Sensus Healthcare, Inc.

SENSUS HEALTHCARE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 —Organization and Summary of Significant Accounting Policies

Description of the Business

Sensus Healthcare, Inc. (together, with its subsidiaries, unless the context otherwise indicates, “Sensus” or the “Company”) is a manufacturer of radiation therapy devices and sells the devices to healthcare providers globally through its distribution and marketing network. The Company operates from its corporate headquarters located in Boca Raton, Florida.

In 2024, the Company formed Sensus Healthcare Services, LLC, a wholly-owned subsidiary that provides operational healthcare services to dermatology clinics in the form of equipment, radiation oncology oversight and physicist oversight, and on-site device operation by radiotherapy technologists where the Company receives a contractual percentage of all SRT reimbursement to the practice.

Basis of Presentation and Principles of Consolidation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company and its subsidiaries. Accounts and transactions between consolidated entities have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

The Company’s revenue is derived from sales of the Company’s devices and services related to operating, maintaining and repairing the devices as part of a contract or on an ad-hoc basis without a service contract.

The Company provides warranties, generally for one year, in conjunction with the sale of its products. These warranties entitle the customer to repair, replacement, or modification of the defective product, subject to the terms of the relevant warranty. The Company has determined that these warranties do not represent separate performance obligations, as the customer does not have the option to purchase the warranty separately and the warranty does not provide the customer with a service in addition to the assurance that the product complies with agreed-upon specifications. The Company records an estimate of future warranty claims at the time it recognizes revenue from the sale of the device based upon management’s estimate of the future claims rate.

Revenue is recognized upon transfer of control of promised goods or services to customers when the product is shipped or the service is rendered, based on the amount the Company expects to receive in exchange for those goods or services. The Company enters into contracts that can include multiple services, which are accounted for separately if they are determined to be distinct.

To determine the transaction pricefor contractsin which a customer promises consideration in a form other than cash, the Company measures the estimated fair value of the noncash consideration at contract inception. If the Company cannot reasonably estimate the fair value of the noncash consideration, the Company measures the consideration indirectly by reference to the stand-alone selling priceof the products promised to the customer or class of customer in exchange for the consideration.

Our service contracts include maintenance or repair service for device purchases and personnel service contracts to assist in the use and operation of leased-out equipment under lease agreements where the Company is the lessor.

The revenues from maintenance or repair service contracts are recognized over the service contract period on a straight-line basis. In the event that a customer does not sign a service contract, but requests maintenance or repair services after the warranty expires, the Company recognizes revenue when the service is rendered. There is no termination provision in the service contract or any penalties in practice for cancellation of the service contract.

The revenues from personnel service contracts are recognized in the period that the work is performed, as the Company has elected the practical expedient under Accounting Standards Codification (“ASC”) 606,Revenue from Contracts with Customers, to recognize revenue in the amount to which the entity has a right to invoice. The service contracts can be terminated by mutual written agreement.

The Company has determined that in practice no significant discount is given on service contracts when offered with the device purchase or equipment lease as compared to when sold on a stand-alone basis. The service level provided is identical whether the service contract is purchased on a stand-alone basis or together with the device purchase or equipment lease. The Company may also incur preparation cost to ensure the customer’s space meets the requirements and specifications for the operation of the equipment. The preparation cost is expensed as incurred.

The Company also generates revenue from leases in which the Company is the lessor. The Company identifies the lease and non-lease components and allocates the contract consideration on a relative stand-alone selling price basis at lease inception. The Company has elected the practical expedient to combine lease and non-lease components when the components qualify to be combined, and such combined components are accounted for as a lease under ASC 842,Leases. Revenues from non-lease components that are not qualified to be combined are recognized under ASC 606,Revenue from Contracts with Customers, when the related services are rendered.

The components of disaggregated revenue for the years ended December 31, 2025 and 2024 were 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 prior to the customer being able to use the product. In cases where such regulatory approval is pending, revenue is deferred until such time as regulatory approval is obtained.

