UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
1934 For the transition period from______________to _____________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an “emerging growth company.” See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As
of August 4, 2023,
SENSUS HEALTHCARE, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
i
INTRODUCTORY NOTE
Caution Concerning Forward-Looking Statements
This report includes statements that are, or may be deemed, “forward-looking statements.” In some cases, these statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately,” or “potential,” or negative or other variations of those terms or comparable terminology, although not all forward-looking statements contain these words.
Forward-looking statements involve risks and uncertainties because they relate to events, developments, and circumstances relating to Sensus Healthcare, Inc., our industry, and/or general economic or other conditions that may or may not occur in the future or may occur on longer or shorter timelines or to a greater or lesser degree than anticipated. In addition, even if future events, developments and circumstances are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward looking statements contained in this report as a result of the following factors, among others: the level and availability of government and/or third party payor reimbursement for clinical procedures using our products, and the willingness of healthcare providers to purchase our products if the level of reimbursement declines; the regulatory requirements applicable to us and our competitors; our ability to efficiently manage our manufacturing processes and costs; concentration of our customers in the U.S. and China, including the concentration of sales to one particular customer in the U.S; the risks arising from doing business in China and other foreign countries; legislation, regulation, or other governmental action that affects our products, taxes, international trade regulation, or other aspects of our business; the performance of the Company’s information technology systems and its ability to maintain data security; our ability to obtain and maintain the intellectual property needed to adequately protect our products, and our ability to avoid infringing or otherwise violating the intellectual property rights of third parties; and other risks described from time to time in our filings with the Securities and Exchange Commission.
To date, the Russian invasion of Ukraine and global geopolitical uncertainty have not had significant impacts on our business, but we continue to monitor developments and will address them in future disclosures, if applicable.
Any forward-looking statements that we make in this report speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this report, except as may be required by applicable law.
ii
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SENSUS HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| As
of June 30, | As
of December 31, | |||||||
| (in thousands, except shares and per share data) | 2023 | 2022 | ||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangibles, net | ||||||||
| Deposits | ||||||||
| Deferred tax asset | ||||||||
| Operating lease right-of-use asset, net | ||||||||
| Other noncurrent asset | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Product warranties | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Income tax payable | ||||||||
| Deferred revenue, current portion | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities | ||||||||
| Deferred revenue, net of current portion | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
1
SENSUS HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands, except shares and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Gain on sale of assets | - | - | ||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | - | ( | ) | - | ( | ) | ||||||||||
| Other income, net | ||||||||||||||||
| Income (loss) before income tax | ( | ) | ( | ) | ||||||||||||
| Provision for (benefit from) income taxes | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net income (loss) per share – basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average number of shares used in computing net income (loss) per share – basic | ||||||||||||||||
| diluted | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
2
SENSUS HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
| Retained | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In | Treasury Stock | Earnings (Accumulated | |||||||||||||||||||||||||
| (in thousands, except shares) | Shares | Amount | Capital | Shares | Amount | Deficit) | Total | |||||||||||||||||||||
| December 31, 2021 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Surrender of shares for tax withholding on stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| March 31, 2022 (unaudited) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Stock repurchase | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| June 30, 2022 (unaudited) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| December 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||
| Forfeiture of restricted stock units | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Surrender of shares for tax withholding on stock-based compensation | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| March 31, 2023 (unaudited) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Forfeiture of restricted stock units | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| June 30, 2023 (unaudited) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
SENSUS HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on sale of assets | ( | ) | ||||||
| Provision for product warranties | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Decrease (increase) in: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Deposits | ||||||||
| Prepaid and other current assets | ( | ) | ( | ) | ||||
| Other noncurrent asset | ||||||||
| Increase (decrease) in: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ||||||
| Income tax payable | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Product warranties | ( | ) | ( | ) | ||||
| Total adjustments | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities | ||||||||
| Acquisition of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of assets | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Repurchase of common stock | ( | ) | ||||||
| Withholding taxes on stock-based compensation | ( | ) | ( | ) | ||||
| Repayment of loan payable | ( | ) | ||||||
| Exercise of stock options | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents – beginning of period | ||||||||
| Cash and cash equivalents – end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income tax paid | $ | $ | ||||||
| Supplemental schedule of noncash investing and financing transactions: | ||||||||
| Operating lease right-of-use asset and lease liability increase from lease modification | $ | $ | ||||||
| Transfer of inventory to property and equipment | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
SENSUS HEALTHCARE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 — Organization and Summary of Significant Accounting Policies
Description of the Business
Sensus Healthcare, Inc. (together, with its subsidiary, unless the context otherwise indicates, “Sensus” or the “Company”) is primarily a manufacturer of radiation therapy devices sold to healthcare providers and distributors globally through its distribution network. The Company operates in one segment from its corporate headquarters located in Boca Raton, Florida.
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 subsidiary. Accounts and transactions between 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 and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.
The condensed consolidated balance sheet as of December 31, 2022 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, 2022 (the “2022 Annual Report”).
Revenue Recognition
The Company’s revenue derives primarily 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 sales 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, only 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 a 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 under 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, it 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.
5
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.
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Product Revenue - recognized at a point in time | $ | $ | $ | $ | ||||||||||||
| Service Revenue - recognized at a point in time | ||||||||||||||||
| Service Revenue - recognized over time | ||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||
The Company operates in a highly regulated environment, primarily in the U.S. dermatology market, in which state regulatory approval is sometimes required before the customer is able to use the product. In cases where such regulatory approval is pending, revenue is deferred until such time as regulatory approval is obtained.
| (in thousands) | Product | Service | Total | |||||||||
| December 31, 2022 | $ | $ | $ | |||||||||
| Revenue recognized | ( | ) | ( | ) | ( | ) | ||||||
| Amounts invoiced | ||||||||||||
| June 30, 2023 | $ | $ | $ | |||||||||
The
Company does not disclose information about remaining performance obligations with original expected durations of one year or less in
connection with deposits for products.
| Year | Service Revenue | |||
| 2023 (July 1 - December 31, 2023) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total | $ | |||
The Company pays commissions for 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.
6
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
Segment and Geographical Information
| For the Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| (in thousands) | 2023 | 2022 | ||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| China | % | % | ||||||||||||||
| Guatemala | % | - | % | |||||||||||||
| Ireland | % | - | % | |||||||||||||
| Other | % | % | ||||||||||||||
| Total Revenue | $ | % | $ | % | ||||||||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| (in thousands) | 2023 | 2022 | ||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| China | % | % | ||||||||||||||
| Guatemala | % | - | % | |||||||||||||
| Ireland | % | - | % | |||||||||||||
| Other | % | % | ||||||||||||||
| Total Revenue | $ | % | $ | % | ||||||||||||
Fair Value of Financial Instruments
Carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate fair value due to their relatively 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 when 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. |
7
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
The Company considers all highly liquid financial instruments with maturities of three months or less when purchased to be cash equivalents.
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 varies by customer, primarily due to the customer’s financial condition. 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 allowance for expected credit
losses was $
Inventories
Inventories
consist of finished product and components and are stated at the lower of cost or net realizable value, determined using the first-in-first-out
method. The Company periodically reviews the value of items in inventory for obsolescence based on its assessment of market conditions
and writes down any obsolete inventory to its net realizable value through a charge to costs of goods sold. The provision for inventory
obsolescence was $
Earnings Per Share
Basic
net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for
the period. Diluted net income per share is computed by giving effect to all potential dilutive common share equivalents outstanding
for the period, using the treasury stock method for options and unvested restricted shares. In periods when the Company has incurred
a net loss, options and unvested shares are considered
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Stock Options | ||||||||||||||||
| Restricted Stock | ||||||||||||||||
| Total | ||||||||||||||||
8
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Basic | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic earnings per share | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Dilutive effects of: | ||||||||||||||||
| Assumed exercise of stock options | ||||||||||||||||
| Restricted stock awards | ||||||||||||||||
| Dilutive shares | ||||||||||||||||
| Diluted earnings per share | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Leases
The Company evaluates arrangements at inception to determine if an arrangement is or contains a lease. The operating lease right-of-use asset (the “ROU asset”) represents the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The ROU asset and operating lease 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 the options. To determine the present value of the lease payment, 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. In addition, the Company has elected available practical expedients to not separate lease and non-lease components for all leased assets and to exclude leases with initial terms of 12 months or less.
The lease payments used to determine the Company’s operating lease asset may include lease incentives, and stated rent increases are recognized in the ROU asset in the Company’s consolidated balance sheets. The ROU asset is amortized to rent expense over the lease term and included in operating expenses in the 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss model for recognition of credit losses with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. In November 2019, the FASB issued ASU 2019-10, which provides a one-year deferral of the effective dates of ASU No. 2016-13. Accordingly, the guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this update in January 2023. This update did not have a significant impact on the Company’s consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
9
Note 2 — Property and Equipment
| As of | As of | |||||||||||
| (in thousands) | June 30, 2023 |
December 31, 2022 |
Estimated Useful Lives |
|||||||||
| Operations equipment | $ | $ | ||||||||||
| Tradeshow and demo equipment | ||||||||||||
| Computer equipment | ||||||||||||
| Subtotal | ||||||||||||
| Less accumulated depreciation | ( |
) | ( |
) | ||||||||
| Property and Equipment, Net | $ | $ | ||||||||||
Depreciation expense was $
Note 3 — Intangibles
| Patent | Customer | |||||||||||
| (in thousands) | Rights | Relationships | Total | |||||||||
| December 31, 2022 | $ | $ | | $ | | |||||||
| Amortization expense | ( | ) | ( | ) | ||||||||
| June 30, 2023 | $ | $ | $ | |||||||||
Accumulated amortization was $
Note 4 — Debt
As of December 31, 2022, the Company
had a revolving credit facility with Silicon Valley Bank (“SVB”) that provided for maximum borrowings equal to the lesser
of (a) the $
On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed receiver. On March 13, 2023, the FDIC transferred all deposits, both insured and uninsured, and substantially all assets of SVB to a newly created, full-service FDIC-operated “bridge bank”, Silicon Valley Bridge Bank, N.A. (“SVBB”), chartered by the Office of the Comptroller of the Currency as a national bank. Subsequently, on March 27, 2023, the FDIC entered into a purchase and assumption agreement for all deposits and loans, as well as certain other assets, of SVBB, with First-Citizens Bank & Trust Company (“FCB”), a subsidiary of First Citizens BancShares, Inc. (“First Citizens”). As a result of this transaction, SVB became a wholly owned subsidiary of FCB.
