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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File No.:  001-36534

IRADIMED CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware

    

73-1408526

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number

1025 Willa Springs Drive
Winter Springs, Florida

32708

(Address of principal executive offices)

(Zip Code)

(407) 677-8022

(Registrant’s telephone number, including area code)

N/A

(Former Name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common stock, par value $0.0001

IRMD

NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 

The registrant had 12,312,481 shares of common stock, par value $0.0001 per share, outstanding as of May 1, 2021.

IRADIMED CORPORATION

Table of Contents

Page

Cautionary Note Regarding Forward-Looking Statements

3

Part I

Financial Information

5

Item 1

Condensed Financial Statements

5

(a)     Condensed Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020

5

(b)    Condensed Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

6

(c)    Condensed Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

7

(d)     Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

8

(e)     Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (Unaudited)

9

(f)      Notes to Unaudited Condensed Financial Statements

10

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4

Controls and Procedures

25

Part II

Other Information

25

Item 1

Legal Proceedings

25

Item 1A

Risk Factors

26

Item 2

Unregistered Sale of Equity Securities and Use of Proceeds

26

Item 3

Default Upon Senior Securities

26

Item 4

Mine Safety Disclosures

26

Item 5

Other Information

26

Item 6

Exhibits

26

Signatures

27

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis and Results of Operations.” In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements include, but are not limited to, statements about:

our ability to respond and adapt to unexpected hospital, legal and regulatory changes resulting from the ongoing COVID-19 pandemic, such as changes in hospital treatment and financial practices, shelter-in-place orders, travel, social distancing and quarantine policies, curtailment of trade, and other business restrictions affecting our ability to assemble and sell our products;
our ability to receive 510(k) clearance for our products and product candidates, complete inspections conducted by the FDA or other regulatory bodies resulting in favorable outcomes, additional actions by or requests from the U.S. Food & Drug Administration (“FDA”), including a request to cease domestic distribution of products, or other regulatory bodies and unanticipated costs or delays associated with the resolution of these matters;
the timing and likelihood of regulatory approvals or clearances from the FDA or other regulatory bodies and regulatory actions on our product candidates and product marketing activities;
unexpected costs, expenses and diversion of management attention resulting from actions or requests posed to us by the FDA or other regulatory bodies;
our primary reliance on a limited number of products;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
our expectations regarding the sales and marketing of our products, product candidates and services;
our expectations regarding the integrity of our supply chain for our products;
the potential for adverse application of environmental, health and safety and other laws and regulations of any jurisdiction on our operations;
our expectations for market acceptance of our new products;
the potential for our marketed products to be withdrawn due to recalls, patient adverse events or deaths;
our ability to establish and maintain intellectual property on our products and our ability to successfully defend these in cases of infringement;
the implementation of our business strategies;
the potential for exposure to product liability claims;
our financial performance expectations and interpretations thereof by securities analysts and investors;
our ability to compete in the development and marketing of our products and product candidates with other companies in our industry;

3

difficulties or delays in the development, production, manufacturing and marketing of new or existing products and services, including difficulties or delays associated with obtaining requisite regulatory approvals or clearances associated with those activities;
changes in laws and regulations or in the interpretation or application of laws or regulations, as well as possible failures to comply with applicable laws or regulations as a result of possible misinterpretations or misapplications;
cost-containment efforts of our customers, purchasing groups, third-party payers and governmental organizations;
costs associated with protecting our trade secrets and enforcing our patent, copyright and trademark rights, and successful challenges to the validity of our patents, copyrights or trademarks;
actions of regulatory bodies and other government authorities, including the FDA and foreign counterparts, that could delay, limit or suspend product development, manufacturing or sales or result in recalls, seizures, consent decrees, injunctions and monetary sanctions;
costs or claims resulting from potential errors or defects in our manufacturing that may injure persons or damage property or operations, including costs from remediation efforts or recalls;
the results, consequences, effects or timing of any commercial disputes, patent infringement claims or other legal proceedings or any government investigations;
interruption in our ability to manufacture our products or an inability to obtain key components or raw materials or increased costs in such key components or raw materials;
uncertainties in our industry due to the effects of government-driven or mandated healthcare reform;
competitive pressures in the markets in which we operate;
the loss of, or default by, one or more key customers or suppliers; and
unfavorable changes to the terms of key customer or supplier relationships.