Deferred revenue activity for 2025 and 2024 was as follows:

Remaining performance obligations related to deposits for products have original expected durations of one year or less. Estimated service revenue to be recognized in the future related to the performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2025 is as follows:

For the years ended December 31, 2025 and 2024, the Company paid commissions for certain equipment sales. Because the recovery of commissions is expected to occur from product revenue within one year, the Company charges commissions to expense as incurred.

In addition, the Company incurs commissions associated with equipment lease agreements, which are accounted for as initial direct costs and recorded in other noncurrent assets in the consolidated balance sheets. The commission is capitalized at the commencement of the lease and recognized as an expense in selling and marketing expenses over the lease term.

Shipping and handling costs are expensed as incurred and are included in cost of sales.

Concentration

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable.

The Company maintains cash balances at financial institutions in excess of federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. The Company holds cash at well-known banks and does not believe that it is exposed to any significant credit risks on its cash.

One customer in the United States accounted for 52% and 73% of revenue for the years ended December 31, 2025 and 2024, respectively, and 65% and 86% of accounts receivable as of December 31, 2025 and 2024, respectively.

Geographical Information

The following table illustrates total revenue for the years ended December 31, 2025 and 2024 by geographic region.

Fair Value of Financial Instruments

Carrying amounts of cash equivalents, accounts receivable, accounts payable and the revolving credit facility approximate fair value due to their relative short maturities.

Fair Value Measurements

The Company uses a fair value hierarchy that prioritizes inputs to valuation approaches used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 Inputs:

Quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date.

Level 2 Inputs:

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; quotes from pricing services or brokers for which the Company can determine that orderly transactions took place at the quoted price or that the inputs used to arrive at the price are observable; and inputs other than quoted prices that are observable, such as models or other valuation methodologies.

Level 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.

Foreign Currency

The Company’s foreign operation functional currency is the U.S. dollar. The Company considers its Israel subsidiary an extension of the parent company operations in the United States. The cash flow in the foreign operation depends primarily on the funding by the parent company.

Cash and Cash Equivalents

Cash and cash equivalents primarily consists of cash, money market funds and short-term, highly liquid investments with original maturities of three months or less.

Accounts Receivable

On January 1, 2023, the Company adopted Accounting Standards Update (“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. This update did not have a significant impact on the Company’s consolidated financial statements.

On October 1, 2025, the Company adopted ASU No. 2025-05,Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this ASU provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606,Revenue from Contracts with Customers. This update did not have a significant impact on the Company’s consolidated financial statements.

The Company does business and extends credit based on an evaluation of each customer’s financial condition, generally without requiring collateral. Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer. The Company estimates future credit losses based on the age of customer receivable balances, collection history and forecasted economic trends. Future collections can be significantly different from historical collection trends or current estimates. The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances. The allowance for expected credit losses was $0.1 million as of December 31, 2025 and 2024. Credit loss expense for the years ended December 31, 2025 and 2024 was $44 thousand and $0.1 million, 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.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation on property and equipment is calculated on the straight-line basis over the estimated useful life of each asset. Maintenance and repairs are expensed as incurred; expenditures that enhance the value of property or extend their useful lives are capitalized. When assets are sold or returned, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in other income in the consolidated statements of (loss) income.

Inventory units designated for customer demonstrations, as part of the sales process, are reclassified to property and equipment and the depreciation is recorded in selling and marketing expense. Property and equipment that were reclassified to or from inventory were $0.2 million and $1.5 million for the years ended December 31, 2025 and 2024, respectively. These property and equipment were for demonstrations and the leasing program where the Company is the lessor.

Research and Development

Research and development costs related to products under development by the Company and quality and regulatory costs and are expensed as incurred.

Earnings Per Share

Basic net (loss) income per share is calculated by dividing the net (loss) income by the weighted-average number of common shares outstanding for the period using the treasury stock method for options, restricted stocks and warrants. Diluted net (loss) income per share is computed by giving effect to all potential dilutive common share equivalents outstanding for the period.

