Item 1A. RISK FACTORS
An investment in Sensus’s common
stock contains a high degree of risk. Investors should carefully consider the following risks and uncertainties before making an
investment decision with respect to our common stock. These disclosures reflect the Company’s beliefs and opinions as to
factors that could materially and adversely affect the Company and its securities in the future. Our business, including our operating
results and financial conditions, could be harmed if any of these risks, as well as other risks not currently known to us or that
we currently deem immaterial, were to materialize. The trading price of Sensus’s common stock could decline due to the occurrence
of any of these risks. In assessing these risks, investors should also refer to the other information included in our filings with
the SEC, including our financial statements and the related notes. References to past events are provided by way of example only
and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or
their likelihood of occurring in the future.
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Risks Related to our Business
If third-party payors do not provide
coverage and adequate reimbursement for the use of our products, it is unlikely that our products will be widely used, and our
revenue will be negatively impacted.
In the U.S., the commercial success of
Sensus’s existing products and any future products will depend, in part, on the extent to which governmental payors at the
federal and state levels, including Medicare and Medicaid, private health insurers, and other third-party payors provide coverage
for and establish adequate reimbursement levels for procedures using these products. Neither hospitals nor physicians are likely
to use Sensus’s products if they do not receive adequate reimbursement payments for the procedures using these products.
Some private payors in the U.S. may base
their reimbursement policies on the coverage decisions determined by CMS. Others may adopt different coverage or reimbursement
policies for procedures performed using Sensus’s products, while some governmental programs, such as Medicaid, have reimbursement
policies that vary from state to state, some of which may not pay an amount that supports the selling price of Sensus’s products,
if at all. A Medicare national or local coverage decision denying coverage for any of the procedures performed using the Company’s
products could result in private and other third-party payors also denying coverage. Medicare (Part B) and a number of private
insurers in the U.S. currently cover and pay for both non-melanoma skin cancer and keloid treatments using the SRT-100. A withdrawal,
or even contemplation of a withdrawal, by CMS, Medicaid or private payors of reimbursements, or any other unfavorable coverage
or reimbursement decisions by government programs or private payors, could have a material adverse effect on the Company’s
revenues and business.
Reimbursement systems in international
markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country
basis. In many international markets, a product must be approved for reimbursement before it can be cleared for sale in that country.
Further, many international markets have government-managed healthcare systems that control reimbursement for new devices and procedures.
In most markets there are private insurance systems as well as government-managed systems. Sensus’s products may not be considered
cost-effective by international third-party payors or governments managing healthcare systems. Furthermore, reimbursement may not
be available or, if available, third-party payors’ reimbursement policies may adversely affect the Company’s ability
to sell products profitably. If sufficient coverage and reimbursement are not available for Sensus’s products, in either
the U.S. or internationally, the demand for these products and, consequently, the Company’s revenues and business, will be
adversely affected.
Substantially all of the Company’s
revenue is generated from the sale of the SRT-100 and related products, and any decline in the sales of these products will negatively
impact the Company’s business, financial condition, and results of operations.
The Company is focused heavily on the development
and commercialization of a limited number of products for the treatment of non-melanoma skin cancer and other skin conditions with
SRT. From the Company’s inception in 2010 through December 31, 2025, revenue has primarily been derived from sales of the
SRT-100 product line and related services and ancillary products. Although the Company has introduced new products, the Company
expects most of revenue in the near to medium term to be derived from or related to sales of the SRT-100 product line. Because
of this, any decline in the sales of these products will negatively impact the Company’s business, financial condition, and
results of operations.
The Company’s technology could
be superseded by new products, treatments, or technologies that gain wider acceptance among doctors and patients, which could adversely
affect the Company.
The medical device industry is highly competitive
and subject to rapid technological change, and is significantly affected by the introduction of new products and treatment options.
The Company’s products, some of which use technologies that have been available for many years, compete for market acceptance
against those of healthcare providers who use other methods of treatment for similar diseases and conditions. Our success depends
on our ability to keep pace with rapid technological changes affecting the development of our products and our operations. Emerging
technological trends such as artificial intelligence, machine learning, and automation are impacting many industries and business
operations, including ours. If we do not adequately invest in new technology, appropriately implement new technologies, or evolve
our business at sufficient speed and scale in response to such developments, or if we do not make the right strategic investments
to respond to these developments, our products, results of operations, and ability to develop and maintain our business could be
negatively affected. Such investments could require substantial expenditures to the extent we were to modify or adapt our existing
products and services to keep pace with such new technologies. If new products, treatments, and/or technologies are developed by
our competitors or other third parties more quickly or more successfully than us that gain wide acceptance among doctors and patients,
including products or treatments developed by our significant customers, it could take market share away from the Company, which
could adversely affect the Company’s render the Company’s products obsolete, which could impair our ability to compete
effectively and adversely affect our results of operations.