Forward-looking statements are not guarantees of future performance and are subject to substantial risks and uncertainties that could cause the actual results to differ materially from those that we predicted in the forward-looking statements. Investors should carefully review the information contained under the caption "Risk Factors" contained in Part II, Item 1A for a description of risks and uncertainties that could cause actual results to differ from those that we predicted. All forward-looking statements are based on information available to us on the date hereof, and we assume no obligation to update forward-looking statements, except as required by Federal Securities laws.

Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “IRADIMED,” the “Company,” “we,” “our,” and “us” refer to IRADIMED CORPORATION.

4

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

IRADIMED CORPORATION

CONDENSED BALANCE SHEETS

March 31,

December 31, 

    

2021

    

2020

    

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

50,801,629

$

50,068,728

Accounts receivable, net of allowance for doubtful accounts of $48,185 as of March 31, 2021 and $46,484 as of December 31, 2020

4,564,172

4,574,932

Investments

 

1,902,940

 

1,909,368

Inventory, net

 

4,640,556

 

3,933,987

Prepaid expenses and other current assets

 

929,382

 

771,666

Prepaid income taxes

 

2,373,828

 

2,477,211

Total current assets

 

65,212,507

 

63,735,892

Property and equipment, net

 

2,126,079

 

2,120,148

Intangible assets, net

 

976,382

 

960,885

Operating lease right-of-use asset, net

2,652,533

2,715,030

Deferred income taxes, net

 

985,336

 

1,272,672

Other assets

 

236,089

 

261,993

Total assets

$

72,188,926

$

71,066,620

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

618,217

$

657,054

Accrued payroll and benefits

 

1,232,683

 

1,714,782

Other accrued taxes

 

77,593

 

103,981

Warranty reserve

 

96,448

 

90,054

Deferred revenue

 

2,203,589

 

1,949,259

Current portion of operating lease liability

259,553

255,698

Other current liabilities

146,435

146,435

Total current liabilities

 

4,634,518

 

4,917,263

Deferred revenue

 

2,083,342

 

2,305,413

Operating lease liability, less current portion

2,392,980

2,459,332

Total liabilities

 

9,110,840

 

9,682,008

Stockholders’ equity:

Common stock; $0.0001 par value; 31,500,000 shares authorized; 12,312,184 shares issued and outstanding as of March 31, 2021 and 12,308,432 shares issued and outstanding as of December 31, 2020

 

1,231

 

1,231

Additional paid-in capital

 

23,988,337

 

23,676,843

Retained earnings

 

39,056,300

 

37,669,451

Accumulated other comprehensive income

 

32,218

 

37,087

Total stockholders’ equity

 

63,078,086

 

61,384,612

Total liabilities and stockholders’ equity

$

72,188,926

$

71,066,620

See accompanying notes to unaudited condensed financial statements.

5

IRADIMED CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

March 31,

    

2021

    

2020

    

Revenue

$

9,223,996

$

8,677,541

Cost of revenue

 

2,161,680

 

2,213,730

Gross profit

 

7,062,316

 

6,463,811

Operating expenses:

General and administrative

 

2,430,369

 

2,862,727

Sales and marketing

 

2,379,124

 

2,433,567

Research and development

 

475,817

 

430,282

Total operating expenses

 

5,285,310

 

5,726,576

Income from operations

 

1,777,006

 

737,235

Other (expense) income, net

 

(5,663)

 

98,502

Income before provision for income taxes

 

1,771,343

 

835,737

Provision for income tax expense (benefit)

 

384,494

 

(933,474)

Net income

$

1,386,849

$

1,769,211

Net income per share:

Basic

$

0.11

$

0.15

Diluted

$

0.11

$

0.14

Weighted average shares outstanding:

Basic

 

12,310,577

 

11,891,428

Diluted

 

12,521,279

 

12,365,605

See accompanying notes to unaudited condensed financial statements.

6

IRADIMED CORPORATION

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

For the Three Months Ended

March 31,

    

2021

    

2020

    

Net income

$

1,386,849

$

1,769,211

Other comprehensive (loss) income :

Change in fair value of available-for-sale securities, net of tax (benefit) expense of $(1,559) and $3,442, respectively

 

(4,869)

 

10,433

Other comprehensive (loss) income

 

(4,869)

 

10,433

Comprehensive income

$

1,381,980

$

1,779,644

See accompanying notes to unaudited condensed financial statements.