At June 30, 2023, the available
borrowings under this facility were $
The Company was in compliance with its financial covenants under the facility as of June 30, 2023 and December 31, 2022. There were no borrowings outstanding under the facility at June 30, 2023 or December 31, 2022.
10
Note 5 — Product Warranties
| (in thousands) | ||||
| Balance, December 31, 2022 | $ | |||
| Warranties accrued during the period | ||||
| Payments on warranty claims | ( | ) | ||
| Balance, June 30, 2023 | $ | |||
Note 6 — Leases
Operating Lease Agreements
The Company leases its headquarters
office from an unrelated third party under a lease expiring in September 2027. The amortization of the ROU asset was $
| Maturity of Operating Lease Liabilities | Amount | |||
| 2023 (July 1 - December 31, 2023) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total undiscounted operating leases payments | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present Value of Operating Lease Liabilities | $ | |||
| Other Information | ||||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % | |||
Cash paid for amounts included
in the measurement of operating lease liabilities was $
Operating lease cost recognized
as expense was $
11
Note 7 — Commitments and Contingencies
Manufacturing Agreement
In 2010, the Company entered into a three-year contract manufacturing agreement with an unrelated third party for the production and manufacture of the SRT-100 (and subsequently the SRT-100 Vision and the SRT-100 Plus), in accordance with the Company’s product specifications. The agreement renews for successive one-year periods unless either party notifies the other party in writing, at least 60 days prior to the anniversary date of the agreement, that it will not renew the agreement. The Company or the manufacturer may also terminate the agreement upon 90 days’ prior written notice.
Purchases from this manufacturer
totaled approximately $
Legal Contingencies
The Company is a party to certain legal proceedings in the ordinary course of business. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and related contingencies.
In 2015, the Company learned that the Department of Justice (the “Department”) had commenced an investigation of the billing to Medicare by a physician who had treated patients with the Company’s SRT-100. The Department subsequently advised the Company that it was considering expanding the investigation to determine whether the Company had any involvements in physician’s use of certain reimbursements codes. The Company has received two Civil Investigative Demands from the Department seeking documents and written responses in connection with its investigation. The Company has fully cooperated with the Department. The Company disputes that it has engaged in any wrongdoing with respect to such reimbursement claims; among other considerations, the Company does not submit claims for reimbursement or provide coding or billing advice to physicians. To the Company’s knowledge, the Department has made no determination as to whether the Company engaged in any wrongdoing, or whether to pursue any legal action against the Company. Should the Department decide to pursue legal action, the Company believes it has strong and meritorious defenses and will vigorously defend itself. As of June 30, 2023, the Company is unable to estimate the cost associated with this matter.
Note 8 — Stockholders’ Equity
Preferred Stock
The Company has authorized
Treasury stock
Treasury stock includes shares surrendered by employees for tax withholding on the vesting of restricted stock awards and shares repurchased in open market transactions. No shares were surrendered by employees for tax withholding in the second quarter of 2023. During the first and second quarters of 2023, the Company did not repurchase any shares in open market transactions.
Note 9 – Stock-Based Compensation
2016 and 2017 Equity Incentive Plans
The Company’s 2016 Equity
Incentive Plan and the 2017 Incentive Plan, as amended in June 2023 (collectively, the “Plans”), provide for the issuance
of up to
12
On February 1, 2020, a total of
On July 21, 2021, a total of
On December 19, 2022, a total
of
On January 26, 2023,
Restricted Stock
| Weighted- Average Grant | ||||||||
| Restricted | Date Fair | |||||||
| Outstanding at | Stock | Value | ||||||
| December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | $ | |||||
| June 30, 2023 | $ | |||||||
The Company recognizes forfeitures
as they occur rather than estimating a forfeiture rate. The reduction of stock compensation expense related to the forfeitures was $
Unrecognized stock compensation expense was $
Stock Options
Stock options expire
| Weighted- Average | Weighted- Average Remaining Contractual | |||||||||||
| Number of | Exercise | Term | ||||||||||
| Options | Price | (In Years) | ||||||||||
| Outstanding - December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired | ||||||||||||
| Outstanding - June 30, 2023 | $ | |||||||||||
| Exercisable – June 30, 2023 | $ | |||||||||||
13
The stock options outstanding had an
intrinsic value of $
Stock compensation expense related
to restricted stock, excluding the recognition of forfeitures, was $
In the first quarter of 2023, the
Company issued
Note 10 — Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, (“ASC 740”), which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Effective income tax rates for interim periods are based upon the Company’s current estimated annual rate, which varies based upon the Company’s estimate of taxable earnings or loss and the mix of taxable earnings or loss in the various states in which the Company operates. In addition, the Company recognizes taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior period as discrete items in the interim period in which the event occurs.
For the quarter ended March 31,
2022, the Company recorded a net valuation allowance release of $
Income tax (benefit) expense was ($
The effective tax rates for the
three months ended June 30, 2023 and 2022 were
Our effective tax rate differs from the U.S. federal statutory rate for the three and six months ended June 30, 2023, primarily due to nondeductible expenses and state income taxes. Our effective tax rate differs from the U.S. federal statutory rate for the three and six months ended June 30, 2022, primarily due to state income taxes and the valuation allowance release, respectively.
As of June 30, 2023, the Company’s U.S. federal and certain state tax returns remain subject to examination, beginning with those filed for the year ended December 31, 2017.
Note 11 — Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
14
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with the information set forth within the 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 2022 Annual Report.
Overview
Sensus is a medical device company committed to providing highly effective, non-invasive and cost-effective treatments for both oncological and non- oncological skin conditions.
Segment Information
The Company manages its business globally within one reportable segment, which is consistent with how our management reviews the business, prioritizes investment and resource allocation decisions and assesses operating performance.
Results of Operations
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| (in thousands, except shares and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues | $ | 4,527 | $ | 12,080 | $ | 7,941 | $ | 22,417 | ||||||||
| Cost of sales | 1,908 | 3,824 | 3,700 | 7,013 | ||||||||||||
| Gross profit | 2,619 | 8,256 | 4,241 | 15,404 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling and marketing | 1,595 | 1,728 | 3,693 | 2,946 | ||||||||||||
| General and administrative | 1,329 | 1,131 | 2,693 | 2,404 | ||||||||||||
| Research and development | 822 | 827 | 1,920 | 1,556 | ||||||||||||
| Total operating expenses | 3,746 | 3,686 | 8,306 | 6,906 | ||||||||||||
| Income (loss) from operations | (1,127 | ) | 4,570 | (4,065 | ) | 8,498 | ||||||||||
| Other income (expense): | ||||||||||||||||
| Gain on sale of assets | - | - | - | 12,779 | ||||||||||||
| Interest income | 245 | 25 | 488 | 28 | ||||||||||||
| Interest expense | - | (1 | ) | - | (1 | ) | ||||||||||
| Other income, net | 245 | 24 | 488 | 12,806 | ||||||||||||
| Income (loss) before income tax | (882 | ) | 4,594 | (3,577 | ) | 21,304 | ||||||||||
| Provision for (benefit from) income taxes | (502 | ) | 1,070 | (1,303 | ) | 1,718 | ||||||||||
| Net income (loss) | $ | (380 | ) | $ | 3,524 | $ | (2,274 | ) | $ | 19,586 | ||||||
Three months ended June 30, 2023 compared to the three months ended June 30, 2022
Revenues. Revenues were $4.5 million for the three months ended June 30, 2023 compared to $12.1 million for the three months ended June 30, 2022, a decrease of $7.6 million, or 62.8%. The decrease was primarily driven by the lower number of SRT units sold, as customers continued to defer purchases of our product and lower sales to a large customer in the three months ended June 30, 2023.
Cost of sales. Cost of sales was $1.9 million for the three months ended June 30, 2023 compared to $3.8 million for the three months ended June 30, 2022, a decrease of $1.9 million, or 50.0%. The decrease in cost of sales was primarily related to the decrease in sales in the three months ended June 30, 2023.
Gross profit. Gross profit was $2.6 million for the three months ended June 30, 2023 compared to $8.3 million for the three months ended June 30, 2022, a decrease of $5.7 million, or 68.7%. Our overall gross profit percentage was 57.8% in the three months ended June 30, 2023 compared to 68.6% in the corresponding period in 2022. The decrease in gross profit was primarily driven by the lower number of units sold and higher costs charged by vendors in the three months ended June 30, 2023.
15
Selling and marketing. Selling and marketing expense was $1.6 million for the three months ended June 30, 2023 compared to $1.7 million for the three months ended June 30, 2022, a decrease of $0.1 million, or 5.9%. The decrease was primarily attributable to the decrease in marketing initiatives and commissions partially offset by an increase in headcount cost.
General and administrative. General and administrative expense was $1.3 million for the three months ended June 30, 2023 compared to $1.1 million for the three months ended June 30, 2022, an increase of $0.2 million, or 18.2%. The net increase in general and administrative expense was primarily due to higher professional fees offset by a reduction in insurance expense.
Research and development. Research and development expense remained unchanged at $0.8 million for the three months ended June 30, 2023 and June 30, 2022.
Other income. Other income of $0.2 million and $24 thousand for the three months ended June 30, 2023 and 2022, respectively, was related to interest income.
Six months ended June 30, 2023 compared to the six months ended June 30, 2022
Revenues. Revenues were $7.9 million for the six months ended June 30, 2023 compared to $22.4 million for the six months ended June 30, 2022, a decrease of $14.5 million, or 64.7%. The decrease was primarily driven by the lower number of SRT units sold, as customers continued to defer purchases of our product and lower sales to a large customer in the six months ended June 30, 2023.
Cost of sales. Cost of sales was $3.7 million for the six months ended June 30, 2023 compared to $7.0 million for the six months ended June 30, 2022, a decrease of $3.3 million, or 47.1%. The decrease in cost of sales was primarily related to the decrease in sales in the six months ended June 30, 2023.
Gross profit. Gross profit was $4.2 million for the six months ended June 30, 2023 compared to $15.4 million for the six months ended June 30, 2022, a decrease of $11.2 million, or 72.7%. Our overall gross profit percentage was 53.2% in the three months ended June 30, 2023 compared to 68.6% in the corresponding period in 2022. The decrease in gross profit was primarily driven by the lower number of units sold and higher costs charged by vendors in the six months ended June 30, 2023.
Selling and marketing. Selling and marketing expense was $3.7 million for the six months ended June 30, 2023 compared to $2.9 million for the six months ended June 30, 2022, an increase of $0.8 million, or 27.6%. The increase was primarily attributable to the increase in tradeshow and advertising expenses.