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The Company’s customers, including
one U.S. customer accounting for a significant portion of our sales, are concentrated in the U.S., and economic difficulties or
changes in the purchasing policies or patterns of the Company’s customers in the U.S. has had and could have in the future
a significant impact on our business and operating results.
Most of the Company’s sales have
been made to customers located in the U.S. (92% and 96% in the years ended December 31, 2025 and 2024, respectively). Additionally,
a single customer in the U.S. accounted for 52% and 73% of revenues for the years ended December 31, 2025, and December 31, 2024,
respectively. Because of these concentrations, changes in economic conditions, competitive products (including any developed by
our significant customers), or the loss of, reduction of business with, or less favorable terms with, our significant customer
or other U.S. customers, has caused, and may cause in the future, significant fluctuations in our revenue. A reduction or delay
in orders for the Company’s products for these or other reasons has in the past, and could in the future, materially harm
our business and results of operations.
The Company has a single preferred
supplier for the x-ray tubes and other major components used in the Company’s products and the loss of this preferred supplier
could adversely affect the Company.
The Company has a single preferred supplier
for the x-ray tubes and other major components used in the Company’s products. Although other suppliers exist in the market,
the Company believes that our preferred supplier’s products are of a superior quality. The loss of the preferred supplier,
or its inability to supply the Company with an adequate supply of these components, could hinder the Company’s ability to
effectively produce the Company’s products to meet existing demand levels, especially if the Company were unable to timely
procure them from other suppliers in the market, which could adversely affect the Company’s ability to commercialize products
and to maintain or increase revenues.
The Company’s operations may
be impaired if our information technology systems fail to perform adequately or are the subject of a data breach or cyberattack.
The Company’s information technology
systems are critically important to operating business efficiently. The Company relies on information technology systems to manage
business data, communications, employee information, and other business processes. The Company outsources certain business process
functions to third-party providers and similarly relies on these third parties to maintain and store confidential information on
their systems. The failure of these information technology systems to perform as the Company anticipates could disrupt business
and could result in transaction errors, processing inefficiencies, and the loss of sales and customers, causing business and results
of operations to suffer.
The Company has experienced, and expects
to continue to experience, cyber security threats and incidents, none of which have been material to the Company to date. Although
the Company protects its information technology systems, the Company has experienced varying degrees of cyber security threats
incidents in the normal conduct of business, which include the use of computer malware, ransomware, computer hacking, viruses,
worms, phishing, and other malicious activities that could result in unauthorized access, theft, misuse, loss, release, or destruction
of data, account takeovers, unavailability of services, or other events. These types of threats may derive from human error, fraud,
or malice on the part of external or internal parties or may result from accidental technological failure. Further, these types
of threats may be exacerbated by recent developments in artificial intelligence and its increased use to produce sophisticated
malware, phishing schemes, and other fraudulent activities. The development and maintenance of measures to mitigate against cyber
security risks is costly and time-consuming, requiring continuous monitoring as technologies change and efforts to overcome security
measures evolve.
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Although there have been no serious consequences
to date, cyber security incidents or other significant disruption of our information systems or those of our customers or third-party
vendors could occur, and, if they do, they could (i) disrupt the proper functioning of our networks and systems and therefore our
operations; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of confidential,
sensitive, or otherwise valuable information of ours; (iii) result in a violation of applicable privacy, data protection, and other
laws, subjecting us to additional regulatory scrutiny and exposing us to civil litigation, enforcement actions, governmental fines,
and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result;
or (v) harm our reputation. The occurrence of any of the foregoing could have a material adverse effect on our business, financial
condition, and results of operations. Furthermore, in the event of a cyber-related incident, we may be delayed in identifying or
responding to the incident, which could increase the negative impact of the incident on our business, financial condition, and
results of operations.
The Company carries insurance against cyber-related
incidents risks, performs penetration tests from time to time, and designs business processes to attempt to mitigate the risk of
such incidents. While our cyber insurance coverage would apply in the event of certain cyber-related incidents, the amount of coverage
may not be adequate depending on the magnitude of the incident. Furthermore, because cyber-related incidents are inherently difficult
to predict and can take many forms, some incidents may not be covered under our cyber insurance coverage.
Sensus may be required to obtain
additional funds in the future, and these funds may not be available on acceptable terms or at all.
Sensus’s operations have consumed
substantial amounts of cash since its inception. Sensus may need to seek additional capital, as our existing financial resources
including our revolving line of credit (which restricts the ability to incur certain indebtedness or permit certain encumbrances
on assets without the prior written consent of the lender), may not allow us to conduct all of the activities that would be beneficial
for future growth. If Sensus is unable to raise funds on favorable terms, or at all, it may not be able to support commercialization
efforts, increase research and development activities, compete effectively, or meet debt and other contractual obligations, and
the growth of our business may be negatively impacted.
The Company’s cash requirements in
the future may be significantly different from current estimates and depend on many factors, including:
● the results of commercialization efforts for products;
● the need for additional capital to fund development programs;
● success in entering into collaborative relationships with other parties.
