncertainties (Middle East conflict, Russian invasion of Ukraine) have not had a significant impact on the business to date, but developments are continuously monitored[10](index=10&type=chunk) [PART I – Financial Information](index=4&type=section&id=PART%20I%20%E2%80%93%20Financial%20Information) [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows [Condensed Consolidated Balance Sheets (unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Assets** | | | | | | Cash and cash equivalents | $22,162 | $22,056 | $106 | 0.5% | | Accounts receivable, net | $12,622 | $19,731 | $(7,109) | -36.0% | | Inventories | $12,405 | $10,097 | $2,308 | 22.9% | | Total current assets | $52,219 | $56,738 | $(4,519) | -8.0% | | Total assets | $58,852 | $62,165 | $(3,313) | -5.3% | | **Liabilities** | | | | | | Accounts payable and accrued expenses | $5,365 | $4,811 | $554 | 11.5% | | Total current liabilities | $6,413 | $5,885 | $528 | 9.0% | | Total liabilities | $6,788 | $6,338 | $450 | 7.1% | | **Stockholders' Equity** | | | | | | Retained earnings | $9,825 | $13,434 | $(3,609) | -26.9% | | Total stockholders' equity | $52,064 | $55,827 | $(3,763) | -6.7% | [Condensed Consolidated Statements of Income (Loss) (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)%20(unaudited)) Condensed Consolidated Statements of Income (Loss) (in thousands, except per share data) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | % Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $7,315 | $9,239 | $(1,924) | -20.8% | $15,659 | $19,902 | $(4,243) | -21.3% | | Cost of sales | $4,412 | $3,816 | $596 | 15.6% | $8,403 | $7,817 | $586 | 7.5% | | Gross profit | $2,903 | $5,423 | $(2,520) | -46.5% | $7,256 | $12,085 | $(4,829) | -40.0% | | Total operating expenses | $4,846 | $3,441 | $1,405 | 40.8% | $11,845 | $7,216 | $4,629 | 64.2% | | (Loss) income from operations | $(1,943) | $1,982 | $(3,925) | -198.0% | $(4,589) | $4,869 | $(9,458) | -194.2% | | Net (loss) income | $(1,037) | $1,612 | $(2,649) | -164.3% | $(3,609) | $3,886 | $(7,495) | -192.9% | | Net (loss) income per share – basic | $(0.06) | $0.10 | $(0.16) | -160.0% | $(0.22) | $0.24 | $(0.46) | -191.7% | | Net (loss) income per share – diluted | $(0.06) | $0.10 | $(0.16) | -160.0% | $(0.22) | $0.24 | $(0.46) | -191.7% | [Condensed Consolidated Statements of Stockholders' Equity (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(unaudited)) Changes in Stockholders' Equity (in thousands, except shares) | Item | December 31, 2024 | March 31, 2025 | June 30, 2025 | | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $169 | $169 | $169 | | Additional Paid-In Capital | $45,795 | $45,874 | $45,941 | | Treasury Stock (Amount) | $(3,571) | $(3,871) | $(3,871) | | Retained Earnings | $13,434 | $10,862 | $9,825 | | Total Stockholders' Equity | $55,827 | $53,034 | $52,064 | - During the six months ended June 30, 2025, the company recorded a **net loss of $3,609 thousand**, which reduced retained earnings. Stock-based compensation added **$151 thousand** to additional paid-in capital[18](index=18&type=chunk) - Treasury stock increased by **$300 thousand** due to repurchases of **50,360 shares** during the six months ended June 30, 2025[18](index=18&type=chunk)[82](index=82&type=chunk) [Condensed Consolidated Statements of Cash Flows (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $440 | $(3,957) | $4,397 | | Net cash used in investing activities | $(34) | $(236) | $202 | | Net cash (used in) provided by financing activities | $(300) | $17 | $(317) | | Net increase (decrease) in cash and cash equivalents | $106 | $(4,176) | $4,282 | | Cash and cash equivalents – end of period | $22,162 | $18,972 | $3,190 | - Operating cash flow significantly improved, shifting from a **$4.0 million** usage in H1 2024 to a **$0.4 million** provision in H1 2025, primarily due to a **$7.1 million** decrease in accounts receivable and a **$3.2 million** increase in inventories[21](index=21&type=chunk)[126](index=126&type=chunk) - Financing activities used **$0.3 million** in H1 2025 due to common stock repurchases, compared to **$17 thousand** provided in H1 2024 from stock option exercises[21](index=21&type=chunk)[129](index=129&type=chunk) [Notes to the Condensed Consolidated Financial Statements (unaudited)](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [Note 