General and administrative. General and administrative expense was $2.7 million for the six months ended June 30, 2023 compared to $2.4 million for the six months ended June 30, 2022, an increase of $0.3 million, or 12.5%. The net increase in general and administrative expense was primarily due to higher professional fees offset by a reduction in insurance expense.
Research and development. Research and development expense was $1.9 million for the six months ended June 30, 2023 compared to $1.6 million for the six months ended June 30, 2022, an increase of $0.3 million, or 18.8%. The increase was primarily due to expenses related to a project to develop a drug delivery system for an aesthetic project. The Company expects the completion of this project by the end of 2023.
Other income. Other income of $0.5 million for the six months ended June 30, 2023 was related to the interest income. Other income of $12.8 million for the six months ended June 30, 2022 is related to the gain on the sale of the Sculptura assets.
Financial Condition
The following discussion summarizes significant changes in assets and liabilities. Please see the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 contained in Part I, Item 1 of this filing.
Assets
Cash and cash equivalents at June 30, 2023 decreased $5.4 million from December 31, 2022. See Cash Flows for details on the change in cash and cash equivalents during the six months ended June 30, 2023.
Accounts receivable at June 30, 2023 decreased $8.2 million from December 31, 2022, primarily due to collections of receivables and the decrease in sales in the six months ended June 30, 2023.
Inventories at June 30, 2023 increased $6.6 million from December 31, 2022, primarily due to an increase in completion of finished goods offset by shipments of units sold in the six months ended June 30, 2023.
Prepaid and other assets at June 30, 2023 increased $1.1 million from December 31, 2022, primarily due to an increase in the deposit paid to a manufacturer in the six months ended June 30, 2023.
16
Liabilities
There were no borrowings under our revolving line of credit at June 30, 2023 or December 31, 2022.
Liquidity and Capital Resources
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 Six Months Ended June 30, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (5,255 | ) | $ | 4,978 | |||
| Investing activities | (218 | ) | 14,911 | |||||
| Financing activities | 6 | (705 | ) | |||||
| Total | $ | (5,467 | ) | $ | 19,184 | |||
Net cash used in operating activities was approximately $5.3 million for the six months ended June 30, 2023, consisting of net loss of approximately $2.3 million, an increase in net operating liabilities of approximately $2.3 million, and non-cash charges of approximately $0.7 million. Cash flows provided by 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 deferred income taxes, stock compensation expense, provision for product warranties and depreciation and amortization. Net cash provided by operating activities was approximately $5.0 million for the six months ended June 30, 2022, consisting of net income of approximately $19.6 million and an increase in net operating assets of approximately $1.6 million, offset by non-cash charges of approximately $16.2 million. Cash flows provided by operating activities primarily include the receipt of revenues offset by the payment of operating expenses incurred in the normal course of business. Non-cash charges consisted of a gain on asset sale, stock compensation expense, depreciation and amortization, a warranty provision, and impairment of intangible assets.
Net cash used in investing activities for the six months ended June 30, 2023 reflected $0.2 million of purchases of property and equipment. Net cash provided by investing activities for the six months ended June 30, 2022 reflected $15 million of proceeds from the sale of assets, partially offset by purchases of property and equipment.
Net cash provided in financing activities for the six months ended June 30, 2023 primarily reflected $46 thousand of exercised stock options, offset by $40 thousand of withholding taxes on stock-based compensation. Net cash used in financing activities for the six months ended June 30, 2022 primarily reflected $1.1 million for actions including the repurchase of common stock, the withholding of taxes on stock-based compensation, and the prepayment of a loan payable, offset by approximately $0.4 million provided by exercised stock options.
17
Indebtedness
Please see Note 4, Debt, to the financial statements.
Contractual Obligations and Commitments
Please see Note 7, Commitments and Contingencies, to the financial statements.
Critical Accounting Policies and Estimates
The preparation of 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. Actual results could differ significantly from those estimates. For a summary of these and additional accounting policies see Note 1, Organization and Summary of Significant Accounting Policies, to the financial statements. In addition, see Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 1, Organization and Summary of Significant Accounting Policies, in the 2022 Annual Report for further information.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Control and Procedures
As of June 30, 2023, the end of the period covered by this Form 10-Q, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer each concluded that, as of June 30, 2023, the end of the period covered by this Form 10-Q, we maintained effective disclosure controls and procedures.
Changes in Internal Control over Financial Reporting
There have been no significant changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to certain legal proceedings in the ordinary course of business. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and related contingencies. See Note 7, Commitments and Contingencies.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2022 Annual Report, as updated in our subsequent quarterly reports. The risks described in our 2022 Annual Report and our subsequent quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities
There were no unregistered sales of securities during the six months ended June 30, 2023.
(b) Use of Proceeds from the Sale of Registered Securities
None.
(c) Purchases of Equity Securities by the Registrant and Affiliated Purchasers.
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
Not applicable.
Item 5. Other Information
(c) Rule 10b5-1 Trading Plans
During the three months ended June 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c) of Regulation S-K. None.
19
Item 6. Exhibits
| Exhibit No. | Description | |
| 10.1 | Employment Agreement between Sensus Healthcare, Inc. and Javier Rampolla | |
| 31.1 | Certification of Joseph C. Sardano, Chairman and Chief Executive Officer of Sensus Healthcare, Inc., Pursuant to Rule 13a- 14(a) of the Securities Exchange Act of 1934. | |
| 31.2 | Certification of Javier Rampolla, Chief Financial Officer of Sensus Healthcare, Inc., Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. | |
| 32.1 | ||
| 32.2 | Certification of Javier Rampolla, Chief Financial Officer of Sensus Healthcare, Inc., Pursuant to 18 U.S.C. Section 1350. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SENSUS HEALTHCARE, INC. | |
| Date: August 11, 2023 | /s/ Joseph C. Sardano |
| Joseph C. Sardano Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: August 11, 2023 | /s/ Javier Rampolla |
| Javier Rampolla | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
21
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made as of June 1, 2023, between Sensus Healthcare, Inc., a Delaware corporation (together with its subsidiaries, the “Company”) and Javier Rampolla (the “Executive”).
WHEREAS, the Company desires to employ the Executive and the Executive desires to be employed by the Company, on the terms and conditions provided below; and
WHEREAS, this Agreement shall govern the employment relationship between Executive and the Company and supersedes all previous agreements and understandings with respect to such employment relationship.
The parties agree as follows:
1. ENGAGEMENT.
The Company agrees to employ the Executive, and the Executive accepts such employment, on the terms and conditions set forth in this Agreement, unless and until such employment shall have been terminated as provided in this Agreement.
2. TITLE AND DUTIES.
During his employment by the Company, the Executive shall render his services as Chief Financial Officer of the Company, reporting directly to the Chief Executive Officer of the Company, shall perform duties consistent with this position as the Board shall request, shall abide by Company policies in effect from time to time, and shall devote his full business time and best efforts to his duties hereunder and the business and affairs of the Company (except during vacation periods and periods of illness or other incapacity), except if an additional job or duty can have a positive effect on the Company (i.e. Public Service, etc.). The Executive may engage in such other pursuits, including, without limitation, personal legal and personal financial affairs, as shall not interfere with the proper performance of his duties and obligations hereunder, provided the Executive shall not serve on any other board of directors of a public or private “for profit” company without the prior consent of the Board. Executive will be based at the Company’s principal headquarters facility currently located in Boca Raton, Florida, subject to customary travel and business requirements.
3. TERM.
(a) This Agreement shall commence as of June 1, 2023 and shall continue in effect up through and including the last day of the Company’s 2023 fiscal year (currently expected to be on or about December 31, 2023); provided that the term of this Agreement shall automatically be extended for additional successive one (1) year renewal terms unless at least six (6) months prior to the expiration of the then current term, the Company or the Executive shall have given written notice to the other party that this Agreement shall not be extended beyond the then current term.
(b) It is acknowledged and agreed that if this Agreement is not renewed by the Company pursuant to Section 3(a) above, and not as a result of Executive’s death, Disability, or Cause pursuant to Section 6(a) or 6(b) below, such non-renewal by the Company will be deemed a termination without Cause pursuant to Section 6(c) or 6(d) below (as applicable). In the event that Executive’s employment with the Company ceases at the end of any term because Executive (and not the Company) has given a non-renewal notice set forth in Section 3(a) above, and not as a result of the occurrence of Good Reason pursuant to Section 6(c) or 6(d) below, then such termination of employment shall be treated as a voluntary termination by Executive without Good Reason.
4. COMPENSATION.
(a) Base Salary. Executive’s base salary as it may be increased from time to time (“Base Salary”) shall be paid in accordance with the Company’s normal payroll practices in effect from time to time. Executive’s Base Salary shall initially be $250,000 per annum. Base Salary may be increased during the term but may not be decreased, and the Board or the Compensation Committee of the Board (the “Compensation Committee”) shall consider, on an annual basis, the nature, extent and advisability, if any, of an increase in the Executive’s Base Salary.
(b) Annual Incentive Bonus. For each fiscal year of the Company that ends during the term, Executive will be eligible to participate in the Company’s annual incentive plan established and developed by the Compensation Committee, as it may then be in effect (the “AIP”). Executive’s target annual bonus opportunity (“Target Bonus”) will be $100,000 which Target Bonus may be increased but not decreased from time to time in the Compensation Committee’s sole discretion. Annual incentive payments will be based on achievement against goals established for the senior executive officer group including Executive by the Compensation Committee, in consultation with Executive.
(c) Executive Stock Based Incentive Plan.
(i) General. The Executive shall be eligible to participate in and receive such equity incentive compensation as may be granted by the Compensation Committee from time to time pursuant to the Company’s Executive Stock Based Incentive Plan as such plan may then be in effect and as it may be amended or superseded from time to time (the “Equity Plan”) and any other long-term incentive plan for senior Company executives that the Board or Compensation Committee may adopt in consultation with Executive.
(d) Other. Future annual-cycle equity awards (which may include performance conditions) to be granted to Executive under the Equity Plan will be determined by the Compensation Committee in its discretion.
5. BENEFITS.
(a) Employer Benefit Plans. During the term, Executive will be eligible to participate, on terms which are generally available to the other senior executives of the Company and subject to the eligibility requirements of the applicable Company plans as in effect from time to time, in the Company’s, deferred compensation, medical, dental, vacation, and disability programs, and other benefits, including a car allowance, generally available to the Company’s senior executives from time to time.
2
(b) Business Expenses. The Executive is authorized to incur and the Company shall either pay directly or reimburse the Executive for ordinary and reasonable expenses in connection with the performance of his duties hereunder, including, without limitation, expenses for (A) transportation, (B) business meals, (C) travel and lodging, and (D) similar items. The Executive agrees to comply with Company policies with respect to reimbursement and record keeping in connection with such expenses.