The factors used in the earnings per share computation are as follows:

Diluted net loss per share for the year ended December 31, 2025 excludes the dilutive effect of any stock options or shares issued under restricted stock awards, as the inclusion would be antidilutive due to the Company’s net loss during the period. Diluted net income per share for the year ended December 31, 2024 includes the dilutive effect of stock options and restricted stock awards that were issued in December 2022, January 2024, and December 2024 to directors, officers, and employees.

Equity-Based Compensation

Pursuant to relevant accounting guidance related to accounting for equity-based compensation, the Company is required to recognize all share-based payments to non-employees and employees in the financial statements based on grant-date fair values. The Company has accounted for issuances of shares and options in accordance with the guidance, which requires the recognition of expense, based on grant-date fair values, over the service period, which is generally the period over which the shares and options vest.

Advertising Costs

Advertising and promotion costs are charged to expense as incurred. Advertising and promotion costs included in selling and marketing expense in the accompanying consolidated statements of (loss) income amounted to $2.0 million and $1.2 million for the years ended December 31, 2025 and 2024, respectively.

Leases

The Company evaluates arrangements at inception to determine if an arrangement is or contains a lease. Operating lease assets represent the Company’s right to control an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and obtains substantially all of the economic benefits from using the underlying asset. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses an incremental borrowing rate that the Company would expect to incur for a fully collateralized loan over a similar term under similar economic conditions to determine the present value of the lease payments. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets.

The lease payments used to determine the Company’s operating lease assets may include lease incentives, and stated rent increases are recognized in the Company’s operating lease assets in the Company’s consolidated balance sheets. Operating lease assets are amortized to rent expense over the lease term and included in operating expenses in the consolidated statements of (loss) income.

For leases in which the Company is the lessor, the Company identifies the lease and non-lease components and allocates the contract consideration to the different components on a relative stand-alone selling price basis at lease inception. The Company uses a residual approach for the components when the stand-alone selling price is not directly observable or those for which the Company has not established a price.

The Company has elected the practical expedient to combine lease and non-lease components when the components qualify to be combined. Continuous supporting services are the primary non-lease components and are not predominant. As a result, the combined components are accounted for as a lease under ASC 842,Leases. The revenues from non-lease components that are not qualified to be combined are recognized when the services are rendered under ASC 606,Revenue from Contracts with Customers. The revenues from non-lease components were $0.2 million and $0.3 million for the years ended December 31, 2025 and 2024, respectively.

For operating leases where the Company is the lessor, the Company recognizes the underlying assets and depreciates them over the estimated useful life which is based upon an estimate of the residual value expected at the end of the lease term. Lease income is recognized on a straight-line basis over the lease term when the lease payment is determined. Lease income is not recognized when collection of all contractual rents over the term of the agreement is not probable. When collection is not probable, the Company limits the lease income to the lesser of the revenue recognized on a straight-line basis or cash basis. The lease income is included in revenues in the consolidated statements of (loss) income.

Variable lease payments associated with the leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are presented within revenues in the consolidated statements of (loss) income.

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.

In July 2025, the One Big Beautiful Bill Act (the “Tax Act”) was enacted, introducing a series of corporate tax changes in the U.S., including 100% bonus depreciation on qualified property and full expensing for research and development expenditures. The impacts of the Tax Act are reflected in our results for the year ended December 31, 2025, and there was no material impact to our income tax expense or effective tax rate. We expect that certain provisions will make the timing of cash tax payments in future periods less frequent.

Uncertain tax positions are recognized in the consolidated financial statements only if a 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 December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance transparency of income tax disclosures. The amendments require annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign jurisdictions, income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign jurisdictions. The amendments also eliminate certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures. The ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. The adoption of ASU No. 2023-09 did not have a significant impact on the Company’s consolidated financial statements.

In March 2024, the FASB issued ASU No. 2024-01,*Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards,*to clarify how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance. ASU No. 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the guidance. The ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within those annual periods. The adoption of ASU No. 2024-01 did not have a significant impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03,*Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,*which requires entities to (i) disclose amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and, (e) depreciation, depletion, and amortization recognized as part of oil-and gas-producing activities, (ii) include certain amounts that are already required to be disclosed under current U.S. GAAP in the same disclosures as other disaggregation requirements, (iii) disclose a qualitative description of the amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, and (iv) disclose the total amount of selling expenses, in annual reporting periods, an entity’s definition of selling expense. ASU No. 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating ASU No. 2024-03 to determine the impact it may have on its consolidated financial statements.