7

IRADIMED CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income

    

Equity

Balances, December 31, 2020

 

12,308,432

$

1,231

$

23,676,843

$

37,669,451

$

37,087

$

61,384,612

Net income

 

 

 

 

1,386,849

 

 

1,386,849

Other comprehensive loss

 

 

 

 

 

(4,869)

 

(4,869)

Stock-based compensation expense

 

 

 

347,741

 

 

 

347,741

Net share settlement of restricted stock units

 

3,502

 

 

(38,707)

 

 

 

(38,707)

Exercise of stock options

 

250

 

 

2,460

 

 

 

2,460

Balances, March 31, 2021

 

12,312,184

$

1,231

$

23,988,337

$

39,056,300

$

32,218

$

63,078,086

Accumulated

 

Additional

Other

 

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income

    

Equity

Balances, December 31, 2019

11,765,875

 

$

1,177

 

$

19,192,394

 

$

36,300,450

 

$

30,374

 

$

55,524,395

Net income

 

 

 

1,769,211

 

 

1,769,211

Other comprehensive income

 

 

 

 

10,433

 

10,433

Stock-based compensation expense

 

 

568,958

 

 

 

568,958

Net share settlement of restricted stock units

14,521

 

1

 

(133,873)

 

 

 

(133,872)

Exercise of stock options

190,541

 

19

 

322,160

 

 

 

322,179

Balances, March 31, 2020

11,970,937

 

$

1,197

 

$

19,949,639

 

$

38,069,661

 

$

40,807

 

$

58,061,304

See accompanying notes to unaudited condensed financial statements.

8

IRADIMED CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

March 31,

    

2021

    

2020

    

Operating activities:

Net income

$

1,386,849

$

1,769,211

Adjustments to reconcile net income to net cash provided by operating activities:

Change in allowance for doubtful accounts

1,728

36,756

Change in provision for excess and obsolete inventory

 

(1,992)

 

128,143

Depreciation and amortization

 

331,794

 

344,784

Stock-based compensation

 

347,741

 

568,958

Deferred income taxes, net

288,895

(32,472)

Changes in operating assets and liabilities:

Accounts receivable

 

9,032

 

1,404,704

Inventory

 

(668,361)

 

(560,996)

Prepaid expenses and other current assets

 

(560,508)

 

(538,093)

Other assets

 

32,059

 

(60,614)

Accounts payable

 

(75,805)

 

(266,644)

Accrued payroll and benefits

 

(482,099)

 

(542,834)

Other accrued taxes

 

(26,388)

 

(469,750)

Warranty reserve

 

6,394

 

7,924

Deferred revenue

 

250,359

 

308,559

Prepaid income taxes

103,383

(901,001)

Net cash provided by operating activities

 

943,081

 

1,196,635

Investing activities:

Purchases of property and equipment

 

(132,318)

 

(166,593)

Capitalized intangible assets

 

(41,615)

 

(63,782)

Net cash used in investing activities

 

(173,933)

 

(230,375)

Financing activities:

Proceeds from exercises of stock options

2,460

322,179

Taxes paid related to the net share settlement of equity awards

(38,707)

(133,872)

Net cash (used in) provided by financing activities

 

(36,247)

 

188,307

Net increase in cash and cash equivalents

 

732,901

 

1,154,567

Cash and cash equivalents, beginning of period

 

50,068,728

 

43,481,781

Cash and cash equivalents, end of period

$

50,801,629

$

44,636,348

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

5,195

$

Operating and short-term lease payments recorded within cash flow provided by operating activities

$

118,067

$

107,081

See accompanying notes to unaudited condensed financial statements.

9

IRADIMED CORPORATION

Notes to Unaudited Condensed Financial Statements

1 — Basis of Presentation

The accompanying interim condensed financial statements of IRADIMED CORPORATION (“IRADIMED”, the “Company”, “we”, “our”) have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The interim financial information is unaudited, but reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These accompanying interim condensed financial statements should be read with the financial statements and related footnotes to financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. The accounting policies followed in the preparation of these interim condensed financial statements, except as described in Note 1, are consistent in all material respects with those described in Note 1 of our Form 10-K.

We operate in one reportable segment which is the development, manufacture and sale of MRI compatible medical devices, related accessories, disposables and service for use by hospitals and acute care facilities during MRI procedures.

Certain Significant Risks and Uncertainties

We market our products to end users in the U.S. and to distributors internationally. Sales to end users in the U.S. are generally made on open credit terms. Management maintains an allowance for potential credit losses.

We have deposited our cash and cash equivalents with various financial institutions. Our cash and cash equivalents balances exceed federally insured limits throughout the year. We have not incurred any losses related to these balances.

Our products require clearance from the Food and Drug Administration and international regulatory agencies prior to commercialized sales. Our future products may not receive required approvals. If we were denied such approvals, or if such approvals were revoked or delayed or if we were unable to timely renew certain approvals for existing products, it would have a materially adverse impact on our business, results of operations and financial condition.