To the extent that Sensus raises additional
capital through the sale of equity or convertible debt securities, the ownership interests of the existing stockholders will be
diluted. Moreover, the terms of newly issued securities may include liquidation or other preferences that adversely affect common
stockholders’ rights. Debt financing, if available, may involve covenants limiting or restricting our ability to take specific
actions such as incurring additional debt, making capital expenditures, or declaring distributions or dividends. If Sensus raises
additional funds through collaboration and licensing arrangements with third parties, the Company may have to relinquish valuable
rights to technologies or products or to grant licenses on terms that are not favorable. Any of these events could adversely affect
Sensus’s ability to declare dividends on its common stock and to achieve future product development and commercialization
goals and could have a material adverse effect on our business, financial condition, and results of operations.
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Consolidation in the healthcare industry
could adversely affect the Company’s future revenues and operating income.
The medical technology industry has experienced
a significant amount of consolidation, resulting in companies with greater market presence. Health care systems and other health
care companies are also consolidating, resulting in greater purchasing power for the combined companies. The disruption in the
healthcare industry caused by consolidation may lead to further competition among medical device suppliers to provide goods and
services, which could adversely affect the Company’s future revenues and operating income.
Pandemics, natural disasters, global
climate change, acts of terrorism and global conflicts may have a negative impact on our business and operations.
Pandemics (such as the COVID-19 pandemic),
natural disasters, global climate change, acts of terrorism, global conflicts or other similar events have in the past, and may
in the future have, a negative impact on our business and operations. These events impact us negatively to the extent that they
result in disruptions in the global and national economies and certain industries and geographies in which we operate. In addition,
these or similar events may impact economic growth negatively, which could have an adverse effect on our business and operations
and may have other adverse effects on us in ways that we are unable to predict.
Risks Related to our Regulatory Environment
Sensus is subject to various federal,
state, and foreign healthcare laws and regulations, and a finding of failure to comply with these laws and regulations could have
a material adverse effect on its business.
Sensus’s operations are, and will
continue to be, directly and indirectly affected by various federal, state, and foreign healthcare laws, including, but not limited
to, those described below.
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Additionally, HIPAA, as amended by HITECH,
and applicable implementing regulations, impose certain requirements relating to the privacy, security, and transmission of individually
identifiable health information without appropriate authorization on entities subject to the law, such as health plans, clearinghouses,
and healthcare providers and their business associates. Internationally, substantially every jurisdiction in which we operate has
established its own data security and privacy legal framework with which we must comply, including the Data Protection Directive
95/46/EC and national implementation of the Directive in the member states of the European Union.
Many states have also adopted laws similar
to each of the above federal laws, such as anti-kickback and false claims laws, which may be broader in scope and apply to items
or services reimbursed by any third-party payor, including commercial insurers, as well as laws that restrict our marketing activities
with healthcare professionals and entities, and require the Company to track and report payments and other transfers of value,
including consulting fees, provided to healthcare professionals and entities. Some states mandate implementation of compliance
programs to ensure compliance with these laws. Additionally, certain states require a certificate of need prior to the installation
of a radiation device, such as the SRT-100. The Company is also subject to foreign fraud and abuse laws, which vary by country.
If the Company’s operations are found
to be in violation of any of the laws or regulations described above or any other governmental laws or regulations that apply now
or in the future, it may be subject to penalties, including administrative, civil, and criminal penalties; damages; fines; disgorgement;
individual imprisonment; contractual damages; reputational harm; exclusion from governmental healthcare programs; and the curtailment
or restructuring of its operations. Any of the foregoing could adversely affect the Company’s ability to operate its business
and financial results.
Sensus is required to comply with
medical device reporting requirements and must report certain malfunctions, deaths, and serious injuries associated with its products,
which can result in voluntary corrective actions or agency enforcement actions.
Under the FDA’s medical device reporting
regulations (21 CFR 803), medical device manufacturers are required to submit information to the U.S. Food and Drug Administration
when they receive a report or become aware that a device has or may have caused or contributed to a death or serious injury or
has or may have a malfunction that would likely cause or contribute to death or serious injury if the malfunction were to recur.
All manufacturers placing medical devices on the market in the European Economic Area are legally bound to report any serious or
potentially serious incidents involving devices they produce or sell (MEDDEV 2.12-1) to the competent authority in whose jurisdiction
the incident occurred through the “European Vigilance” process.
If an event subject to medical device reporting
requirements occurs, Sensus will need to comply with the reporting requirements, which would adversely affect its reputation and
subject Sensus to actions by regulatory authorities, such as ordering recalls, imposing fines, or seizing the affected products.
Furthermore, any corrective action, whether voluntary or involuntary, will require the dedication of time and capital and will
distract management from business operations. Any of the foregoing would negatively impact Sensus’s reputation, business,
and financial results.
