Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the information set forth within the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and with our Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2025 Annual Report.

Overview

Sensus Healthcare, Inc. (together, with its subsidiaries, Sensus Medical Devices Ltd. and Sensus Healthcare Services, LLC, unless the context otherwise indicates, "Sensus," "we," "us," "our," or the "Company") is a medical device company committed to providing highly effective, non-invasive treatments for non-melanoma skin cancer and post-surgical keloid scar prevention. The Company uses a proprietary low-energy X-ray technology known as superficial radiation therapy ("SRT"), which is based on decades of dedicated research and development, and has successfully incorporated SRT into a portfolio of treatment devices: the SRT-100^TM, SRT-100+^TM and SRT-100 Vision^TM. To date, SRT technology has been used to effectively and safely treat oncological and non-oncological skin conditions of close to one-million patients around the world.

Our business was organized in 2010 and the Company, incorporated in Delaware, completed its initial public offering in 2016. 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 offerings to dermatology clinics in the form of equipment, radiation oncology and physicist oversight, and on-site device operation by radiotherapy technologists. The term the Company uses for this service model is the "Fair Deal Agreement."

Segment Information

The Company manages its business globally within one reportable segment, which is consistent with how our management views the business, prioritizes investment and resource allocation decisions, and assesses operating performance.

Results of Operations

		For the Three Months Ended
		March 31,
(in thousands, except shares and per share data)		2026				2025
Revenues		$	3,394			$	8,344
Cost of sales			2,403				3,990
Gross profit			991				4,354
Operating expenses
General and administrative			2,043				2,208
Selling and marketing			1,716				2,186
Research and development			1,590				2,606
Total operating expenses			5,349				7,000
Loss from operations			(4,358	)			(2,646	)
Other income:
Interest income, net			125				184
Other income, net			125				184
Loss before income tax			(4,233	)			(2,462	)
(Benefit from) provision for income taxes			(1,607	)			110
Net loss		$	(2,626	)		$	(2,572	)

Three months ended March 31, 2026 compared to the three months ended March 31, 2025

Revenues. Revenues were $3.4 million for the three months ended March 31, 2026 compared to $8.3 million for the three months ended March 31, 2025, a decrease of $4.9 million, or 59.0%. The decrease in revenue was primarily driven by a lower number of units sold (10 in the three months ended March 31, 2026, compared to 21 in the three months ended March 31, 2025), reflecting no units sold in the current period to a historically large customer. In addition, some systems placed during the quarter were under Fair Deal Agreement program and rental arrangements, for which revenue is recognized over the term of the agreement rather than at the time of shipment.

Cost of sales. Cost of sales was $2.4 million for the three months ended March 31, 2026 compared to $4.0 million for the three months ended March 31, 2025, a decrease of $1.6 million, or 40%. The decrease in cost of sales was primarily related to lower number of units sold.

Gross profit. Gross profit was $1.0 million for the three months ended March 31, 2026 compared to $4.4 million for the three months ended March 31, 2025, a decrease of $3.4 million, or 77.3%. Our overall gross profit percentage was 29.4% in the three months ended March 31, 2026 compared to 53.0% in the corresponding period in 2025. The decrease in gross profit and margin was primarily driven by product mix, including a higher proportion of international shipments, which carry lower average selling prices, and costs associated with new system placements pursuant to the Fair Deal Agreement program, which are recognized upfront while related revenue is recognized over the term of the applicable agreement.

General and administrative. General and administrative expense was $2.0 million for the three months ended March 31, 2026 compared to $2.2 million for the three months ended March 31, 2025, a decrease of $0.2 million, or 9.1%. The net decrease in general and administrative expense was primarily due to lower professional fees.

Selling and marketing. Selling and marketing expense was $1.7 million for the three months ended March 31, 2026 compared to $2.2 million for the three months ended March 31, 2025, a decrease of $0.5 million, or 22.7%. The decrease was primarily driven by an decrease in tradeshow expenses.

Research and development. Research and development expense was $1.6 million for the three months ended March 31, 2026 compared to $2.6 million for the three months ended March 31, 2025, a decrease of $1.0 million, or 42%. The decrease was primarily due to the decrease in lobbying costs related to billing code reimbursement, decreased headcount, and decrease in product development costs related to next generation systems.

Other income. Other income of $0.1 and $0.2 million for the three months ended March 31, 2026 and 2025, respectively, relates primarily to interest income.

Income taxes. The effective tax rates for the three months ended March 31, 2026 and 2025 were 37.9% and (4.5%), respectively. The increase in the effective tax rate for the three months ended March 31, 2026 compared to the prior period was primarily due to projected full year income and a decrease in the estimated tax credits that are expected to be generated and utilized in proportion to the amount of pretax profit.

The Company evaluates the realizability of its deferred tax assets on a quarterly basis, considering both positive and negative evidence in accordance with ASC 740. A key component of this assessment is the Company's recent cumulative earnings history. As of March 31, 2026, the Company has generated cumulative pre-tax income over the most recent three-year period, which represents significant positive evidence supporting the realizability of its deferred tax assets.