In July 2025, the FASB issued ASU No. 2025-05,Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606,Revenue from Contracts with Customers. Under ASU No. 2025-05, an entity is required to disclose whether it has elected to use the practical expedient. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collection are evaluated. ASU No. 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company adopted this standard early on October 1, 2025. The adoption of ASU No. 2025-05 did not have a significant impact on the Company’s consolidated financial statements.

In December 2025, the FASB issued ASU No. 2025-11,Interim Reporting (Topic 270), which is intended to improve the navigability of the guidance in ASC 270,Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASUNo.2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASUNo. 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating ASU No. 2025-11 to determine the impact it may have on its consolidated financial statements.

Note 2 —Property and Equipment

Property and equipment consists of the following:

Depreciation expense was $0.4 million and $0.2 million for the years ended December 31, 2025 and 2024, respectively.

Note 3 —DEBT

In September 2023, the Company entered into a revolving credit facility (the “Credit Facility”) with Comerica Bank (“Comerica”) that originally provided for maximum borrowings of $10 million. In October 2024, the Credit Facility was amended to extend the term of the Credit Facility and to increase the maximum borrowings to $15 million. The Credit Facility may be terminated by the Company or Comerica at any time without penalty. At December 31, 2025, the available borrowings under this facility were $15 million. Any borrowings bear interest at the Secured Overnight Financing Rate plus 2.50% (or 6.37% at December 31, 2025) and would be due upon demand by Comerica. The Credit Facility is secured by all of the Company’s assets. The Credit Facility includes covenants requiring that the Company maintain (1) unencumbered liquid assets having a minimum value of $10.0 million in a Comerica account; (2) minimum profitability of $1 on a trailing 12-month basis; and (3) the contractual relationship with RbM Services, LLC (“RbM”) as the manufacturer of the SRT-100*.*

At December 31, 2025, the Company was in default under the Credit Facility for failing to maintain the required minimum profitability covenant. The Company was in compliance with its financial covenants under the Credit Facility as of December 31, 2024. There were no borrowings outstanding under the facility at December 31, 2025 and December 31, 2024.

In February 2026, Comerica was acquired by Fifth Third and the Company is currently evaluating any impact this may have on the facility.

Note 4 —Product Warranties

Changes in product warranty liability were as follows for the years ended December 31, 2025 and 2024:

Note 5 —Leases

Operating Lease Agreements

The Company leases its headquarters office from an unrelated third party under a lease expiring in September 2027. The amortization expense of the right of use lease asset was $0.2 million for the years ended December 31, 2025 and 2024. In January 2025, the Company entered into a sublease agreement with an unrelated third party to lease a new office space which is adjacent to the current headquarters office. The sublease is effective from January 2025 to September 2027.

The following table presents information about the amount, timing and uncertainty of future cash flows arising from the Company’s operating leases as of December 31, 2025.

Cash paid for amounts included in the measurement of operating lease liabilities was $0.2 million for the years ended December 31, 2025 and 2024, and is included in cash flows from operating activities in the accompanying consolidated statements of cash flows.

Operating lease cost recognized as expense was $0.3 million and $0.2 million for the years ended December 31, 2025 and 2024, respectively. The financing component for operating lease obligations represents the effect of discounting the operating lease payments to their present value.

Lessor Accounting

The Company, through its subsidiary, Sensus Healthcare Services, LLC, leases superficial radiotherapy equipment to dermatology clinics. These leases generally have an initial term of 60 months and automatically renew for a one-year period upon the expiration of the initial lease term. Payments due under the leases may be fixed or variable payments.