Certain key components of our products essential to their functionality are sole-sourced. Any disruption in the availability of these components would have a materially adverse impact on our business, results of operations and financial condition.

COVID-19 Considerations

The COVID-19 pandemic caused disruption in global supply and distribution channels and dramatically changed the way companies do business. From the beginning of this global health crisis, our first priority has been the safety and well-being of our employees.

We continue to monitor the developments associated with the COVID-19 pandemic and its effects on our employees, customers, supply chain and distribution channels. The ongoing impact of the pandemic depends on a number of factors including the severity and duration of the pandemic and the extent and severity of the impact on our customers, which is uncertain and unpredictable. Our future results of operations and cash flows may suffer adverse effects from delays in payments on outstanding accounts receivable, potential manufacturing, distribution and supply chain disruptions and uncertain demand, and effects of any actions we may take to address financial and operational challenges our customers may face. Our future results will be heavily determined by timely rollout of the vaccines, effectiveness of the vaccines, the duration of the pandemic, its geographic spread, further business disruptions and the overall impact on the global economy. Other risks and uncertainties that we face include, but are not limited to:

postponement or cancellation of MRI medical procedures and their uncertain return which adversely impacts our business;
potential temporary or prolonged closure of our office and production facility;

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the health of our employees and ability to meet staffing needs;
potential new or continued governmental actions that may limit employees’ ability to work;
civil unrest relating to government, corporate and societal responses to the pandemic;
volatility in economic conditions and the financial markets, and
other unanticipated effects that remain unknown.

We are actively managing our response to the COVID-19 pandemic and working with our customers, distributors, vendors, and suppliers and assessing the potential effects to our financial position, results of operations and cash flows. As of the date of the issuance of these financial statements, the extent to which COVID-19 may materially impact our financial condition, liquidity, or results of operations in future periods remains uncertain.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements to be Implemented

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief, which provided additional implementation guidance on ASU 2016-03. The previously mentioned ASUs are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We do not expect the adoption of these ASUs to have a material impact on our financial condition, results of operations or cash flows.

Accounting Pronouncements Implemented in 2021

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. We adopted ASU 2019-12 on January 1, 2021, and the adoption did not have an impact on our financial condition, results of operations or cash flows.

2 — Revenue Recognition

Disaggregation of Revenue

We disaggregate revenue from contracts with customers by geographic region and revenue type as we believe it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow.

Revenue information by geographic region is as follows:

Three Months Ended

March 31,

    

2021

    

2020

    

(unaudited)

United States

 

$

7,272,830

 

$

6,322,106

 

International

 

1,951,166

 

2,355,435

Total revenue

 

$

9,223,996

 

$

8,677,541

 

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Revenue information by type is as follows:

Three Months Ended

March 31,

    

2021

    

2020

(unaudited)

Devices:

MRI compatible IV infusion pump system

 

$

3,503,347

 

$

2,664,834

MRI compatible patient vital signs monitoring systems

 

2,603,830

 

2,888,703

Total Devices revenue

 

6,107,177

 

5,553,537

Disposables, services and other

 

2,635,466

 

2,662,713

Amortization of extended warranty agreements

 

481,353

 

461,291

Total revenue

 

$

9,223,996

 

$

8,677,541

Contract Liabilities

Our contract liabilities consist of:

March 31,

December 31, 

    

2021

    

2020

    

(unaudited)

Advance payments from customers

 

$

191,227

 

$

85,590

 

Shipments in-transit

 

218,100

 

35,013

Extended warranty agreements

 

3,877,604

 

4,134,069

Total

 

$

4,286,931

 

$

4,254,672

 

Changes in the contract liabilities during the periods presented are as follows:

Deferred

    

Revenue

Contract liabilities, December 31, 2020

 

$

4,254,672

Increases due to cash received from customers

681,433

Decreases due to recognition of revenue

(649,174)

Contract liabilities, March 31, 2021

 

$

4,286,931

    

Deferred 

    

Revenue

Contract liabilities, December 31, 2019

$

4,301,887

Increases due to cash received from customers

 

779,048

Decreases due to recognition of revenue

 

(492,924)

Contract liabilities, March 31, 2020

$

4,588,011

Capitalized Contract Costs

Our capitalized contract costs totaled $352,308 and $384,367 as of March 31, 2021 and December 31, 2020, respectively.