However, the Company's operating results have historically exhibited seasonality, with variability in revenue and profitability across interim periods driven in part by the timing of equipment sales and customer purchasing patterns. This seasonality can result in fluctuations in quarterly and annual earnings and introduces additional uncertainty into projections of future taxable income.

Management continues to monitor all available evidence, including recent operating results, forecasts of future profitability, and the impact of business trends, in assessing the need for a valuation allowance. While management currently believes it is more likely than not that its deferred tax assets are realizable (excluding certain foreign net operating losses), changes in the Company's operating performance, including the continuation or worsening of seasonal variability or declines in revenue, could impact this conclusion in future periods and may result in the recording of a valuation allowance, which could materially affect the Company's results of operations.

Financial Condition

The following discussion summarizes significant changes in assets and liabilities. Please see the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025 contained in Part I, Item 1 of this filing.

Assets

Cash and cash equivalents were $18.3 million at March 31, 2026 compared to $22.1 million at December 31, 2025, a decrease of $3.8 million. See Cash Flows for details on the change in cash and cash equivalents during the three months ended March 31, 2026.

Accounts receivable was $3.6 million at March 31, 2026 compared to $6.0 million at December 31, 2025, a decrease of $2.4 million. The decrease was primarily due to the decrease in sales and concentration of sales to the Company's historically large customer, which have historically been subject to extended payment terms.

Inventories were $16.5 million at March 31, 2026 compared to $14.6 million at December 31, 2025, an increase of $1.9 million. The increase was primarily due to the anticipation of increasing future sales.

Liabilities

There were no borrowings outstanding under our revolving line of credit with Comerica Bank at March 31, 2026 and December 31, 2025.

Liquidity and Capital Resources

In general terms, liquidity is a measurement of the Company's ability to meet its cash needs. For the three months ended March 31, 2026, funding was derived primarily from cash generated by the sale of equipment to our customers in the ordinary course of business and existing cash reserves. The Company believes that proceeds from maturing cash equivalents, as well as cash on hand are sufficient to meet operating capital and funding requirements for the next 12 months from the date this Quarterly Report was issued. The Company's liquidity position and capital requirements may be impacted by a number of factors, including the following:

●

ability to generate and increase revenue;

●

fluctuations in gross margins, operating expenses and net results; and

●

financial market instability or disruptions to the banking system due to bank failures

The Company's primary short-term capital needs, which are subject to change, include expenditures related to:

●

expansion of sales and marketing activities; and

●

expansion of research and development activities.

Sensus's management regularly evaluates cash requirements for current operations, commitments, capital requirements and business development transactions, and may seek to raise additional funds for these purposes in the future. However, there can be no assurance that it will be able to raise such funds or the terms on which such funds may be raised, if at all.

Cash flows

The following table provides a summary of cash flows for the periods indicated:

		For the Three Months Ended
		March 31,
(in thousands)		2026				2025
Net cash provided by (used in):
Operating activities		$	(3,753	)		$	(2,677	)
Investing activities			(3	)			(7	)
Financing activities			-				(300	)
Total		$	(3,756	)		$	(2,984	)

Cash flows from operating activities

Net cash used in operating activities was $3.8 million for the three months ended March 31, 2026, consisting of net loss of $2.6 million and non-cash activity of $1.3 million, offset by a decrease in net operating liabilities of $0.1 million. Cash flows used in operating activities primarily include the receipt of revenues offset by the payment of operating expenses incurred in the normal course of business. Non-cash items consisted of stock-based compensation expense, deferred income taxes, provision for product warranties, amortization of right-of-use asset, and depreciation of property and equipment. Net cash used in operating activities was $2.7 million for the three months ended March 31, 2025, consisting of net loss of $2.6 million and an increase in net operating assets of $0.5 million, offset by non-cash charges of $0.4 million. Cash flows used in operating activities primarily include the receipt of revenues offset by the payment of operating expenses incurred in the normal course of business. Non-cash items consisted of stock-based compensation expense, provision for product warranties, amortization of right-of-use asset and depreciation of property and equipment.

Cash flows from investing activities

Net cash used in investing activities for the three months ended March 31, 2026 reflected $3 thousand of purchases of property and equipment. Net cash used in investing activities for the three months ended March 31, 2025 reflected $7 thousand of purchases of property and equipment.

Cash flows from financing activities

No cash was used in financing activities for the three months ended March 31, 2026. Net cash used in financing activities for the three months ended March 31, 2025 reflected $0.3 million of repurchases of common stock.

Inflation

During the first quarter of 2026, we continued to experience some increase in commodity and shipping prices and energy and labor costs which resulted in minor inflationary pressures across various parts of our business and operations, including on our customers, partners, and suppliers. We continue to monitor the impact of inflation and we are taking actions, such as ordering inventory in advance, to minimize its effects on our product cost and sales.

Indebtedness

Please see Note 3, Debt, to the condensed consolidated financial statements.

Contractual Obligations and Commitments

Please see Note 6, Commitments and Contingencies, to the condensed consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. Management has not applied any critical accounting estimates but has identified revenue recognition policies as critical to understanding the Company's financial condition and results of operations. For a detailed discussion on the application of these and other accounting policies, see the Note 1, Organization and Summary of Significant Accounting Policies to the consolidated financial statements included in the 2025 Annual Report for further information.