6. TERMINATION OF EMPLOYMENT.
The employment of the Executive hereunder may be terminated by the Company at any time, subject to the company providing the compensation and benefits in accordance with the terms of this Section 6, which shall constitute the Executive’s sole and exclusive remedy and legal recourse upon any such termination of employment (and the Executive hereby waives and releases any and all other claims against the Company and its parent entities, affiliates, officers, directors and employees in such event).
(a) Termination Due To Death Or Disability. In the event of the Executive’s death, Executive’s employment shall automatically cease and terminate ‘as of the date of death. If Executive becomes Disabled, the Company may terminate Executive’s employment upon thirty (30) days written notice to Executive. For purposes of this Agreement, the terms “Disabled” or “Disability” means Executive’s inability, because of physical or mental illness or injury, substantially to perform his duties hereunder as a result of physical incapacity for a continuous period of at least four (4) months, and any dispute as to the Executive’s incapacitation shall be resolved by an independent physician selected by the Board and reasonably acceptable to the Executive, whose determination shall be final and binding upon both the Executive and the Company. In the event of the termination of employment due to Executive’s death or Disability, Executive or his estate or legal representatives shall be entitled to receive:
(i) payment for all accrued but unpaid Base Salary as of the date of Executive’s termination of employment;
(ii) reimbursement for expenses incurred by the Executive pursuant to Sections 5(b) hereof up to and including the date on which employment is terminated;
(iii) any earned benefits to which the Executive may be entitled as of the date of termination pursuant to the terms of any compensation or benefit plans to the extent permitted by such plans (with the payments described in subsections (i) through (iii) above collectively called the “Accrued Payments”);
(iv) any annual incentive bonuses earned but not yet paid for any completed full fiscal year immediately preceding the employment termination date;
(v) if employment termination occurs prior to the end of any fiscal year, a pro rata annual incentive bonus for such fiscal year in which employment termination occurs (based on actual business days in such fiscal year prior to such employment termination, divided by the total annual business days) determined and paid based on actual performance achieved for that fiscal year against the performance goals for that fiscal year; and
3
(b) Termination For Cause. The Company may, by providing written notice to Executive, terminate Executive’s employment for Cause. The term “Cause” for purpose of this Agreement shall mean:
(i) Executive’s conviction of, or entrance of a plea of guilty or nolo contendere to, a felony under federal law or state law; or
(ii) fraudulent conduct by Executive in connection with the business affairs of the Company; or
(iii) theft, embezzlement, or other criminal misappropriation of funds by Executive (other than good faith expense account disputes or de minimis amounts); or
(iv) Executive’s willful refusal to materially perform his executive duties hereunder; or
(v) Executive’s willful misconduct, which has, or would have if generally known, a materially adverse effect on the business or reputation of the Company; or
(vi) The Executive’s willful breach of any material employment policy of the Company, including, but not limited to, conduct relating to falsification of business records, violation of the Company’s Code of Business Conduct and Ethics, harassment, creation of a hostile work environment, excessive absenteeism, insubordination, violation of the Company’s policy on drug and alcohol use, or violent acts or threats of violence; or
(vii) Executive’s material breach of a covenant, representation, warranty or obligation of Executive under this Agreement.
For purposes of this Section 6(b), an act or failure to act shall be considered “willful” only if done or omitted to be done without a good faith reasonable belief that such act or failure to act was in the best interests of the Company.
Any determination of Cause by the Company will be made by a resolution approved by a majority of the members of the Board, provided that no such determination may be made until Executive has been given written notice detailing the specific event constituting such Cause and a period of thirty (30) days following receipt of such notice to cure such event (if susceptible to cure), and, if such event is not curable or is not cured, an opportunity to appear before the Board (with legal counsel if so requested in writing by Executive) to discuss the specific circumstances alleged to give rise to the Cause event. Subject to Executive’s right to cure and/or appear before the Board, if Executive’s employment is terminated for Cause, the termination shall take effect on the effective date of such termination as specified in the written notice of such termination delivered to Executive.
In the event of the termination of Executive’s employment hereunder by the Company for Cause, then Executive shall be entitled to receive payment of the Accrued Payments.
If the Company attempts to terminate Executive’s employment pursuant to this Section 6(b) and it is ultimately determined that the Company lacked Cause, the provisions of Section 6(c) or Section 6(d) (as applicable) shall apply and Executive shall be entitled to receive the payments set forth under Section 6(c) or Section 6(d) (as applicable).
4
(c) Termination without Cause or for Good Reason. The Company may terminate Executive’s employment hereunder without Cause at any time, by providing Executive 30 days’ prior written notice of such termination. Such notice shall specify the effective date of the termination of Executive’s employment. The Executive may terminate his employment for Good Reason by providing 30 days’ prior written notice to the Company. In the event of the termination of Executive’s employment under this Section 6(c) without Cause or by the Executive for Good Reason, in each case prior to or more than 12 months following a Change-in-Control (as defined in the Company’s Equity Plan), then Executive shall be entitled to:
(i) payment of the Accrued Payments;
(ii) a separation allowance, payable in equal installments in accordance with normal payroll practices over a 12 month period beginning immediately following the date of termination, equal to one (1) times the sum of (x) Executive’s then Base Salary and (y) the Executive’s then Target Bonus;
(iii) any annual incentive bonuses earned but not yet paid for any completed full fiscal year immediately preceding the employment termination date;
(iv) if employment termination occurs prior to the end of any fiscal year, a pro rata annual incentive bonus for such fiscal year in which employment termination occurs (based on actual business days in such fiscal year prior to such employment termination, divided by total the annual business days) determined and paid based on actual performance achieved for such fiscal year against the performance goals for that fiscal year;
(v) the Company shall arrange for the Executive to continue to participate (through COBRA or otherwise), on substantially the same terms and conditions as in effect for the Executive (including any required contribution) immediately prior to such termination, in the medical, dental, disability and life insurance programs provided to the Executive pursuant to Section 5(a) hereof until the earlier of (i) the end of the 12 month period beginning on the effective date of the termination of Executive’s employment hereunder, or (ii) such time as the Executive is eligible to be covered by comparable benefit(s) of a subsequent employer. The foregoing of this Section 6(c)(v) is referred to as “Benefits Continuation”. The Executive agrees to notify the Company promptly if and when he begins employment with another employer and if and when he becomes eligible to participate in any benefit or other welfare plans, programs or arrangements of another employer;
(vi) all of Executive’s then-outstanding equity awards in any Equity Plan will vest in full.
5
For purposes of this Agreement, the term “Good Reason” means, without Executive’s written consent:
(i) a reduction by the Company in Executive’s Base Salary or Target Bonus as in effect from time to time; or
(ii) the Board materially reduces (including as a result of any co-sharing of responsibilities arrangement), other than during any period of illness or incapacity, Executive’s authority, responsibilities. or duties such that Executive no longer has the title of, or serves or functions as the Chief Financial Officer of the Company (provided that it is understood that a Change-in-Control or going private event will not constitute Good Reason); or
(iii) the Company requiring Executive to be based at a location in excess of fifty (50) miles from the location of the Company’s principal executive office as of the effective date of this Agreement, except for required travel on Company business; or
(iv) the Company fails to obtain the written assumption of its obligations under this Agreement by a successor not later than the consummation of a merger, consolidation or sale of the Company; or
(v) a material breach by the Company of its obligations under this Agreement, which, in each of subsections (i) through (vi) above, is not remedied by the Company within 30 days of receipt of written notice of such event or breach delivered by Executive to the Company; provided, that the Executive may only exercise his right to terminate this Agreement for Good Reason within the 120 day period immediately following the occurrence of any of the events described in subsections (i) through (vi) above.
(d) Termination of Employment without Cause or for Good Reason following a Change-in-Control. If the Company terminates Executive’s employment without Cause upon 30 days’ prior written notice or Executive terminates his employment for Good Reason by providing 30 days’ prior written notice to the Company, in each case within 12 months following a Change-in-Control (as defined in the Company’s Equity Plan), the Company will provide to Executive:
(i) payment of the Accrued Payments;
(ii) a lump sum separation allowance equal to two (2) times the sum of (x) Executive’s then Base Salary and (y) Executive’s then Target Bonus;
(iii) any annual incentive bonuses earned but not yet paid for any completed full fiscal year immediately preceding the employment termination date;
(iv) if employment termination occurs prior to the end of any fiscal year, a pro rata annual incentive bonus for such fiscal year in which employment termination occurs (based on actual business days in such fiscal year prior to such employment termination, divided by the total annual business days) determined and paid based on actual performance achieved for such fiscal year against the performance goals for that fiscal year;
(v) Benefit Continuation until the earlier of 24 months after termination of employment or such time as Executive is eligible to be covered by comparable benefit(s) of a subsequent employer. The Executive agrees to notify the Company promptly if and when he begins employment with another employer and if and when he becomes eligible to participate in any benefit or other welfare plans, programs or arrangements of another employer;
(vi) all of Executive’s then-outstanding equity awards in any Equity Plan will vest in full.
6
(e) Voluntary Termination by the Executive without Good Reason. In the event Executive terminates his employment without Good Reason, he shall provide 90 days’ prior written notice of such termination to the Company. Upon such voluntary termination, the Executive will be entitled to the Accrued Payments. Without limiting all other rights and remedies of the Company under this Agreement, a termination of employment by the Executive without Good Reason will not constitute a breach by the Executive of this Agreement.
(f) Resignation from all Boards. Upon any termination or cessation of Executive’s employment with the Company, for any reason, Executive agrees immediately to resign, and any notice of termination or actual termination or cessation of employment shall act automatically to effect such resignation, from any position on the Board and on any board of directors of any subsidiary or affiliate of the Company.
(g) Release of Claims as Condition. The Company’s obligation to pay the separation allowance and provide all other benefits and rights referred to in this Section 6 and in Section 4(d) above shall be conditioned upon the Executive having delivered to the Company an executed full and unconditional release (that is not subject to revocation) of claims against the Company, its parent entities, affiliates, employee benefit plans and fiduciaries, officers, employees, directors, agents and representatives satisfactory in form and content to the Company’s counsel.
(h) No Mitigation. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, nor shall the amount of any payment hereunder be reduced by any compensation earned by Executive as a result of subsequent employment.