1 — Organization and Summary of Significant Accounting Policies](index=8&type=section&id=Note%201%20%E2%80%94%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) [Description of the Business](index=8&type=section&id=Description%20of%20the%20Business) - Sensus Healthcare, Inc. manufactures radiation therapy devices for healthcare providers globally[22](index=22&type=chunk) - In 2024, the company formed Sensus Healthcare Services, LLC, a wholly owned subsidiary providing operational healthcare services, including leased equipment and radiation oncology/physics oversight for dermatology clinics[23](index=23&type=chunk) [Basis of Presentation and Principles of Consolidation](index=8&type=section&id=Basis%20of%20Presentation%20and%20Principles%20of%20Consolidation) - Financial statements are prepared in accordance with GAAP for interim information, consolidating subsidiaries, and eliminating intercompany transactions[24](index=24&type=chunk)[25](index=25&type=chunk) [Use of Estimates](index=8&type=section&id=Use%20of%20Estimates) - Management makes estimates and assumptions affecting reported amounts in financial statements, with actual results potentially differing[27](index=27&type=chunk) [Revenue Recognition](index=8&type=section&id=Revenue%20Recognition) - Revenue is derived from device sales and related maintenance/repair services, recognized upon transfer of control of goods or services[28](index=28&type=chunk)[30](index=30&type=chunk) Disaggregated Revenue (in thousands) | Revenue Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Product Revenue - recognized at a point in time | $5,390 | $8,074 | $12,098 | $17,566 | | Product Revenue - recognized over time | $358 | $0 | $557 | $0 | | Service Revenue - recognized at a point in time | $726 | $367 | $1,350 | $739 | | Service Revenue - recognized over time | $841 | $798 | $1,654 | $1,597 | | Total Revenue | $7,315 | $9,239 | $15,659 | $19,902 | - Deferred revenue for service contracts expected to be recognized in the future totals **$480 thousand** as of June 30, 2025, with **$348 thousand** in H2 2025, **$122 thousand** in 2026, and **$10 thousand** in 2027[37](index=37&type=chunk)[38](index=38&type=chunk) [Concentration](index=10&type=section&id=Concentration) - One U.S. customer accounted for **56%** and **83%** of revenue for the three months ended June 30, 2025 and 2024, respectively, and **63%** and **77%** for the six months ended June 30, 2025 and 2024, respectively[41](index=41&type=chunk) - This same customer represented **78%** and **86%** of accounts receivable as of June 30, 2025 and December 31, 2024, respectively[41](index=41&type=chunk) [Geographical Information](index=10&type=section&id=Geographical%20Information) Total Revenue by Country (in thousands) | Country | 3 Months Ended June 30, 2025 | % | 3 Months Ended June 30, 2024 | % | 6 Months Ended June 30, 2025 | % | 6 Months Ended June 30, 2024 | % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | United States | $6,712 | 92% | $8,667 | 94% | $14,863 | 95% | $19,146 | 96% | | China | $587 | 8% | $572 | 6% | $763 | 5% | $727 | 4% | | Other | $16 | 0% | $0 | 0% | $33 | 0% | $29 | 0% | | Total Revenue | $7,315 | 100% | $9,239 | 100% | $15,659 | 100% | $19,902 | 100% | [Fair Value of Financial Instruments](index=11&type=section&id=Fair%20Value%20of%20Financial%20Instruments) - Carrying amounts of cash equivalents, accounts receivable, accounts payable, and the revolving credit facility approximate fair value due to their relatively short maturities[45](index=45&type=chunk) [Fair Value Measurements](index=11&type=section&id=Fair%20Value%20Measurements) - The company uses a fair value hierarchy (Level 1, 2, 3) that prioritizes inputs to valuation approaches, with Level 1 being quoted prices in active markets for identical assets/liabilities and Level 3 being unobservable inputs[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [Cash and Cash Equivalents](index=11&type=section&id=Cash%20and%20Cash%20Equivalents) - 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[49](index=49&type=chunk) [Accounts Receivable](index=11&type=section&id=Accounts%20Receivable) - The allowance for expected credit losses remained at **$0.1 million** as of June 30, 2025, and December 31, 2024[50](index=50&type=chunk) - Credit loss expense was **$0** for the three and six months ended June 30, 2025, compared to **$42 thousand** for the same periods in 2024[50](index=50&type=chunk) [Inventories](index=12&type=section&id=Inventories) - Inventories consist of finished product and components, stated at the lower of cost or net realizable value, determined using the first-in, first-out method[51](index=51&type=chunk) [Earnings Per Share](index=12&type=section&id=Earnings%20Per%20Share) Net (Loss) Income Per Share (in thousands, except per share data) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(1,037) | $1,612 | $(3,609) | $3,886 | | Weighted average shares – basic | 16,320 | 16,298 | 16,331 | 16,297 | | Net (loss) income per share - basic | $(0.06) | $0.10 | $(0.22) | $0.24 | | Weighted average shares – diluted | 16,320 | 16,333 | 16,331 | 16,326 | | Net (loss) income per share - diluted | $(0.06) | $0.10 | $(0.22) | $0.24 | - Diluted net loss per share for the three and six months ended June 30, 2025, excludes dilutive effects of stock options and restricted stock awards because their inclusion would be antidilutive due to the net loss[52](index=52&type=chunk) [Leases](index=12&type=section&id=Leases) - The company evaluates arrangements at inception to determine if they are or contain a lease, recognizing operating lease assets and liabilities based on the present value of lease payments[53](index=53&type=chunk) - For leases where the company is the lessor, lease income is recognized on a straight-line basis over the lease term, and non-lease components are accounted for separately or combined based on criteria[55](index=55&type=chunk)[57](index=57&type=chunk) [Income Taxes](index=13&type=section&id=Income%20Taxes) - Deferred tax assets and liabilities are recognized for future tax consequences of events, with a valuation allowance recorded if realization is not probable[59](index=59&type=chunk) - Uncertain tax positions are recognized only if more likely than not to be sustained upon examination by taxing authorities[60](index=60&type=chunk) [Recent Accounting Pronouncements](index=13&type=section&id=Recent%20Accounting%20Pronouncements) - The company is evaluating ASU 2023-09 (Income Taxes) for enhanced transparency in income tax disclosures, effective for fiscal years beginning after December 15, 2024[61](index=61&type=chunk) - ASU 2024-01 (Compensation - Stock Compensation) clarifies scope application for profits interest awards but is not expected to have a significant impact on the company's financial statements[62](index=62&type=chunk) - The company is evaluating ASU 2024-03 (Income Statement - Expense Disaggregation Disclosures) for its potential impact, effective for annual reporting periods beginning after December 15, 2026[63](index=63&type=chunk) [Note 2 — Property and Equipment](index=14&type=section&id=Note%202%20%E2%80%94%20Property%20and%20Equipment) Property and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Operations equipment | $968 | $940 | | Equipment leased to customers | $2,357 | $1,597 | | Tradeshow and demo equipment | $1,184 | $1,184 | | Computer equipment | $175 | $168 | | Research and development equipment | $100 | $0 | | Subtotal | $4,784 | $3,889 | | Construction in progress | $228 | $228 | | Less accumulated depreciation | $(2,298) | $(2,120) | | Property and Equipment, Net | $2,714 | $1,997 | - Depreciation expense was **$99 thousand** for the three months ended June 30, 2025 (vs. **$31 thousand** in 2024) and **$185 thousand** for the six months ended June 30, 2025 (vs. **$101 thousand** in 2024)[64](index=64&type=chunk) [Note 3 — Debt](index=15&type=section&id=Note%203%20%E2%80%94%20Debt) - The company has a revolving credit facility with Comerica Bank, amended in October 2024, increasing maximum borrowings to **$15 million** (previously **$10 million**)[66](index=66&type=chunk) - Interest on borrowings is SOFR plus **2.50%** (**6.95%** at June 30, 2025), due upon demand, and secured by all company assets[66](index=66&type=chunk) - The company was in compliance with financial covenants as of June 30, 2025, and December 31, 2024, with no outstanding borrowings[67](index=67&type=chunk) [Note 4 — Product Warranties](index=15&type=section&id=Note%204%20%E2%80%94%20Product%20Warranties) Changes in Product Warranty Liability (in thousands) | Item | Amount | | :--- | :--- | | Balance, December 31, 2024 | $329 | | Warranties accrued during the period | $138 | | Payments on warranty claims | $(200) | | Balance, June 30, 2025 | $267 | [Note 5 — Leases](index=15&type=section&id=Note%205%20%E2%80%94%20Leases) [Operating Lease Agreements](index=15&type=section&id=Operating%20Lease%20Agreements) - The company leases its headquarters office until September 2027 and entered into a sublease for an adjacent office space in January 2025, also ending in September 2027[69](index=69&type=chunk) Maturity of Operating Lease Liability (in thousands) as of June 30, 2025 | Year | Amount | | :--- | :--- | | 2025 (July 1 - December 31, 2025) | $138 | | 2026 | $281 | | 2027 | $214 | | Total undiscounted operating leases payments | $633 | | Present Value of Operating Lease Liability | $595 | - Weighted-average remaining lease term is **2.25 years**, and the weighted-average discount rate is **5.32%**[71](index=71&type=chunk) [Lessor Accounting](index=16&type=section&id=Lessor%20Accounting) - Sensus Healthcare Services, LLC leases superficial radiotherapy equipment to dermatology clinics, typically with initial **60-month** terms and one-year automatic renewals[73](index=73&type=chunk) Lease Income - Operating Leases (in thousands) | Lease Income Type | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :--- | :--- | :--- | | Fixed payments | $64 | $128 | | Variable payments | $294 | $429 | | Total | $358 | $557 | Future Minimum Fixed Lease Payments to be Received (in thousands) as of June 30, 2025 | Year | Amount | | :--- | :--- | | 2025 (July 1 - December 31, 2025) | $128 | | 2026 | $256 | | 2027 | $256 | | 2028 | $256 | | 2029 | $256 | | Thereafter | $87 | | Total | $1,239 | [Note 6 – Commitments and Contingencies](index=17&type=section&id=Note%206%20%E2%80%93%20Commitments%20and%20Contingencies) [Manufacturing Agreement](index=17&type=section&id=Manufacturing%20Agreement) - The company has a contract manufacturing agreement for SRT-100 devices, which renews annually unless terminated with **60 days'** notice[77](index=77&type=chunk) - Prepayments for finished goods were **$1.3 million** (Q2 2025) and **$4.9 million** (H1 2025), with **$2.7 million** in prepaid inventory as of June 30, 2025[78](index=78&type=chunk) [Legal Contingencies](index=17&type=section&id=Legal%20Contingencies) - The Department of Justice is investigating the billing practices of a physician using the SRT-100, considering expanding the investigation to Sensus Healthcare[80](index=80&type=chunk) - Sensus disputes any wrongdoing, as it does not submit claims or provide billing advice, and believes it has strong defenses if legal action is pursued. The cost, if any, is currently unestimable[80](index=80&type=chunk) [Note 7 — Stockholders' Equity](index=17&type=section&id=Note%207%20%E2%80%94%20Stockholders%27%20Equity) [Preferred Stock](index=17&type=section&id=Preferred%20Stock) - The company has authorized **5,000,000 shares** of preferred stock, but no shares were issued or outstanding at June 30, 2025, or December 31, 2024[81](index=81&type=chunk) [Treasury Stock](index=18&type=section&id=Treasury%20Stock) - Treasury stock includes shares surrendered by employees for tax withholding and shares repurchased in open market transactions. No shares were surrendered for tax withholding in Q2 2025 or H1 2025[82](index=82&type=chunk) - The company repurchased **50,360 shares** in open market transactions during the six months ended June 30, 2025, but none in Q2 2025 or Q2 2024[82](index=82&type=chunk) [Note 8 — Equity-based Compensation](index=18&type=section&id=Note%208%20%E2%80%94%20Equity-based%20Compensation) [2016 and 2017 Equity Incentive Plans](index=18&type=section&id=2016%20and%202017%20Equity%20Incentive%20Plans) - As of June 30, 2025, **200,223 shares** were available to be granted under the Plans (vs. **195,223** at December 31, 2024)[83](index=83&type=chunk) - On December 17, 2024, **100,000 shares** were issued to employees and directors at **$7.78** per share, with vesting periods ranging from immediate to **four years**[85](index=85&type=chunk) [Restricted Stock](index=18&type=section&id=Restricted%20Stock) Restricted Stock Activity (Six Months Ended June 30, 2025) | Item | Restricted Stock (Shares) | Weighted Average Grant Date Fair Value | | :--- | :--- | :--- | | Outstanding