Healthcare policy changes may have
a material adverse effect on Sensus’s business.
The Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act, included, among other things, comparative effectiveness research,
an independent payment advisory board, payment system reforms (including shared savings pilots), and other provisions, one or more
of which may significantly affect the payment for, and the availability of, healthcare services and may result in fundamental changes
to federal healthcare reimbursement programs, any of which may materially affect numerous aspects of our business.
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Other healthcare reform measures may result
in more rigorous coverage criteria and in additional downward pressure on the reimbursement received for procedures utilizing our
products. In addition, other legislative changes have been proposed and adopted since the law discussed above was enacted that
may adversely affect Sensus’s revenues. Changes to existing laws may result in additional reductions in Medicare and other
healthcare funding, which could have a material adverse effect on Sensus’s business and financial operations. Any reduction
in reimbursement from Medicare or other government programs may result in a reduction in payments from private payors. The implementation
of cost containment measures or other healthcare reforms may prevent Sensus from being able to increase revenue, attain profitability,
or commercialize its devices. In addition, other legislative changes may be enacted or existing regulations, guidance, or interpretations
may be changed, each of which may adversely affect our operations.
Risks Related to our Intellectual Property
If Sensus’s patents and other
intellectual property rights do not adequately protect its products, it may lose market share to competitors and be unable to operate
business profitably.
Sensus’s success significantly depends
on its ability to protect proprietary rights to the technologies used in its products. Sensus relies on three U.S. patents and
two foreign patents, as well as a combination of copyright, trade secret, and trademark laws, and nondisclosure, confidentiality,
and other contractual restrictions, to protect its proprietary technology. Sensus also has patent applications currently pending
and in the process of being submitted. However, these legal means afford only limited protection and may not adequately protect
its rights or permit Sensus to gain or keep any competitive advantage. For example, some or all of the pending patent applications
or any future pending applications may be unsuccessful. The U.S. Patent and Trademark Office may deny or require significant narrowing
of claims in the pending patent applications or future patent applications, and patents issued as a result of these patent applications,
if any, may not provide Sensus with significant commercial protection or be issued in a form that is advantageous. Sensus could
also incur substantial costs in proceedings before the U.S. Patent and Trademark Office. These proceedings could result in adverse
decisions as to the priority of its inventions and the narrowing or invalidation of claims in its issued patents. Third parties
may successfully challenge issued patents and those that may be issued in the future, which would render these patents invalid
or unenforceable, which in turn could limit Sensus’s ability to stop competitors from marketing and selling related products.
In addition, pending patent applications include claims to aspects of Sensus’s products and procedures that are not currently
protected by issued patents, and third parties may successfully patent those aspects before us or otherwise challenge our rights
to these aspects.
Both the patent application process and
the process of managing patent disputes can be time consuming and expensive. Competitors may be able to design around Sensus’s
patents or develop products that provide outcomes that are comparable to Sensus’s products. Although Sensus has entered into
confidentiality agreements and intellectual property assignment agreements with certain of its employees, consultants, and advisors
in order to protect our intellectual property and other proprietary technology, these agreements may not be enforceable or may
not provide meaningful protection for trade secrets or other proprietary information in the event of unauthorized use or disclosure
or other breaches of the agreements. In addition, Sensus has not sought patent protection in all countries where it sells products.
If Sensus fails to timely file a patent application in any such country or major market, Sensus may be precluded from doing so
at a later date. Competitors may use Sensus’s technologies in jurisdictions where Sensus has not obtained patent protection
to develop their own products and, further, may export otherwise infringing products to territories in which Sensus has patent
protection that may not be sufficient to terminate infringing activities. Furthermore, the laws of some foreign countries may not
protect intellectual property rights to the same extent as the laws of the U.S., if at all.
In the event a competitor infringes upon
one of Sensus’s patents or other intellectual property rights, enforcing those patents and rights may be difficult and time
consuming. Even if successful, litigation to defend these patents against challenges or to enforce Sensus’s intellectual
property rights could be expensive and time consuming and could divert management’s attention. Moreover, Sensus may not have
sufficient resources to defend patents against challenges or to enforce intellectual property rights, any of which would adversely
affect its ability to compete. Any of the foregoing would negatively impact Sensus’s business, operations, and financial
results.
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If Sensus’s trademarks or trade
names are not adequately protected, then Sensus may be unable to build name recognition in markets of interest and its business
may be adversely affected.
Sensus’s registered or unregistered
trademarks or trade names may be challenged, infringed, circumvented, declared generic, or determined to infringe other marks.
Sensus may be unable to protect the rights to these trademarks and trade names, which it needs to build name recognition by potential
partners or customers in markets of interest. If these trademarks are challenged, infringed upon, circumvented, or declared generic
or infringing, or if Sensus is unable to establish name recognition based on these trademarks and trade names, then it may be unable
to compete effectively and Sensus’s business may be adversely affected.