7. INDEMNIFICATION.
(a) Provided that the Executive has not been terminated for “Cause” as defined herein, the Company shall indemnify, defend and hold the Executive harmless, to the maximum extent permitted by law, against all judgments, fines, amounts paid in settlement and all reasonable expenses, including attorneys’ fees incurred by the Executive, in connection with the defense of, or as a result of, any action or proceeding (or any appeal from any action or proceeding) in which the Executive is made or is threatened to be made a party by reason of the fact that the Executive is or was an officer or director of the Company, regardless of whether such action or proceeding is one brought by or in the right of the Company. Each of the parties hereto shall give prompt notice to the other of any action or proceeding from which the Company is obligated to indemnify, defend and hold harmless the Executive of which it or he (as the case may be) gains knowledge.
(b) The Company agrees that the Executive shall be covered and insured up to the full limits provided by all directors’ and officers’ insurance which the Company then maintains to indemnify its directors and officers (and to indemnify the Company for any obligations which it incurs as a result of its undertaking to indemnify its officers and directors), subject to applicable deductibles and to the terms and conditions of such policies.
7
8. ENFORCEABILITY.
It is the intention of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies of each state and jurisdiction in which such enforcement is sought, but that the unenforceability (or the modification to conform with such laws or public policies) of any provisions hereof, shall not render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision of this Agreement shall be determined to be invalid or unenforceable, either in whole or in part, this Agreement shall be deemed amended to delete or modify, as necessary, the offending provisions and to alter the balance of this Agreement in order to render the same valid and enforceable to the fullest extent permissible.
9. ASSIGNMENT.
This Agreement is personal in nature to the Company and the rights and obligations of the Executive under this Agreement shall not be assigned or transferred by the Executive. This Agreement and all of the provisions hereof shall be binding upon, and inure to the benefit of, the parties hereto and their successors (including successors by merger, consolidation, sale or similar transaction, permitted assigns, executors, administrators, personal representatives, heirs and distributees).
10. NON-DISCLOSURE; NON-SOLICITATION; COOPERATION.
(a) The Executive shall not, at any time during or following the period of employment, disclose, use, transfer or sell, except in the course of such employment, any confidential information or proprietary data of the Company or its affiliates so long as such information or data remains confidential and has not been disclosed or is not otherwise in the public domain, except as required by law or pursuant to legal process or in connection with an administrative proceeding before a governmental agency. The Company and the Executive agree that the Executive’s obligations under this Section 10 (a) shall not apply if (1) any disclosure by the Executive is made with the express written permission of the Company or (2) if the Executive can show by legal evidence that it was lawfully received by the Executive from a third party who is not or was not bound, at the time the information was conveyed to Executive, by any confidential relationship or obligation to the Company.
(b) The Executive agrees that, for a period of twelve (12) months after the termination or cessation of the Executive’s employment with the Company for any reason, the Executive will not:
(i) directly or indirectly solicit, attempt to hire, or hire any employee of the Company (or any person who may have been employed by the Company during the last year of the Executive’s employment with the Company), or assist in such hiring by any other person or business entity or encourage, induce or attempt to induce any such employee to terminate his or her employment with the Company; or
(ii) take action intended to encourage any vendor or supplier of the Company to cease to do business with the Company or materially reduce the amount of business the vendor or supplier does with the Company; or
(iii) materially disparage the Company.
8
(c) Executive agrees to cooperate with the Company, during the term of this Agreement and at any time thereafter (including following Executive’s termination of employment for any reason), by making himself reasonably available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, as requested; provided, however that it does not materially interfere with his then current professional activities. The Company agrees to reimburse Executive for all reasonable expenses actually incurred in connection with his provision of testimony or assistance.
11. NON-COMPETITION AGREEMENT.
The Executive agrees that throughout the term of his employment, and for a period of twelve (12) months after termination or cessation of employment for any reason, he will not engage in, participate in, carry on, own, or manage, directly or indirectly, either for herself or as a partner, stockholder, investor, officer, director, employee, agent, independent contractor, representative or consultant of any person, partnership, corporation or other enterprise, in any “Competitive Business” in any jurisdiction in which the Company actively conducts business. For purposes of this Section 11, “Competitive Business” means “Any and all Therapeutic Devices treating various skin disorders such as skin cancer, keloids and psoriasis.”
The Executive’s engaging in the following activities will not be deemed to be engaging or participating in a Competitive Business: (i) passive ownership of less than 2% of any class of securities of a company; and (ii) engaging or participating solely in a noncompetitive business of an entity which also separately operates a business which is a “Competitive Business”.
The Executive acknowledges, with the advice of legal counsel, that he understands the foregoing provisions of this Section 11 and that these provisions are fair, reasonable, and necessary for the protection of the Company’s business.
12. TAXES.
(a) All payments to be made to and on behalf of the Executive under this Agreement will be subject to required withholding of federal, employment and excise taxes, and to related reporting requirements.
(b) Limitation on Parachute Payments. In the event that the payment and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code and (ii) but for this Section 12(b), would be subject to the excise tax imposed by Section 4999 of the Code, then Executive’s payments and benefits will be either:
(i) delivered in full, or
(ii) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,
9
whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code.
If a reduction in severance and other payments and benefits constituting “parachute payments” is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (i) reduction of cash payments; (ii) cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Code Section 280G), (iii) cancellation of accelerated vesting of equity awards, and (iv) reduction of employee benefits. Within any such category of payments and benefits (that is, (i), (ii), (iii) or (iv)), a reduction shall occur first with respect to amounts that are not Deferred Payments and then with respect to amounts that are. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant of Executive’s equity awards.
Any determination required under this Section 12(b) will be made in writing by the Company’s independent public accountants engaged by the Company for general audit purposes immediately prior to the Change in Control (the “Accountants”), whose good faith determination will be conclusive and binding upon Executive and the Company for all purposes. If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, or if such firm otherwise cannot perform the calculations, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder. For purposes of making the calculations required by this Section 12(b), the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company will bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this section.
(c) Section 409A. If any provision of this Agreement (or any award of compensation or benefits provided under this Agreement) would cause Executive to incur any additional tax or interest under Section 409A of the Code, the Company shall reform such provision to comply with Section 409A and agrees to maintain, to the maximum extent practicable without violating Section 409A of the Code, the original intent and economic benefit to Executive of the applicable provision. The Company shall not accelerate the payment of any deferred compensation in violation of Section 409A of the Code and, to the extent required under Section 409A, the Company shall delay the payment of any deferred compensation for six months following Executive’s termination of employment. When used in connection with any payments subject to Section 409A required to be made hereunder, the phrase “termination of employment” and correlative terms shall mean separation from service as defined in Section 409A. Unless such payments are otherwise exempt from Section 409A, any reimbursements or in-kind benefits provided under this Agreement shall be administered in accordance with Section 409A, such that: (a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during one year shall not affect the expenses eligible for reimbursement or the in-kind benefits provided in any other year; (b) reimbursement of eligible expenses shall be made on or before December 31 of the year following the year in which the expense was incurred; (c) Executive’s right to reimbursement or in-kind benefits shall not be subject to liquidation or to exchange for another benefit; and, (d) if the payment of any deferred compensation shall be payable at any time within a period that overlaps two calendar years, payment shall be made in the second of the two years. For purposes of Section 409A, Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
10
13. SURVIVAL.
Anything in Section 6 hereof to the contrary notwithstanding, the provisions of Section 7 through 15 shall survive the expiration or termination of this Agreement, regardless of the reasons therefor.
14. NO CONFLICT: REPRESENTATIONS AND WARRANTIES.
The Executive represents and warrants that (i) the information (written and oral) provided by the Executive to the Company in connection with obtaining employment with the Company or in connection with the Executive’s former employments, work history, circumstances of leaving former employments, and educational background, is true and complete, (ii) he has the legal capacity to execute and perform this Agreement, (iii) this Agreement is a valid and binding obligation of the Executive enforceable against him in accordance with its terms, (iv) the Executive’s execution, delivery or performance of this Agreement will not conflict with or result in a breach of any agreement, understanding, order, judgment or other obligation to which the Executive is a party or by which he may be bound, written or oral, and (v) the Executive is not subject to or bound by any covenant against competition, non-disclosure or confidentiality obligation, or any other agreement, order, judgment or other obligation, written or oral, which would conflict with, restrict or limit the performance of the services to be provided by him hereunder. The Executive agrees not to use, or disclose to anyone within the Company, at any time during his employment hereunder, any trade secrets or any confidential information of any other employer or other third party. Executive has provided to the Company a true copy of any non-competition obligation or agreement to which he may be subject.
15. MISCELLANEOUS.
(a) Notices. All notices hereunder shall be given in writing, by personal delivery, nationally-recognized overnight courier (such as UPS or Federal Express), or prepaid registered or certified mail, return receipt requested, to the addresses of the proper parties as set forth below:
TO THE EXECUTIVE:
Javier Rampolla
Sensus Healthcare, Inc.
851 Broken Sound Parkway NW #215
Boca Raton, FL 33487
TO THE COMPANY:
Sensus Healthcare, Inc.
851 Broken Sound Parkway NW #215
Boca Raton, FL 33487
Attention: Chief Executive Officer
11
Any notice given as set forth above will be deemed given on the business day sent when delivered by hand during normal business hours, on the business day after the business day sent if delivered by a nationally recognized overnight courier, or on the third business day after the business day sent if delivered by registered or certified mail, return receipt requested.
(b) Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts made and to be wholly performed in that state without regard to its conflicts of laws provisions or principles.
(c) Jurisdiction. (i) In any suit, action or proceeding seeking to enforce any provision of this Agreement or for purposes of resolving any dispute arising out of or related to this Agreement, the Company and the Executive each hereby irrevocably consents to the exclusive jurisdiction of any federal court located in the State of Florida, Palm Beach County, or any of the state courts of the State of Florida located in Palm Beach County; (ii) the Company and the Executive each hereby waives, to the fullest extent permitted by applicable law, any objection which it or he may now or hereafter have to the laying of venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum; (iii) process in any such suit, action or proceeding may be served on either party anywhere in the world, whether within or without the jurisdiction of such court, and, without limiting the foregoing, each of the Company and the Executive irrevocably agrees that service of process on such party, in the same manner as provided for notices in Section 15(a) above, shall be deemed effective service of process on such party in any such suit; action or proceeding; (iv) WAIVER OF JURY TRIAL: EACH OF THE COMPANY AND THE EXECUTIVE HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT; and (v) Limitation on Damages: the parties agree that there will be no punitive damages payable as a result of or in connection with any claim, matter or breach under or related to this Agreement or the transactions contemplated by this Agreement, and each of the parties agrees not to request punitive damages. Notwithstanding the foregoing of this Section, each of the parties agrees that prior to commencing any claims for breach of this Agreement (except to pursue injunctive relief) to submit, for a period of sixty (60) days, to voluntary mediation before a jointly selected neutral third party mediator under the auspices of JAMS, Miami, Florida, Resolutions Center (or any successor location), pursuant to the procedures of JAMS Mediation Rules conducted in the State of Florida (however, such mediation or obligation to mediate shall not suspend or otherwise delay any termination or other action of the Company or affect the Company’s other rights).