at December 31, 2024 | 135,000 | $7.04 | | Vested | (10,000) | $2.65 | | Forfeited | (5,000) | $6.40 | | Outstanding at June 30, 2025 | 120,000 | $7.44 | - Stock compensation expense related to restricted stock was **$72 thousand** for Q2 2025 (vs. **$66 thousand** in Q2 2024) and **$151 thousand** for H1 2025 (vs. **$158 thousand** in H1 2024)[88](index=88&type=chunk) - Unrecognized stock compensation expense was **$0.7 million** as of June 30, 2025, to be recognized over a weighted-average period of **3.0 years**[88](index=88&type=chunk) [Stock Options](index=19&type=section&id=Stock%20Options) Stock Options Activity (After December 31, 2024) | Item | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (In Years) | | :--- | :--- | :--- | :--- | | Outstanding - December 31, 2024 | 77,550 | $5.55 | 3.08 | | Outstanding - June 30, 2025 | 77,550 | $5.55 | 2.58 | | Exercisable - June 30, 2025 | 77,550 | $5.55 | 2.58 | - No stock compensation expense related to stock options was incurred for the three and six months ended June 30, 2025 and 2024[90](index=90&type=chunk) [Note 9 — Income Taxes](index=19&type=section&id=Note%209%20%E2%80%94%20Income%20Taxes) Income Tax (Benefit) Expense and Effective Tax Rates | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Income tax (benefit) expense (in thousands) | $(723) | $579 | $(613) | $1,406 | | Effective tax rate | 41.1% | 26.4% | 14.5% | 26.6% | - The increase in the effective tax rate for Q2 2025 (**41.1%** vs. **26.4%**) was primarily due to the reversal of a negative effective tax rate from Q1 2025, as the projected full-year tax liability began to exceed estimated tax credits[95](index=95&type=chunk) - The decrease in the effective tax rate for H1 2025 (**14.5%** vs. **26.6%**) was primarily due to an increase in estimated tax credits expected to be generated and utilized[95](index=95&type=chunk) [Note 10 — Segment Reporting](index=20&type=section&id=Note%2010%20%E2%80%94%20Segment%20Reporting) - The company operates as a single reportable segment, focusing on selling medical devices for skin conditions using SRT technology and providing related services[97](index=97&type=chunk) - The CEO serves as the operating decision-maker, assessing performance and making decisions based on net income, revenue, and gross profit[98](index=98&type=chunk) [Note 11 — Subsequent Events](index=20&type=section&id=Note%2011%20%E2%80%94%20Subsequent%20Events) - The company did not identify any subsequent events that would have required adjustment to or disclosure in the condensed consolidated financial statements up to the date of issuance[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, condition, liquidity, capital resources, and factors impacting future outlook [Overview](index=21&type=section&id=Overview) - Sensus Healthcare, Inc. is a medical device company specializing in non-invasive, cost-effective treatments for oncological and non-oncological skin conditions using proprietary superficial radiation therapy (SRT) technology[101](index=101&type=chunk) - The company's portfolio includes SRT-100, SRT-100+, and SRT-100 Vision devices, which have been used to treat hundreds of thousands of patients globally[101](index=101&type=chunk) [Segment Information](index=21&type=section&id=Segment%20Information) - The company manages its business globally within one reportable segment, consistent with how management views the business and allocates resources[102](index=102&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) [Three months ended June 30, 2025 compared to the three months ended June 30, 2024](index=21&type=section&id=Three%20months%20ended%20June%2030%2C%202025%20compared%20to%20the%20three%20months%20ended%20June%2030%2C%202024) - Revenues decreased by **$1.9 million** (**20.7%**) to **$7.3 million**, primarily due to lower unit sales to a large customer[104](index=104&type=chunk) - Cost of sales increased by **$0.6 million** (**15.8%**) to **$4.4 million**, driven by higher servicing costs and a new placement program[105](index=105&type=chunk) - Gross profit decreased by **$2.5 million** (**46.3%**) to **$2.9 million**, with the gross profit percentage falling to **39.7%** from **58.7%**[106](index=106&type=chunk) - Total operating expenses increased significantly: General and administrative by **$0.4 