The components of lease income for the years ended December 31, 2025 and 2024 are as follows:

The future minimum fixed lease payments to be received under the lease agreements as of December 31, 2025 are as follows:

Note 6 —Commitments and Contingencies

Manufacturing Agreement

The Company has a contract manufacturing agreement with an unrelated third party, RbM, for the production and manufacture of the SRT-100 (and subsequently the SRT-100 Vision and the SRT-100+), 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 RbM may terminate the agreement upon 90 days’ prior written notice.

The Company pays RbM for finished goods in advance of the inventory being received. The Company paid RbM $7.9 million and $9.9 million for finished goods for the years ended December 31, 2025 and 2024, respectively. Approximately $10.3 million of finished goods was received from RbM for each of the years ended December 31, 2025 and 2024. As of December 31, 2025 and December 31, 2024, a prepayment related to these finished goods of $1.5 million and $3.3 million, respectively, was presented in prepaid inventory in the accompanying consolidated balance sheets.

Legal contingencies

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.

In August 2019, the Company received a Civil Investigative Demand from the Department of Justice (the “Department”) seeking documents and written responses in connection with 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 involvement in the physician’s use of certain reimbursements codes. 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 December 31, 2025, the Company was unable to estimate the cost, if any, associated with this matter.

Note 7 —Employee Benefit Plans

The Company sponsors a 401(k) defined contribution retirement plan that allows eligible employees to contribute a portion of their compensation, as defined by the plan and subject to Internal Revenue Code (“IRC”) limitations. The Company makes contributions to the plan which include matching a percentage of the employees’ contributions up to certain limits. Expenses related to this plan were $0.2 million and $0.1 million for each of the years ended December 31, 2025 and 2024, respectively.

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 December 31, 2025 or December 31, 2024.

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.1,227 and 8,525 shares were surrendered by employees for tax withholding for the years ended December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024, the Company repurchased 50,360 and 0 shares, respectively, in open market transactions.

Note 9 —Equity-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 and August 2025 (collectively, the “Plans”), provide for the issuance of up to 397,473 shares and 2,250,000 shares, respectively. In August 2025, the Company amended the 2017 Incentive Plan to increase the number of shares of common stock authorized for issuance thereunder by 1,500,000 shares. In addition, unless the Compensation Committee specifically determines otherwise, the maximum number of shares available under the Plans and the awards granted under the Plans will be 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 things. As of December 31, 2025 and 2024,1,675,223 and 195,223 shares were available to be granted in the Plans, respectively.

On December 19, 2022, a total of 77,000 shares of restricted common 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 theyear ended December 31, 2025,15,000 shares of common stock vested, and 5,000 shares of unvested common stock were forfeited due to the termination of one employee. As of December 31, 2025,62,000 of the shares issued on December 19, 2022 were vested or forfeited.

On January 11, 2024,20,000 shares of restricted common stock with a fair value of $2.65 per share, the stock price on the grant date, were issued to an employee.10,000 of the shares vested and the expense related to these shares was recognized on the grant date. The remaining 10,000 shares vested in January 2025. The grant date fair value of $2.65 per share is being recognized as expense on a straight-line basis over the vesting period. As of December 31, 2025, the shares issued on January 11, 2024 were fully vested.

On December 17, 2024,100,000 shares of restricted common stock with a fair value of $7.78 per share, the stock price on the grant date, were issued to employees and directors.10,000 of the shares issued to one individual vested and the expense related to these shares was recognized on the grant date. The remaining 30,000 shares issued to the same individual vest over a three-year period. The remaining 60,000 shares issued to other individuals vest 25% per year over a four-year period. The grant date fair value of $7.78 per share is being recognized as expense on a straight-line basis over the vesting period. During theyear ended December 31, 2025,25,000 shares of the common stock vested, and 15,000 shares of unvested common stock were forfeited due to the termination of one director. As of December 31, 2025,50,000 of the shares issued on December 17, 2024 were vested or forfeited.

On December 12, 2025,40,000 shares of restricted common stock with a fair value of $3.83 per share, the stock price on the grant date, were issued to an employee. The grant date fair value of $3.83 per share is being recognized as expense on a straight-line basis over the vesting period of four years. As of December 31, 2025, none of the shares issued on December 12, 2025 were vested or forfeited.