(d) Headings. The Section headings contained in this Agreement are for convenience of reference only and are not intended to determine, limit or describe the scope or intent of any provision of this Agreement.
(e) Number and Gender. Whenever in this Agreement the singular is used, it shall include the plural if the context so requires, and whenever the feminine gender is used in this Agreement, it shall be construed as if the masculine, feminine or neuter gender, respectively, has been used where the context so dictates, with the rest of the sentence being construed as if the grammatical and terminological changes thereby rendered necessary have been made.
(f) Entire Agreement. This Agreement contains the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes any prior or contemporaneous understandings and agreements, written or oral, between and among them respecting such subject matter.
(g) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but both of which taken together shall constitute one instrument.
(h) Amendments. This Agreement may not be amended except by a writing executed by each of the parties to this Agreement.
(i) No Waiver. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board, No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
12
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first written above.
| JAVIER RAMPOLLA | SENSUS HEALTHCARE, INC. | ||
| /s/ Javier Rampolla | By: | /s/ Joseph C. Sardano | |
| Name: | Joseph C. Sardano | ||
| Date: June 1, 2023 | Title: | Chairman & CEO | |
| Date: June 1, 2023 | |||
13
Exhibit 31.1
Certification of CEO Pursuant to Securities Exchange Act
Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Joseph C. Sardano, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sensus Healthcare, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 11, 2023 |
/s/ Joseph C. Sardano |
| Joseph C. Sardano | |
| Chairman and Chief Executive Officer |
Exhibit 31.2
Certification of CFO Pursuant to Securities Exchange Act
Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Javier Rampolla, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sensus Healthcare, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 11, 2023 |
/s/ Javier Rampolla |
| Javier Rampolla | |
| Chief Financial Officer |
Exhibit 32.1
Certification of CEO Pursuant to 18 U.S.C. Section 1350
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that:
(1) the Quarterly Report for Sensus Healthcare, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered therein.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
|
/s/ Joseph C. Sardano |
|
| Joseph C. Sardano | |
| Chairman and Chief Executive Officer | |
| August 11, 2023 |
Exhibit 32.2
Certification of CFO Pursuant to 18 U.S.C. Section 1350
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that:
(1) the Quarterly Report for Sensus Healthcare, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered therein.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
|
/s/ Javier Rampolla |
|
| Javier Rampolla | |
| Chief Financial Officer | |
| August 11, 2023 |
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Common stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, authorized | 50,000,000 | 50,000,000 |
| Common stock share issued | 16,912,595 | 16,902,761 |
| Common stock shares outstanding | 16,395,766 | 16,390,419 |
| Treasury stock, shares | 516,829 | 512,342 |
Organization and Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 subsidiary, unless the context otherwise indicates, “Sensus” or the “Company”) is primarily a manufacturer of radiation therapy devices sold to healthcare providers and distributors globally through its distribution network. The Company operates in one segment from its corporate headquarters located in Boca Raton, Florida.
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 subsidiary. Accounts and transactions between 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 and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.
The condensed consolidated balance sheet as of December 31, 2022 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, 2022 (the “2022 Annual Report”).
Revenue Recognition
The Company’s revenue derives primarily 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 sales 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, only 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 a 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 under 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, it 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.
Disaggregated revenue for the three and six months ended June 30, 2023 and 2022 was as follows:
The Company operates in a highly regulated environment, primarily in the U.S. dermatology market, in which state regulatory approval is sometimes required before the customer is 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 as of June 30, 2023 was as follows:
The Company does not disclose information about remaining performance obligations with original expected durations of one year or less in connection with deposits for products. Estimated service revenue to be recognized in the future related to performance obligations fully or partially unsatisfied as of June 30, 2023 is as follows:
The Company pays commissions for 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 46% and 78% of revenue for the three months ended June 30, 2023 and 2022, respectively, approximately 52% and 77% of revenue for the six months ended June 30, 2023 and 2022, respectively, and 86% and 91% of the accounts receivable as of June 30, 2023 and December 31, 2022, respectively.
Segment and Geographical Information
The following table illustrates total revenue for the three and six months ended June 30, 2023 and 2022 by geographic region.
Fair Value of Financial Instruments
Carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate fair value due to their relatively 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 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 when 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 3 Inputs:
Unobservable inputs for the valuation of the asset or liability, which may include nonbinding broker quotes.
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
The Company considers all highly liquid financial instruments with maturities of three months or less when purchased to be cash equivalents.
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 varies by customer, primarily due to the customer’s financial condition. 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 allowance for expected credit losses was $28 thousand and $107 thousand as of June 30, 2023 and December 31, 2022, respectively. Bad debt expense was $5 thousand and $0 for the three months ended June 30, 2023 and 2022, respectively, and $5 thousand and $0 for the six months ended June 30, 2023 and 2022, respectively.
Inventories
Inventories consist of finished product and components and are stated at the lower of cost or net realizable value, determined using the first-in-first-out method. The Company periodically reviews the value of items in inventory for obsolescence based on its assessment of market conditions and writes down any obsolete inventory to its net realizable value through a charge to costs of goods sold. The provision for inventory obsolescence was $18 thousand as of both June 30, 2023 and December 31, 2022.
Earnings Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed by giving effect to all potential dilutive common share equivalents outstanding for the period, using the treasury stock method for options and unvested restricted shares. In periods when the Company has incurred a net loss, options and unvested shares are considered common share equivalents but have been excluded from the calculation of diluted net loss per share as their effect is antidilutive. Shares excluded were as follows:
The factors used in the earnings per share computation are as follows:
Leases
The Company evaluates arrangements at inception to determine if an arrangement is or contains a lease. The operating lease right-of-use asset (the “ROU asset”) represents the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The ROU asset and operating lease 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 the options. To determine the present value of the lease payment, 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. In addition, the Company has elected available practical expedients to not separate lease and non-lease components for all leased assets and to exclude leases with initial terms of 12 months or less.
The lease payments used to determine the Company’s operating lease asset may include lease incentives, and stated rent increases are recognized in the ROU asset in the Company’s consolidated balance sheets. The ROU asset is amortized to rent expense over the lease term and included in operating expenses in the 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss model for recognition of credit losses with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. In November 2019, the FASB issued ASU 2019-10, which provides a one-year deferral of the effective dates of ASU No. 2016-13. Accordingly, the guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this update in January 2023. This update did not have a significant impact on the Company’s consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment | Note 2 — Property and Equipment
Depreciation expense was $59 thousand and $50 thousand for the three months ended June 30, 2023 and 2022, respectively, and $107 thousand and $118 thousand for the six months ended June 30, 2023 and 2022, respectively. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangibles |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangibles [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangibles | Note 3 — Intangibles
Accumulated amortization was $1,273 thousand and $1,224 thousand as of June 30, 2023 and December 31, 2022, respectively. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Debt [Abstract] | |
| Debt | Note 4 — Debt
As of December 31, 2022, the Company had a revolving credit facility with Silicon Valley Bank (“SVB”) that provided for maximum borrowings equal to the lesser of (a) the $15 million commitment amount or (b) the borrowing base plus a $7.5 million non-formula sublimit.
On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed receiver. On March 13, 2023, the FDIC transferred all deposits, both insured and uninsured, and substantially all assets of SVB to a newly created, full-service FDIC-operated “bridge bank”, Silicon Valley Bridge Bank, N.A. (“SVBB”), chartered by the Office of the Comptroller of the Currency as a national bank. Subsequently, on March 27, 2023, the FDIC entered into a purchase and assumption agreement for all deposits and loans, as well as certain other assets, of SVBB, with First-Citizens Bank & Trust Company (“FCB”), a subsidiary of First Citizens BancShares, Inc. (“First Citizens”). As a result of this transaction, SVB became a wholly owned subsidiary of FCB.
At June 30, 2023, the available borrowings under this facility were $15 million. Interest on any borrowings, at Prime plus 0.75% (9.00% at June 30, 2023) and Prime plus 1.50% on non-formula borrowings (9.75% at June 30, 2023), is payable monthly, and the outstanding principal and interest are due on the maturity date. The revolving credit facility is secured by all of the Company’s assets.
The Company was in compliance with its financial covenants under the facility as of June 30, 2023 and December 31, 2022. There were no borrowings outstanding under the facility at June 30, 2023 or December 31, 2022. |
Product Warranties |
6 Months Ended | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||
| Product Warranties [Abstract] | ||||||||||||||||||||||||||
| Product Warranties | Note 5 — Product Warranties
Changes in product warranty liability were as follows for the six months ended June 30, 2023:
|
|||||||||||||||||||||||||
Leases |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | Note 6 — Leases
Operating Lease Agreements
The Company leases its headquarters office from an unrelated third party under a lease expiring in September 2027. The amortization of the ROU asset was $46 thousand and $51 thousand for the three months ended June 30, 2023 and 2022, respectively, and $90 thousand and $103 thousand for the six months ended June 30, 2023 and 2022, respectively.
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of June 30, 2023.
Cash paid for amounts included in the measurement of operating lease liabilities was $104 thousand and $97 thousand for the six months ended June 30, 2023 and 2022, respectively, and is included in cash flows from operating activities in the accompanying consolidated statement of cash flows.
Operating lease cost recognized as expense was $57 thousand and $60 thousand for the three months ended June 30, 2023 and 2022, respectively, and $114 thousand and $123 thousand for the six months ended June 30, 2023 and 2022, respectively. The financing component for operating lease obligations represents the effect of discounting the operating lease payments to their present value. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Commitments and Contingencies [Abstract] | |
| Commitments and Contingencies | Note 7 — Commitments and Contingencies
Manufacturing Agreement
In 2010, the Company entered into a three-year contract manufacturing agreement with an unrelated third party for the production and manufacture of the SRT-100 (and subsequently the SRT-100 Vision and the SRT-100 Plus), in accordance with the Company’s product specifications. The agreement renews for successive one-year periods unless either party notifies the other party in writing, at least 60 days prior to the anniversary date of the agreement, that it will not renew the agreement. The Company or the manufacturer may also terminate the agreement upon 90 days’ prior written notice.
Purchases from this manufacturer totaled approximately $1.2 million and $3.5 million for the three months ended June 30, 2023 and 2022, respectively, and $7.9 million and $6.8 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, approximately $1.4 million and $1.5 million, respectively, was due to this manufacturer, which is presented in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.
Legal Contingencies
The Company is a party to certain legal proceedings in the ordinary course of business. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and related contingencies.