million** (**25.0%**) due to higher professional fees and compensation; Selling and marketing by **$0.4 million** (**40.0%**) due to tradeshows, clinical studies, and headcount; Research and development by **$0.6 million** (**66.7%**) for next-generation systems[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Six months ended June 30, 2025 compared to the six months ended June 30, 2024](index=22&type=section&id=Six%20months%20ended%20June%2030%2C%202025%20compared%20to%20the%20six%20months%20ended%20June%2030%2C%202024) - Revenues decreased by **$4.2 million** (**21.1%**) to **$15.7 million**, primarily due to lower unit sales to a large customer[112](index=112&type=chunk) - Cost of sales increased by **$0.6 million** (**7.7%**) to **$8.4 million**, driven by higher servicing costs and a new placement program[113](index=113&type=chunk) - Gross profit decreased by **$4.8 million** (**39.7%**) to **$7.3 million**, with the gross profit percentage falling to **46.5%** from **60.8%**[114](index=114&type=chunk) - Total operating expenses increased significantly: General and administrative by **$1.0 million** (**31.3%**) due to higher professional fees and compensation; Selling and marketing by **$1.3 million** (**56.5%**) due to tradeshows, clinical studies, and headcount; Research and development by **$2.3 million** (**127.8%**) due to lobbying costs for billing code reimbursement, increased headcount, and next-generation product development[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Financial Condition](index=23&type=section&id=Financial%20Condition) [Assets](index=23&type=section&id=Assets) - Cash and cash equivalents increased by **$0.1 million** to **$22.2 million** at June 30, 2025[120](index=120&type=chunk) - Accounts receivable decreased by **$7.1 million** to **$12.6 million**, mainly due to lower sales and extended payment terms with the primary customer[121](index=121&type=chunk) - Inventories increased by **$2.3 million** to **$12.4 million**, in anticipation of increasing future sales[121](index=121&type=chunk) [Liabilities](index=23&type=section&id=Liabilities) - There were no borrowings outstanding under the revolving line of credit with Comerica Bank at June 30, 2025, or December 31, 2024[122](index=122&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes its cash equivalents, borrowing capacity, and access to capital are sufficient to meet operating and funding requirements for the next **12 months**[123](index=123&type=chunk) - Funding for the six months ended June 30, 2025, primarily came from equipment sales. Short-term capital needs include expanding sales, marketing, and R&D activities[123](index=123&type=chunk)[127](index=127&type=chunk) - The company received **$0.3 million** in Employee Retention Credits (ERC) in Q2 2025 and **$0.2 million** in Q4 2024, recorded against payroll expenses[123](index=123&type=chunk) [Cash flows](index=24&type=section&id=Cash%20flows) [Cash flows from operating activities](index=24&type=section&id=Cash%20flows%20from%20operating%20activities) - Net cash provided by operating activities was **$0.4 million** for H1 2025, a significant improvement from **$4.0 million** used in H1 2024[126](index=126&type=chunk) - The improvement was primarily driven by a **$7.1 million** decrease in accounts receivable and a **$3.2 million** increase in inventories in H1 2025[126](index=126&type=chunk) [Cash flows from investing activities](index=25&type=section&id=Cash%20flows%20from%20investing%20activities) - Net cash used in investing activities was **$34 thousand** for H1 2025, primarily for property and equipment purchases, a decrease from **$0.2 million** used in H1 2024[128](index=128&type=chunk) [Cash flows from financing activities](index=25&type=section&id=Cash%20flows%20from%20financing%20activities) - Net cash used in financing activities was **$0.3 million** for H1 2025, reflecting common stock repurchases, compared to **$17 thousand** provided in H1 2024 from stock option exercises[129](index=129&type=chunk) [Inflation](index=25&type=section&id=Inflation) - The company experienced continued increases in commodity, shipping, energy, and labor costs during Q1 and Q2 2025, leading to inflationary pressures[130](index=130&type=chunk) - Actions are being taken, such as ordering inventory in advance, to