The medical device industry is characterized
by extensive patent litigation, and if Sensus becomes subject to litigation, it could be costly, result in the diversion of management’s
attention, require us to pay significant damages or royalty payments, or prevent us from marketing and selling existing or future
products.
The medical device industry is characterized
by extensive litigation and administrative proceedings over patent and other intellectual property rights. Determining whether
a product infringes a patent involves complex legal and factual issues. As the number of participants in the market for skin cancer
and general oncology devices and treatments increases, the possibility of patent infringement claims against Sensus increases.
Any infringement claims, litigation or other proceedings would place a significant strain on Sensus’s financial resources,
divert the attention of management from the core business and harm Sensus’s reputation. Any of the foregoing could negatively
impact Sensus’s business, operations, and financial results.
Adverse outcomes in litigation or
similar proceedings could adversely impact business.
Sensus may in the future be named as a
party to litigation or other similar legal proceedings. Adverse outcomes in any or all of these proceedings could result in monetary
damages or injunctive relief that could adversely affect its ability to continue conducting business. If an unfavorable final outcome
in any such matter becomes probable and reasonably estimable, the Company’s financial condition could be materially and adversely
affected.
Risks Related to the Ownership of Sensus’s
Securities
We have a history of net losses prior
to 2021 and we reported a net loss in 2025. If we do not return to and maintain profitability, our financial condition and the
value of our common stock could suffer.
The Company has a history of net losses.
The historical losses from inception through December 31, 2021 totaled $17.8 million. While the Company achieved profitability
in 2021 and maintained profitability on an annual basis through 2024, the Company reported a net loss of $7.7 million during the
year ended December 31, 2025. The accumulated net loss prior to 2021 was mainly related to the research and development expenses
in the early stage of the Company. The Company expects to continue to incur significant expenses as it seeks to grow its business,
including costs related to research and development, sales and marketing, and general and administrative functions. The Company
is continuously managing expenses and pursuing strategies to improve operational efficiency and increase revenues. However, there
can be no assurances that these and other actions will result in the Company returning to profitability or, if profitability is
achieved, that the Company will be able to sustain profitability. The Company’s failure to achieve and maintain profitability
could negatively impact our financial condition and the value of our common stock.
Limited trading activity for shares
of Sensus’s common stock may contribute to price volatility.
While Sensus’s common stock is listed
and traded on the Nasdaq Capital Market, there has been limited trading activity in the Company’s shares. Due to the limited
trading activity of Sensus’s common stock, relativity small trades may have a significant impact on the price of our common
stock.
The Company does not anticipate paying
dividends for the foreseeable future. As a result, investors must rely on price appreciation of the Company’s common stock
for a return on its investment in the foreseeable future.
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The Company expects to retain any funds
and future earnings to support the operation, growth, and development of its business and does not anticipate paying any cash dividends
on its common stock in the foreseeable future. As a result, a return on an investor’s investment in the near future will
occur only if the Company’s share price appreciates. The Company’s common stock price may not appreciate in value or
maintain the price at which an investor purchased these securities, and in either case, may not realize a return on investment
or could lose all or part of an investment in the Company’s securities.
Any future determination to declare cash
dividends will be made at the discretion of the Company’s Board of Directors (the “Board of Directors”) and will
be subject to compliance with applicable laws and covenants under any credit facilities, which may restrict or limit the Company’s
ability to pay dividends. For example, the Company’s current revolving line of credit restricts the ability to pay dividends
or make any distributions or payments or redeem, retire, or purchase any capital stock without the prior written consent of the
lender (with limited exceptions). Also, the form, frequency, and amount of dividends will depend upon the Company’s future
operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, and other factors
that the Board of Directors may deem relevant. Sensus may not pay dividends as a result of any of the foregoing, and in these cases,
an investor would need to rely on price appreciation of the Company’s common stock for a return on investment.
Sensus’s executive officers
and directors may exert control over the Company and may exercise influence over matters subject to stockholder approval.
Sensus’s executive officers and directors,
together with their respective affiliates, beneficially owned approximately 9.0% of our outstanding common stock as of February
12, 2026. Accordingly, these stockholders, if they act together, may exercise substantial influence over matters requiring stockholder
approval, including the election of directors and approval of corporate transactions, such as a merger. This concentration of ownership
could have the effect of delaying or preventing a change in control or otherwise discourage a potential acquirer from attempting
to obtain control over Sensus, which in turn could have a material adverse effect on the market value of Sensus’s common
stock.
If securities or industry analysts
do not publish research or publish unfavorable or inaccurate research about Sensus, the price of Sensus’s securities and
trading volume could decline.