In 2015, the Company learned that the Department of Justice (the “Department”) had commenced an investigation of the billing to Medicare by a physician who had treated patients with the Company’s SRT-100. The Department subsequently advised the Company that it was considering expanding the investigation to determine whether the Company had any involvements in physician’s use of certain reimbursements codes. The Company has received two Civil Investigative Demands from the Department seeking documents and written responses in connection with its investigation. The Company has fully cooperated with the Department. The Company disputes that it has engaged in any wrongdoing with respect to such reimbursement claims; among other considerations, the Company does not submit claims for reimbursement or provide coding or billing advice to physicians. To the Company’s knowledge, the Department has made no determination as to whether the Company engaged in any wrongdoing, or whether to pursue any legal action against the Company. Should the Department decide to pursue legal action, the Company believes it has strong and meritorious defenses and will vigorously defend itself. As of June 30, 2023, the Company is unable to estimate the cost associated with this matter. |
Stockholders' Equity |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Stockholders' Equity [Abstract] | |
| Stockholders' Equity | Note 8 — Stockholders’ Equity
Preferred Stock
The Company has authorized 5 million shares of preferred stock. No shares of preferred stock were issued or outstanding at June 30, 2023 or December 31, 2022.
Treasury stock
Treasury stock includes shares surrendered by employees for tax withholding on the vesting of restricted stock awards and shares repurchased in open market transactions. No shares were surrendered by employees for tax withholding in the second quarter of 2023. During the first and second quarters of 2023, the Company did not repurchase any shares in open market transactions. |
Stock-Based Compensation |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | Note 9 – Stock-Based Compensation
2016 and 2017 Equity Incentive Plans
The Company’s 2016 Equity Incentive Plan and the 2017 Incentive Plan, as amended in June 2023 (collectively, the “Plans”), provide for the issuance of up to 397,473 shares and 750,000 shares, respectively. Unless the Compensation Committee specifically determines otherwise, the maximum number of shares available under the Plans and the awards granted under them are subject to appropriate adjustment in the case of any stock dividends, stock splits, recapitalizations, reorganizations, mergers, consolidations, exchanges or other changes in capitalization affecting the Company’s common stock. The awards may be made in the form of restricted stock awards or stock options, among other forms. As of June 30, 2023, 307,473 shares are available for grant under the Plans.
On February 1, 2020, a total of 35,000 shares of restricted stock were issued to employees. The restricted shares vest 25% per year over a four-year period. The grant date fair value of $4.11 per share is being recognized as expense on a straight-line basis over the vesting period. During the first quarter of 2023, 7,500 shares of unvested common stock were forfeited due to the termination of employment for two employees with the Company.
On July 21, 2021, a total of 130,000 shares of restricted stock were issued to employees and board members. The restricted shares vest 25% at grant date and 25% per year over a three-year period. The grant date fair value of $3.84 per share is being recognized as expense on a straight-line basis over the vesting period.
On December 19, 2022, a total of 77,000 shares of restricted stock were issued to employees. The restricted shares vest 25% per year over a four-year period. The fair value of $6.40 per share, the stock price on grant date, is being recognized as expense on a straight-line basis over the vesting period. During the second quarter of 2023, 1,000 shares of unvested common stock were forfeited due to the termination of employment for one employee with the Company.
On January 26, 2023, 10,000 shares of common stock were issued to an employee and were recorded at the fair value of $8.96 per share, the stock price on the grant date. The shares vested at grant date.
Restricted Stock
Restricted stock activity for the six months ended June 30, 2023 is summarized below:
The Company recognizes forfeitures as they occur rather than estimating a forfeiture rate. The reduction of stock compensation expense related to the forfeitures was $1 thousand and $0 for the three months ended June 30, 2023 and 2022, respectively, and $19 thousand and $0 for the six months ended June 30, 2023 and 2022, respectively.
Unrecognized stock compensation expense was $557 thousand as of June 30, 2023, which will be recognized over a weighted average period of 3 years.
Stock Options
Stock options expire 10 years after the grant date. Options that have been granted are exercisable and vest based on the terms on the related agreements.
The following table summarizes the Company’s stock option activity:
The stock options outstanding had an intrinsic value of $0 and $183 thousand as of June 30, 2023 and December 31, 2022, respectively.
Stock compensation expense related to restricted stock, excluding the recognition of forfeitures, was $67 thousand and $40 thousand for the three months ended June 30, 2023 and 2022, respectively, and $228 thousand and $97 thousand for the six months ended June 30, 2023 and 2022, respectively
In the first quarter of 2023, the Company issued 8,334 shares of common stock upon the exercise of stock options with an exercise price of $5.55 per share. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Income Taxes [Abstract] | |
| Income Taxes | Note 10 — Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, (“ASC 740”), which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Effective income tax rates for interim periods are based upon the Company’s current estimated annual rate, which varies based upon the Company’s estimate of taxable earnings or loss and the mix of taxable earnings or loss in the various states in which the Company operates. In addition, the Company recognizes taxes related to unusual or infrequent items or resulting from a change in judgment regarding a position taken in a prior period as discrete items in the interim period in which the event occurs.
For the quarter ended March 31, 2022, the Company recorded a net valuation allowance release of $3.7 million on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2023, management determined there continues to be sufficient positive evidence that it is more likely than not that the net deferred tax asset (other than foreign net operation losses) is realizable.
Income tax (benefit) expense was ($502) thousand and $1,070 thousand for the three months ended June 30, 2023 and 2022, respectively. Income tax (benefit) expense was ($1,303) thousand and $1,718 thousand for the six months ended June 30, 2023 and 2022, respectively.
The effective tax rates for the three months ended June 30, 2023 and 2022 were 56.9% and 23.3%, respectively. The effective tax rates for the six months ended June 30, 2023 and 2022 were 36.4% and 8.1%, respectively. The increase in our effective tax rate for the three months ended June 30, 2023 compared to the prior year was primarily due to an increase in the proportion of non-deductible expenses to pretax book income. The increase in our effective tax rate for the six months ended June 30, 2023 compared to the prior year was primarily due to the valuation allowance release in the first quarter of 2022.
Our effective tax rate differs from the U.S. federal statutory rate for the three and six months ended June 30, 2023, primarily due to nondeductible expenses and state income taxes. Our effective tax rate differs from the U.S. federal statutory rate for the three and six months ended June 30, 2022, primarily due to state income taxes and the valuation allowance release, respectively.
As of June 30, 2023, the Company’s U.S. federal and certain state tax returns remain subject to examination, beginning with those filed for the year ended December 31, 2017. |
Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 11 — Subsequent Events
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued for potential recognition or disclosure. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements. |
Accounting Policies, by Policy (Policies) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Principles of Consolidation | 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 subsidiary. Accounts and transactions between 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 and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period. The condensed consolidated balance sheet as of December 31, 2022 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, 2022 (the “2022 Annual Report”). |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Recognition | Revenue Recognition The Company’s revenue derives primarily 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 sales 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, only 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 a 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 under 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, it 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. Disaggregated revenue for the three and six months ended June 30, 2023 and 2022 was as follows:
The Company operates in a highly regulated environment, primarily in the U.S. dermatology market, in which state regulatory approval is sometimes required before the customer is 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 as of June 30, 2023 was as follows:
The Company does not disclose information about remaining performance obligations with original expected durations of one year or less in connection with deposits for products. Estimated service revenue to be recognized in the future related to performance obligations fully or partially unsatisfied as of June 30, 2023 is as follows:
The Company pays commissions for 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 | 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 46% and 78% of revenue for the three months ended June 30, 2023 and 2022, respectively, approximately 52% and 77% of revenue for the six months ended June 30, 2023 and 2022, respectively, and 86% and 91% of the accounts receivable as of June 30, 2023 and December 31, 2022, respectively. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment and Geographical Information | Segment and Geographical Information The following table illustrates total revenue for the three and six months ended June 30, 2023 and 2022 by geographic region.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments | Fair Value of Financial Instruments Carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate fair value due to their relatively short maturities. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements | 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 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 when 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 3 Inputs: Unobservable inputs for the valuation of the asset or liability, which may include nonbinding broker quotes.
