Sensus Healthcare CEO On IPO, Finances And Stock Performance: 'We Are Very Comfortable'

Sensus Healthcare Inc SRTS SRTSW is a micro-cap manufacturer of superficial radiation therapy (SRT) devices for the treatment of skin cancer and keloids, which went public on the Nasdaq exchange in June. Benzinga recently had the chance to chat with the company’s CEO Joseph C. Sardano, who shared some insight into the company, its IPO and its financial situation.

A Little Context

Sensus went public on the Nasdaq on June, completing an IPO of 2.3 million units at $5.50 per unit. Each unit included one share of common stock and a three-year warrant to acquire one share of common at $6.75. Total proceeds almost reached $11 million.

While successful, the IPO was smaller than originally planned. At first, the company had announced an offering of approximately 1.8 million shares of common stock at $10 to $12 per share.

After the IPO, on July 27, the units separated into the components. The warrants went on to trade under the symbol SRTSW (at $6.45), and the stock under SRTS ticker.

Understanding A Complex IPO

Benzinga first asked Sensus’ chief executive about the IPO and why it was downsized.

“The way we came into the IPO market was originally what we wanted to do in the first place,” he explicated. The first financial advisory firm the company was working with believed it would be best to go into the market with “much larger numbers,” although Sensus’ management team did not want this, he continued.

“We followed their advice and we went into the market. The closing for that process did not work out, so we went to work with Northland Capital, and they worked it out the way we wanted them to work it out, at the size we wanted [...] and it ended up being very successful for us.”

Sardano then went into the reason for separating the stock into two components. This was on the advice of the company’s bankers, he assured. “They felt that it was a good idea to come into the market with a unit that included the share and the warrant as a one-to-one, which separated 52 days after the IPO. This provides us with a roadmap, if you will, or access to additional capital in the next several years if, by chance, we needed to.”

Discussing Volatility

Shares of Sensus plummeted right after the U.S. presidential election. When Benzinga questioned Sardano about the tumble, he commented, “There’s not a lot of shares that are being traded, so it’s being done minimally. I don’t think [our fall] had anything to do with the election; I think that our shares have consistently remained above the IPO price, and even since the election they’ve been somewhere between $5.50 and $6.00. So, I think we’ve been traded fairly, and based on the amount of shares and the activity that we’ve experienced, we are doing very well at the present time.”

The stock then rebounded toward late-November, when queried about the surge, he reiterated, “I think that the stock has been following the market trends of both NASDAQ Composite (INDEXNASDAQ:.IXIC) and the Dow. It’s not due to any major shift in stock being traded, because that has been very low. I think that will change at some point in the future, but it is not changing now. So, I think we are working with the whim of were the market is going, and I don’t know if there is any reasoning behind it, but it’s certainly not due to the amount of shares that are being traded.”

“Right now, we are focusing on the long-term approach,” he supplemented. “We are continuing to drive business each and every quarter, and we want to stay on target with what our quarterly goals are.”

Institutional Support And Insider Sales

Going into institutional support, Benzinga asked about the company’s relationship with some of its largest shareholders, like AWM Investment Company and Dialectic Capital Management, which disclosed ownership of 491,938 shares and 226,000 shares, respectively, as of September 30.

Sardano: We stay in touch with our institutional investors on a quarterly basis, if not shorter than that. You have to remember there was a lockup period for most of the shares, so, again, there wasn’t a lot of activity in that lockup period [...] The institutional investors that we have, I think they believe in the product and the timeline that the company will eventually mature into a much bigger company. I think that they are long-term players, which is what we're searching for.

Benzinga: what about the recent insider sales seen in the company?

Sardano: We have several insiders that have been investors since day one, almost 6.5 years ago. So, maybe there is some people looking to get back some of their original investment, and then let some other shares ride along with it [...] I think they have the right to trade in some of that stock [...] I think it has to do with further financial planning on their part as to where they are on their lives. The activity was very small.”

In my particular case, this is certainly not any kind of indication of bailing out on the company. If anything, everybody in the management team is fully invested in the opportunity that we have, and we have the intention to continue operating this company for many years ahead of us.

Balance Sheet

Finally, Benzinga went into the company’s balance sheet.

Benzinga: Are you planning to raise capital?

Sardano: We are very comfortable with the capital and cash that we have on hand right now. From an operations standpoint, we are not burning cash, we do not have debt [...] Therefore, the revenues that we are driving through the sales of our equipment are paying for all the expenses that we are going through, and are also providing us with a nice comfort level for the R&D work as well.

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