The trading market for Sensus’s securities
depends, in part, on the research and reports that securities or industry analysts publish about us. Sensus may be unable to attract
or sustain coverage by well-regarded securities and industry analysts. If either none or only a limited number of securities or
industry analysts cover Sensus, or if these securities or industry analysts are not widely respected within the general investment
community, the trading price for Sensus’s securities would be materially and negatively impacted. In the event Sensus obtains
securities or industry analyst coverage, if one or more of the analysts who cover Sensus downgrades the securities or publishes
inaccurate or unfavorable research about the Company, the price of Sensus’s securities would likely decline. If one or more
of these analysts cease coverage of Sensus, or fail to publish reports on Sensus regularly, demand for the Sensus’s securities
could decrease, which might cause the price of its securities and trading volume to decline.
The Company’s certificate of
incorporation and bylaws, and Delaware law contain provisions that could discourage another company from acquiring the Company
and may prevent attempts by the Company’s stockholders to replace or remove the current directors and management.
Provisions of the Delaware General Corporation
Law (“DGCL”) and the Company’s certificate of incorporation and bylaws may discourage, delay, or prevent a merger
or acquisition that stockholders may consider favorable, including transactions in which an investor might otherwise receive a
premium for its stock. In addition, these provisions may frustrate or prevent any attempts by the Company’s stockholders
to replace or remove the current management by making it more difficult for stockholders to replace or remove directors from the
Board of Directors. These provisions include:
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● prohibiting stockholder action by written consent;
In addition, the Company is subject to
Section 203 of the DGCL, which may have an anti-takeover effect with respect to transactions not approved in advance by the Board
of Directors, including discouraging takeover attempts that could result in a premium over the market price for shares of the Company’s
common stock. These provisions will apply even if a takeover offer may be considered beneficial by some stockholders and could
delay or prevent an acquisition that the Board of Directors determines is not in the best interests of the Company and its stockholders
and could also affect the price that some investors are willing to pay for the Company’s common stock.
The Company’s certificate of
incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes
between the Company and its stockholders, which could limit a stockholder’s ability to obtain a favorable judicial forum
for disputes with the Company or its directors, officers, or employees.
The Company’s certificate of incorporation
provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State
of Delaware is the exclusive forum for: any derivative action or proceeding brought on behalf of the Company; any action asserting
a breach of fiduciary duty; any action asserting a claim against the Company arising pursuant to the DGCL, the Company’s
certificate of incorporation, or bylaws; or any action asserting a claim against the Company that is governed by the internal affairs
doctrine. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds
favorable for disputes with the Company or its directors, officers, or other employees, which may discourage these lawsuits against
the Company and its directors, officers, and other employees. If a court were to find the choice of forum provision contained in
the Company’s certificate of incorporation to be inapplicable or unenforceable in an action, the Company may incur additional
costs associated with resolving the action in other jurisdictions, which could harm business and financial condition.
If the Company fails to maintain
proper and effective internal controls, the Company’s ability to produce accurate and timely financial statements could be
impaired and investors’ views of the Company or its business could be harmed, resulting in a decrease in value of the Company’s
common stock.
As a public company, the Company is required
to maintain internal control over financial reporting and to report any material weaknesses in the Company’s internal controls.
In addition, the Company is required to furnish a report by management on the effectiveness of the internal control over financial
reporting pursuant to Section 404 of the Sarbanes-Oxley Act. In addition, the Company’s independent registered public accounting
firm will be required to attest to the effectiveness of the internal control over financial reporting beginning with the Company’s
annual report on Form 10-K following the date on which the Company no longer qualifies as a smaller reporting company. Compliance
with Section 404 of the Sarbanes-Oxley Act will require the Company to incur substantial accounting expense and expend significant
management efforts. If the Company is unable to comply with the requirements of Section 404 in a timely manner, or the Company
and the independent registered public accounting firm identify deficiencies in the internal control over financial reporting that
are deemed to be material weaknesses, the market price of the Company’s common stock could decline and the Company could
be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities, which would require additional financial
and management resources.
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In connection with the preparation of our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, we identified a material weakness in our internal control over
financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements
will not be prevented or detected on a timely basis. We have since enhanced our internal control environment and remediated this
material weakness. However, we cannot guarantee that we will not identify different material weaknesses in the future.
Item 1B. UNRESOLVED STAFF COMMENTS
The Company has no unresolved comments
from the SEC staff relating to the Company’s periodic or current reports filed with the SEC pursuant to the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
Item 1C. CYBERSECURITY
Cybersecurity Risk Management and Processes
Sensus is actively working towards the
integration of a cybersecurity risk management program into its comprehensive risk management framework to protect the confidentiality,
integrity, and availability of its critical systems and information.
Our cybersecurity risk management program
is being designed based on various cybersecurity frameworks, including National Institute of Standards and Technology and the Center
for Internet Security, as well as information security standards issued by the International Organization for Standardization,
including ISO 27001 and ISO 27002. The Company uses these frameworks and information security standards as a guide to identify,
assess, and management cybersecurity risks relevant to the business.