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 The Company considers all highly liquid financial instruments with maturities of three months or less when purchased to be cash equivalents. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable | 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 varies by customer, primarily due to the customer’s financial condition. 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 allowance for expected credit losses was $28 thousand and $107 thousand as of June 30, 2023 and December 31, 2022, respectively. Bad debt expense was $5 thousand and $0 for the three months ended June 30, 2023 and 2022, respectively, and $5 thousand and $0 for the six months ended June 30, 2023 and 2022, respectively. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories | Inventories Inventories consist of finished product and components and are stated at the lower of cost or net realizable value, determined using the first-in-first-out method. The Company periodically reviews the value of items in inventory for obsolescence based on its assessment of market conditions and writes down any obsolete inventory to its net realizable value through a charge to costs of goods sold. The provision for inventory obsolescence was $18 thousand as of both June 30, 2023 and December 31, 2022. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share | Earnings Per Share Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income per share is computed by giving effect to all potential dilutive common share equivalents outstanding for the period, using the treasury stock method for options and unvested restricted shares. In periods when the Company has incurred a net loss, options and unvested shares are considered common share equivalents but have been excluded from the calculation of diluted net loss per share as their effect is antidilutive. Shares excluded were as follows:
The factors used in the earnings per share computation are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | Leases The Company evaluates arrangements at inception to determine if an arrangement is or contains a lease. The operating lease right-of-use asset (the “ROU asset”) represents the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The ROU asset and operating lease 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 the options. To determine the present value of the lease payment, 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. In addition, the Company has elected available practical expedients to not separate lease and non-lease components for all leased assets and to exclude leases with initial terms of 12 months or less. The lease payments used to determine the Company’s operating lease asset may include lease incentives, and stated rent increases are recognized in the ROU asset in the Company’s consolidated balance sheets. The ROU asset is amortized to rent expense over the lease term and included in operating expenses in the consolidated statements of income (loss). |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | 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 | Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss model for recognition of credit losses with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. In November 2019, the FASB issued ASU 2019-10, which provides a one-year deferral of the effective dates of ASU No. 2016-13. Accordingly, the guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this update in January 2023. This update did not have a significant impact on the Company’s consolidated financial statements. Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization and Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Disaggregated Revenue | Disaggregated
revenue for the three and six months ended June 30, 2023 and 2022 was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Revenue | Deferred
revenue as of June 30, 2023 was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Estimated Service Revenue to Be Recognized | Estimated service revenue to be recognized in the future related to performance obligations fully
or partially unsatisfied as of June 30, 2023 is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Illustrates Total Revenuee | The
following table illustrates total revenue for the three and six months ended June 30, 2023 and 2022 by geographic region
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Basic Net Income (Loss) Per Share | common share equivalents but have been excluded from the calculation of diluted
net loss per share as their effect is antidilutive. Shares excluded were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share Computation | The
factors used in the earnings per share computation are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangibles (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangibles [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Product Warranties (Tables) |
6 Months Ended | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||
| Product Warranties [Abstract] | ||||||||||||||||||||||||||
| Schedule of Changes in Product Warranty Liability | Changes in product warranty liability
were as follows for the six months ended June 30, 2023:
|
|||||||||||||||||||||||||
Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Operating Leases | The following table presents information
about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of June 30, 2023.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Restricted Stock Activity | Restricted stock activity for the six
months ended June 30, 2023 is summarized below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Stock Option Activity | The following table summarizes the Company’s stock option activity:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | |||||
| Allowance for doubtful accounts receivable, current | $ 28 | $ 28 | $ 107 | ||
| Bad debt expenses | 5 | $ 0 | 5 | $ 0 | |
| Reserve for inventory obsolescence | $ 18 | $ 18 | $ 18 | ||
| Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Customer [Member] | |||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | |||||
| Concentration risk percentage 1 | 46.00% | 78.00% | 52.00% | 77.00% | |
| Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer [Member] | |||||
| Organization and Summary of Significant Accounting Policies (Details) [Line Items] | |||||
| Concentration risk percentage 1 | 86.00% | 91.00% | |||
Organization and Summary of Significant Accounting Policies (Details) - Schedule of Disaggregated Revenue - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Disaggregation of Revenue [Line Items] | ||||
| Total Revenue | $ 4,527 | $ 12,080 | $ 7,941 | $ 22,417 |
| Product Revenue - recognized at a point in time [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total Revenue | 3,524 | 10,970 | 5,993 | 20,199 |
| Service Revenue - recognized at a point in time [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total Revenue | 306 | 205 | 647 | 524 |
| Service Revenue - recognized over time [Member] | ||||
| Disaggregation of Revenue [Line Items] | ||||
| Total Revenue | $ 697 | $ 905 | $ 1,301 | $ 1,694 |
Organization and Summary of Significant Accounting Policies (Details) - Schedule of Deferred Revenue $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
USD ($)
| |
| Organization and Summary of Significant Accounting Policies (Details) - Schedule of Deferred Revenue [Line Items] | |
| Balance, beginning of period | $ 832 |
| Revenue recognized | (1,310) |
| Amounts invoiced | 1,286 |
| Balance, end of period | 808 |
| Product [Member] | |
| Organization and Summary of Significant Accounting Policies (Details) - Schedule of Deferred Revenue [Line Items] | |
| Balance, beginning of period | 45 |
| Revenue recognized | (9) |
| Amounts invoiced | |
| Balance, end of period | 36 |
| Service [Member] | |
| Organization and Summary of Significant Accounting Policies (Details) - Schedule of Deferred Revenue [Line Items] | |
| Balance, beginning of period | 787 |
| Revenue recognized | (1,301) |
| Amounts invoiced | 1,286 |
| Balance, end of period | $ 772 |
Organization and Summary of Significant Accounting Policies (Details) - Schedule of Estimated Service Revenue to Be Recognized $ in Thousands |
Jun. 30, 2023
USD ($)
|
|---|---|
| Schedule of Estimated Service Revenue to be Recognized [Abstract] | |
| 2023 (July 1 - December 31, 2023) | $ 457 |
| 2024 | 255 |
| 2025 | 40 |
| 2026 | 20 |
| Total | $ 772 |
Organization and Summary of Significant Accounting Policies (Details) - Schedule of Basic Net Income (Loss) Per Share - shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Organization and Summary of Significant Accounting Policies (Details) - Schedule of Basic Net Income (Loss) Per Share [Line Items] | ||||
| Total | 235,550 | 235,550 | ||
| Stock Options [Member] | ||||
| Organization and Summary of Significant Accounting Policies (Details) - Schedule of Basic Net Income (Loss) Per Share [Line Items] | ||||
| Total | 89,550 | 89,550 | ||
| Restricted Stock [Member] | ||||
| Organization and Summary of Significant Accounting Policies (Details) - Schedule of Basic Net Income (Loss) Per Share [Line Items] | ||||
| Total | 146,000 | 146,000 | ||
Organization and Summary of Significant Accounting Policies (Details) - Schedule of Earnings Per Share Computation - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Basic | ||||
| Net income (loss) (in Dollars) | $ (380) | $ 3,524 | $ (2,274) | $ 19,586 |
| Weighted average common shares outstanding | 16,250 | 16,495 | 16,248 | 16,509 |
| Basic earnings per share (in Dollars per share) | $ (0.02) | $ 0.21 | $ (0.14) | $ 1.19 |
| Diluted | ||||
| Net income (loss) (in Dollars) | $ (380) | $ 3,524 | $ (2,274) | $ 19,586 |
| Weighted average common shares outstanding | 16,250 | 16,495 | 16,248 | 16,509 |
| Dilutive effects of: | ||||
| Assumed exercise of stock options | 60 | 127 | ||
| Restricted stock awards | 76 | 75 | ||
| Dilutive shares | 16,250 | 16,631 | 16,248 | 16,711 |
| Diluted earnings per share (in Dollars per share) | $ (0.02) | $ 0.21 | $ (0.14) | $ 1.17 |
Property and Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Property and Equipment [Abstract] | ||||
| Depreciation expenses | $ 59 | $ 50 | $ 107 | $ 118 |
Property and Equipment (Details) - Schedule of Property and Equipment - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, gross | $ 2,590 | $ 2,374 |
| Less accumulated depreciation | (2,223) | (2,131) |
| Property and Equipment, Net | 367 | 243 |
| Operations equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, gross | $ 1,241 | 1,222 |
| Property, plant and equipment, estimated useful Life | 3 years | |
| Tradeshow and demo equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, gross | $ 1,178 | 990 |
| Property, plant and equipment, estimated useful Life | 3 years | |
| Computer Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment, gross | $ 171 | $ 162 |
| Property, plant and equipment, estimated useful Life | 3 years |
Intangibles (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Intangibles [Abstract] | ||
| Accumulated amortization | $ 1,273 | $ 1,224 |
Intangibles (Details) - Schedule of Intangible Assets $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
USD ($)
| |
| Finite-Lived Intangible Assets [Line Items] | |
| Beginning balance | $ 50 |
| Amortization expense | (49) |
| Ending balance | 1 |
| Patent Rights [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Beginning balance | 49 |
| Amortization expense | (49) |
| Ending balance | |
| Customer Relationships [Member] | |
| Finite-Lived Intangible Assets [Line Items] | |
| Beginning balance | 1 |
| Amortization expense | |
| Ending balance | $ 1 |
Debt (Details) - USD ($) $ in Millions |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Debt (Details) [Line Items] | ||
| Commitment amount (in Dollars) | $ 7.5 | |
| Borrowing facility amount (in Dollars) | $ 15.0 | |
| Prime Rate [Member] | ||
| Debt (Details) [Line Items] | ||
| Borrowing interest | 0.75% | |
| Non formula borrowings | 1.50% | |
| Base Rate [Member] | ||
| Debt (Details) [Line Items] | ||
| Borrowing interest | 9.00% | |
| Non formula borrowings | 9.75% | |
| Silicon valley bank [Member] | ||
| Debt (Details) [Line Items] | ||
| Commitment amount (in Dollars) | $ 15.0 |
Product Warranties (Details) - Schedule of Changes in Product Warranty Liability $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
USD ($)
| |
| Schedule of Changes in Product Warranty Liability [Abstract] | |
| Balance, beginning of period | $ 403 |
| Warranties accrued during the period | 281 |
| Payments on warranty claims | (305) |
| Balance, end of period | $ 379 |
Leases (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Leases [Abstract] | ||||
| Amortization | $ 46 | $ 51 | $ 90 | $ 103 |
| Operating lease expense | 104 | 97 | ||
| Operating lease cost | $ 57 | $ 60 | $ 114 | $ 123 |
Leases (Details) - Schedule of Operating Leases $ in Thousands |
Jun. 30, 2023
USD ($)
|
|---|---|
| Schedule of Operating Leases [Abstract] | |
| 2023 (July 1 - December 31, 2023) | $ 111 |
| 2024 | 223 |
| 2025 | 229 |
| 2026 | 236 |
| 2027 | 181 |
| Total undiscounted operating leases payments | 980 |
| Less: Imputed interest | (101) |
| Present Value of Operating Lease Liabilities | $ 879 |
| Other Information | |
| Weighted-average remaining lease term | 4 years 3 months |
| Weighted-average discount rate | 5.00% |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Commitments and Contingencies [Abstract] | |||||
| Purchase commitment amount | $ 1.2 | $ 3.5 | $ 7.9 | $ 6.8 | |
| Accounts payable and accrued expenses | $ 1.4 | $ 1.4 | $ 1.5 | ||
Stockholders' Equity (Details) - shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Stockholders' Equity [Abstract] | ||
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Stock-Based Compensation (Details) - Schedule of Restricted Stock Activity |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Schedule of Restricted Stock Activity [Abstract] | |
| Restricted Stock, balance at beginning | shares | 159,500 |
| Weighted-Average Grant Date Fair Value, balance at beginning | $ / shares | $ 5.11 |
| Restricted Stock, Granted | shares | 10,000 |
| Weighted-Average Grant Date Fair Value, Granted | $ / shares | $ 8.96 |
| Restricted Stock, Vested | shares | (15,000) |
| Weighted-Average Grant Date Fair Value, Vested | $ / shares | $ 7.34 |
| Restricted Stock, Forfeited | shares | (8,500) |
| Weighted-Average Grant Date Fair Value, Forfeited | $ / shares | $ 4.38 |
| Restricted Stock, balance at ending | shares | 146,000 |
| Weighted-Average Grant Date Fair Value, balance at ending | $ / shares | $ 5.18 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Mar. 31, 2022 |
|
| Income Taxes [Abstract] | |||||
| Valuation allowance | $ 3,700 | ||||
| Income tax expense | $ 502 | $ 1,070 | $ 1,303 | $ 1,718 | |
| Effective tax rate | 56.90% | 23.30% | 36.40% | 8.10% | |
@KO1"KO1&"_DZ5P+!BM!X,%
MWO;Z^)T5[!2.R:T 7WWT6S\.P)DR>=R9.GT/^0
M=YY&^DD[":?P_7>+.(K.X%$NXC":@:@R>IC#NV^U*<4ZRR3G)IF