minimize the effects of inflation on product cost and sales[130](index=130&type=chunk) [Indebtedness](index=25&type=section&id=Indebtedness) - Refer to Note 3, Debt, for detailed information regarding the company's revolving credit facility[131](index=131&type=chunk) [Contractual Obligations and Commitments](index=25&type=section&id=Contractual%20Obligations%20and%20Commitments) - Refer to Note 6, Commitments and Contingencies, for detailed information regarding the company's contractual obligations and commitments[132](index=132&type=chunk) [Critical Accounting Policies and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management has identified revenue recognition policies as critical to understanding the financial condition and results of operations, but has not applied any critical accounting estimates[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No quantitative or qualitative disclosures about market risk are applicable to the company for the reported period - This item is not applicable to the company for the reported period[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of disclosure controls and procedures and reports on internal control changes [Evaluation of Disclosure Control and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Control%20and%20Procedures) - Management, including the CEO and CFO, concluded that the company maintained effective disclosure controls and procedures as of June 30, 2025[135](index=135&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There have been no significant changes in internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[136](index=136&type=chunk) [PART II – Other Information](index=26&type=section&id=PART%20II%20%E2%80%93%20Other%20Information) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to detailed disclosures on legal proceedings and contingencies in the financial statement notes - The company is party to certain legal proceedings in the ordinary course of business. Refer to Note 6, Commitments and Contingencies, for further details[138](index=138&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the annual and quarterly reports for a comprehensive discussion of material risk factors - Readers should carefully consider the risk factors discussed in Part I, Item 1A. 'Risk Factors' in the 2024 Annual Report, as updated in subsequent quarterly reports[139](index=139&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales or purchases of equity securities occurred during the three months ended June 30, 2025 - There were no unregistered sales of securities during the three months ended June 30, 2025[140](index=140&type=chunk) - There were no purchases of equity securities by the registrant and affiliated purchasers during the three months ended June 30, 2025[142](index=142&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reported period - There were no defaults upon senior securities[143](index=143&type=chunk) [Item 4. Mine Safety Disclosure](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) Mine safety disclosure requirements are not applicable to the company - This item is not applicable to the company[144](index=144&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - None of the company's directors or officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[145](index=145&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including CEO/CFO certifications and XBRL documents Exhibit Index | Exhibit No. | Description | | :--- | :--- | | 31.1* | Certification of Joseph C. Sardano, Chairman and Chief Executive Officer | | 31.2* | Certification of Javier Rampolla, Chief Financial Officer | | 32.1* | Certification of Joseph C. Sardano, Chairman and Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350 | | 32.2* | Certification of Javier Rampolla, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350 | | 101.INS* | Inline XBRL Instance Document | | 104.* | Cover Page Interactive Data File | [Signatures](index=28&type=section&id=Signatures) This section contains required signatures from the CEO and CFO, certifying the filing of the report - The report is duly signed on behalf of Sensus Healthcare, Inc. by Joseph C. Sardano, Chief Executive Officer, and Javier Rampolla, Chief Financial Officer, on August 12, 2025[150](index=150&type=chunk)[152](index=152&type=chunk)