The Company has implemented or is implementing
the following key elements into the cybersecurity risk management program:
● Formalization and implementation of robust IT security policies;
● Conducting vulnerability assessments;
● Thorough review of the accuracy and completeness of user listings and access;
● Preservation of evidence related to system modifications; and
In addition, the Company has a strategic
plan, which encompasses the following key elements:
● Establishment of a dedicated cybersecurity governance committee;
● Standardization of cybersecurity incident response procedures and formats;
● Conducting penetration tests on a quarterly basis;
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The Company has not identified any risks
from known cybersecurity threats and did not have any cybersecurity incidents that have materially affected or are reasonably likely
to materially affect the Company. For a discussion of whether and how any risks from cybersecurity threats are reasonably likely
to materially affect us, refer to Item 1A. Risk Factors – “The Company’s operations may be impaired if our information
technology systems fail to perform adequately or are the subject of a data breach or cyberattack,” which is incorporated
by reference into this Item 1C.
Cybersecurity
Governance
The Board of Directors
actively collaborates with management to supervise cybersecurity risks. The Chief Technology Officer (“CTO”), with
over ten years of experience in technology and engineering within the medical device industry, leads the Company’s overall
cybersecurity function and is responsible for monitoring cybersecurity risks. The CTO works with internal personnel and
third-party
consultants to design and implement controls for the prevention, detection, mitigation, and remediation of cybersecurity risks.
The CTO maintains regular communication with the Board on matters related to cybersecurity and provides updates to management on
a quarterly basis. In the event of a cybersecurity incident, the Board is to be promptly notified.
Management considers
cybersecurity risk as part of its risk oversight function and is in the process of establishing a cybersecurity governance committee.
The cybersecurity governance committee will oversee the management’s implementation of the cybersecurity risk management
program.
Item 2. PROPERTIES
The Company’s corporate headquarters
is located in Boca Raton, Florida and occupies a total of 10,356 square feet of space under a lease and a sublease that both expire
in September 2027. The Company believes that the current facilities are suitable and
adequate to meet the Company’s current needs and that suitable additional space will be available as and when needed. The
Company’s main manufacturing function is physically located at our third-party manufacturer’s facility in Oak Ridge,
Tennessee. Additional disclosures have been included within Note 6, Commitments and Contingencies, of the consolidated financial
statements.
Item 3. LEGAL PROCEEDINGS
From time to time, Sensus is party to certain
legal proceedings in the ordinary course of business. Management, after consultation with legal counsel, currently does not anticipate
that the aggregate liability arising out of these legal proceedings will have a material effect on Sensus’s results of operations,
financial position, or cash flows and have assessed that there is no need to record a liability for these legal proceedings and
related contingencies. Additional disclosures have been included within Note 6, Commitments and Contingencies, of the consolidated
financial statements.
Item 4. MINE SAFETY DISCLOSURE
Not applicable.
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PART II.
Item 5. MARKET FOR THE REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s Class A common stock
is publicly traded on the NASDAQ Capital Market under the symbol “SRTS.”
Holders
At the close of business on February 26,
2026, there were 16 common stockholders of record. This does not include “street name” or beneficial owners, whose
shares are held of record by banks, brokers, and other financial institutions.
Dividends
The Company has never declared or paid
any dividends on its common stock and anticipates that for the foreseeable future all earnings will be retained for use rather
than paid out as dividends. Any future payment of cash dividends will be dependent upon the Company’s financial condition,
results of operations, current and anticipated cash requirements, and plans for expansion, as well as other factors that the Board
of Directors deems relevant. Additionally, certain contractual agreements and provisions of Delaware law impose restrictions on
our ability to pay dividends. For example, the Company’s current revolving line of credit restricts the ability to pay dividends
or make any distributions or payments or redeem, retire, or purchase any capital stock without the prior written consent of the
lender (with limited exceptions). Additionally, Section 170(a) of the DGCL only permits dividends to be paid out of two legally
available sources: (1) out of surplus, or (2) if there is no surplus, out of net profits for the year in which the dividend is
declared or the preceding year (so-called “nimble dividends”). However, dividends may not be declared or paid out of
net profits if “the capital of the corporation, computed in accordance with sections 154 and 244 of the DGCL, shall have
been diminished by depreciation in the value of its property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution
of assets.” Contractual obligations and applicable law will restrict the ability to declare and pay dividends in the future.
Unregistered Sales of Securities
There were no unregistered sales of securities
during the year ended December 31, 2025.
Purchases of Equity Securities by the
Registrant and Affiliated Purchasers
In August 2023, the Company announced that
its Board of Directors had authorized a program to purchase up to $3,000,000 of shares of its common stock. Purchases may be made
in a variety of methods, including open market, from time to time, depending upon market conditions, including the market price
of the common stock, and other factors. The program has no time limit and may be modified, suspended, or discontinued at any time.
No purchases were made during the fourth quarter of 2025 by or on behalf of the Company.
Item 6. RESERVED
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following management’s
discussion and analysis (“MD&A”) in conjunction with the information set forth within the financial statements
and related notes included in this Annual Report on Form 10-K.