Restricted Stock

Restricted stock activity for the years ended December 31, 2025 and 2024 is summarized below:

The Company recognizes forfeitures as they occur. The reduction of stock compensation expense related to the forfeitures was $5 thousand and $2 thousand for the years ended December 31, 2025 and 2024, respectively.

Stock compensation expense related to restricted stock, excluding the recognition of forfeitures, was $0.3 million for the years ended December 31, 2025 and 2024.

Unrecognized stock compensation expense was $0.7 million as of December 31, 2025, which will be recognized over a weighted-average period of 2.8 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 of the related agreements.

The following table summarizes the Company’s stock options activity for the years ended December 31, 2025 and 2024:

As of December 31, 2025, the stock options have been fully vested. The stock options outstanding had an intrinsic value of $0 and $0.1 million as of December 31, 2025 and 2024, respectively.

Note 10 —Income Taxes

The provision (benefit) for income taxes consisted of the following:

For the years ended December 31, 2025 and 2024, the expected tax expense (benefit) based on the statutory rate is reconciled with the actual tax expense (benefit) as follows:

As of December 31, 2025 and December 31, 2024, the Company’s net deferred tax asset consisted of the tax effects of temporary differences attributable to the following:

As of December 31, 2025, the Company has federal net operating loss (“NOL”) carryforwards of approximately $5.6 million and state NOL carryforwards spread across various jurisdictions with a combined total of approximately $12.8 million. The federal NOL carryforwards have an indefinite carryforward period and are usable against up to 80% of taxable income annually. The state NOL carryforwards relate to various jurisdictions, the majority of which are attributable to the State of Illinois, and begin to expire in 2037. Additionally, as of December 31, 2025, the Company has federal tax credit carryforwards of approximately $0.2 million, and state tax credit carryforwards of approximately $0.3 million. If not claimed, federal research and development (“R&D”) credits will start to expire in 2045, whereas California R&D credits have no expiration date. Utilization of the Company’s federal NOL carryforwards and certain tax credit carryforwards may be subject to an annual limitation under IRC Section 382 if an ownership change, as defined by the IRC, has occurred or occurs in the future. The Company has not completed a formal IRC Section 382 study. If an ownership change has occurred or were to occur, the Company’s ability to utilize its pre-change tax attributes could be limited.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the future generation of taxable income during the periods in which those temporary differences become deductible. In making this assessment, management considers, by tax jurisdiction, the future reversal of existing taxable temporary differences, projected future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in prior carryback periods where carryback is permitted, and available tax planning strategies. Based on this evaluation, management has continued to maintain a full valuation allowance against the Company’s net deferred tax assets in Israel and recorded a valuation allowance during the current year against California research and development credit carryforwards, as it is more likely than not that these deferred tax assets will not be realized as of the balance sheet date. The valuation allowance related to the California research and development tax credit increased by $260 thousand for the year ended December 31, 2025, compared tono change in the valuation allowance for the year ended December 31, 2024.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2025 and 2024. The Company does not expect any significant changes in its unrecognized tax benefits within 12 months of the reporting date. The Company has U.S. federal and certain state tax returns subject to examination by tax authorities beginning with those filed for the year ended December 31, 2018. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses.

Cash paid and received for income taxes by jurisdiction pursuant to the disclosure requirements of ASU No. 2023-09 for the years ended December 31, 2025 and 2024 is as follows:

Note 11 —Segment Reporting

The Company has a single reportable segment focused around sale ofsimilar products and related services. This reportable segment derives revenues from customers by selling medical devices which are used totreat oncological and non-oncological skin conditions with SRT technologyand providing services related to operating, maintaining, and repairing these devices.

The Company’s chief operating decision-maker (the “CODM”), who is the chief executive officer, assesses performance for the reportable segment and decides how to allocate resources using net income as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross profit, and net income. Expense information, including cost of sales can be easily computed from the provided information. These segment (and consolidated) measures of profitability are shown in the consolidated statements of (loss) income. The measure of segment assets is reported on the consolidated balance sheets as total assets.

Note 12 —Subsequent Events

The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the consolidated 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 consolidated financial statements.