Overview
As discussed elsewhere in this Report,
Sensus achieved profitability for the first time in 2021, and maintained profitability through 2024. The Company incurred a net
loss in 2025, mostly related to lobbying costs to secure reimbursement codes and lower demand particularly from our historically
largest customer. Sensus continues to seek to return to profitability in 2026 by, among other things, increasing sales and managing
operational expenses where necessary in order to continue to invest in marketing initiatives to promote the Company’s products.
SRT reimbursement was just revalued and increased by CMS, effective as of January 1, 2026. Management expects that the new reimbursement
codes will increase the demand for the SRT product. However, Sensus faces a number of uncertainties in 2026 that could impact our
ability to achieve this goal. These include further decreased demand from its historically largest customer, increased cost due
to hiring more sales representatives, continued inflation, and decreased demand for its higher priced SRT device.
Components of our results of operations
Sensus manages its business globally within
one reportable segment, which is consistent with how management views the business, prioritizes investment and resource allocation
decisions, and assesses operating performance.
Results of Operation
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For the Years Ended
December 31,
(in thousands, except shares and per share data) 2025 2024
Operating expenses
Other income:
(Loss) income before income tax (9,624 ) 9,022
(Benefit from) provision for income taxes (1,905 ) 2,375
Net income per share – basic $ (0.47 ) $ 0.41
Weighted average number of shares used in
2025 Compared with 2024
Revenues of
$27.5 million in 2025 decreased by $14.3 million, or 34%, from $41.8 million in 2024. The decrease in revenue was primarily driven
by a lower number of units sold (70 in the year ended December 31, 2025, compared to 115 in the year ended December 31, 2024),
reflecting reduced sales to our largest customer, slightly offset by revenue recognized from new placements under the Fair Deal
Agreement (the “Program”).
Cost of sales of $15.6 million in
2025 decreased by $1.8 million, or 10%, from $17.4 million in 2024. The decrease in cost of sales was primarily related to a lower
number of units sold offset by significantly higher costs of servicing systems and the cost associated with new placements under
the Program, which generates costs related to installation and training in advance of related revenues.
Gross profit of $11.9 million, or
43.3% of revenue, in 2025 decreased by $12.5 million, or 51%, from $24.4 million, or 58.4% of revenue, in 2024. The decrease in
gross profit was primarily driven by lower sales, higher cost of servicing systems and the costs associated with new placements
under the Program.
General and administrative expenses
of $7.9 million in 2025 increased by $0.8 million, or 11%, from $7.1 million in 2024. The net increase in general and administrative
expense was primarily due to higher professional fees and insurance costs and compensation costs.
Selling and marketing expenses of
$6.5 million in 2025 increased by $1.5 million, or 30%, from $5.0 million in 2024. The increase was primarily driven by increases
in tradeshow costs and payroll cost due to increase in headcount.
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Research and development expenses
of $7.8 million in 2025 increased by $3.6 million, or 86%, from $4.2 million in 2024. The increase was primarily due to significant
lobbying costs related to billing code reimbursement, increased headcount, and an increase in product development costs related
to next generation systems. The Company expects research and development expenses incurred in 2026 to be substantially lower than
those incurred in 2025.
Other income, net of $0.7 million
and $0.9 million in the years ended December 31, 2025 and 2024, respectively, relates primarily to interest income.
Cash and cash
equivalents of $22.1 million at December 31, 2025 was unchanged as compared to December 31, 2024. See Cash flows for
details on the change in cash and cash equivalents during the year ended December 31, 2025.
Accounts receivable,
net of $6.0 million at December 31, 2025 decreased by $13.7 million, or 70%, from $19.7 million at December 31, 2024. The decrease
was primarily due to the decrease in sales and concentration of sales to the Company’s largest customer that are subject
to extended payment terms.
Inventories of $14.6 million at
December 31, 2025 increased by $4.5 million, or 44%, from $10.1 million at December 31, 2024. The increase was primarily due to
the anticipation of increasing future sales.
Liabilities
There were no
borrowings under our revolving lines of credit at December 31, 2025 or December 31, 2024. See Note 3, Debt, to the consolidated
financial statements for further discussion.
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Liquidity and Capital Resources
In general terms, liquidity is a measurement
of the Company’s ability to meet its cash needs. For the year ended December 31, 2025, funding was derived primarily from
cash generated by the sale of equipment to our customers in the ordinary course of business. The Company believes that proceeds
from maturing cash equivalents, as well as the Company’s borrowing capacity under its existing line of credit provide the
Company with access to capital resources sufficient to meet operating capital and funding requirements for the next 12 months from
the date of this annual report. Please see Note 3, Debt , to the consolidated financial statements for a discussion regarding
the Company’s revolving credit facility with Comerica Bank. 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
The Company’s primary short-term
capital needs, which are subject to change, include expenditures related to:
● expansion of sales and marketing activities; and
● continued research and development activities.
The