3 — Basic and Diluted Net Income per Share

Basic net income per share is based upon the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Stock options and restricted stock units granted by us represent the only dilutive effect reflected in diluted weighted-average shares outstanding.

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The following table presents the computation of basic and diluted net income per share:

Three Months Ended

March 31,

    

2021

    

2020

(unaudited)

Net income

$

1,386,849

$

1,769,211

Weighted-average shares outstanding — Basic

 

12,310,577

 

11,891,428

Effect of dilutive securities:

Stock options

189,933

414,439

Restricted stock units

20,769

59,738

Weighted-average shares outstanding — Diluted

 

12,521,279

 

12,365,605

Basic net income per share

$

0.11

$

0.15

Diluted net income per share

$

0.11

$

0.14

Stock options and restricted stock units excluded from the calculation of diluted net income per share because the effect would have been anti-dilutive are as follows:

Three Months Ended

March 31,

    

2021

    

2020

    

(unaudited)

Anti-dilutive stock options and restricted stock units

 

4,902

62,904

 

4 — Inventory

Inventory consists of:

March 31,

December 31, 

    

2021

    

2020

    

(unaudited)

Raw materials

$

3,502,986

$

3,210,815

Work in process

 

292,644

 

207,807

Finished goods

 

980,607

 

653,038

Inventory before allowance for excess and obsolete

4,776,237

4,071,660

Allowance for excess and obsolete

(135,681)

(137,673)

Total

$

4,640,556

$

3,933,987

5 — Property and Equipment

Property and equipment consist of:

March 31,

December 31, 

    

2021

    

2020

    

(unaudited)

Computer software and hardware

$

721,008

$

705,811

Furniture and fixtures

 

1,226,865

 

1,226,113

Leasehold improvements

 

230,351

 

230,351

Machinery and equipment

 

1,842,037

 

1,823,835

Tooling in-process

 

569,365

 

470,446

 

4,589,626

 

4,456,556

Accumulated depreciation

 

(2,463,547)

 

(2,336,408)

Total

$

2,126,079

$

2,120,148

Depreciation expense of property and equipment was $127,139 and $126,308 for the three months ended March 31, 2021 and 2020, respectively.

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Property and equipment, net, information by geographic region is as follows:

March 31,

December 31, 

    

2021

    

2020

    

(unaudited)

United States

 

$

1,855,369

 

$

1,832,894

 

International

 

270,710

 

287,254

Total property and equipment, net

 

$

2,126,079

 

$

2,120,148

 

Long-lived assets held outside of the United States consist principally of tooling and machinery and equipment, which are components of property and equipment, net.

6 — Intangible Assets

The following table summarizes the components of intangible asset balances:

March 31,

December 31, 

    

2021

    

2020

    

(unaudited)

Patents — in use

$

362,162

$

362,162

Patents — in process

 

73,648

 

69,733

Internally developed software — in use

 

872,218

 

872,253

Internally developed software — in process

299,357

261,622

Trademarks

27,247

27,247

 

1,634,632

 

1,593,017

Accumulated amortization

 

(658,250)

 

(632,132)

Total

$

976,382

$

960,885

Amortization expense of intangible assets was $26,118 and $22,491 for the three months ended March 31, 2021 and 2020, respectively.

Expected annual amortization expense for the remaining portion of 2021 and the next five years related to intangible assets is as follows (excludes in process intangible assets):

Nine months ending December 31, 2021

$

75,313

2022

$

99,700

2023

$

99,189

2024

$

98,787

2025

$

95,849

2026

$

84,830

7 — Investments

Our investments consist of bonds that we have classified as available-for-sale and are summarized in the following tables:

March 31, 2021

    

    

Gross

    

Gross

    

 

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

U.S. corporate bonds

 

$

1,863,382

 

$

39,558

 

$

 

$

1,902,940

December 31, 2020

    

    

Gross

    

Gross

    

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

U.S. corporate bonds

$

1,863,382

 

$

45,986

 

$

 

$

1,909,368

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8 — Fair Value Measurements

The fair values of cash equivalents, accounts receivables, net and accounts payable approximate their carrying amounts due to their short duration.

The fair value of our assets and liabilities subject to recurring fair value measurements are as follows:

Fair Value at March 31, 2021

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Market for

Observable

Unobservable

Fair

Identical Assets

Inputs

Inputs

    

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

U.S. corporate bonds

$

1,902,940

$

$

1,902,940

$

Fair Value at December 31, 2020

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Market for

Observable

Unobservable

Fair

Identical Assets

Inputs

Inputs

    

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

U.S. corporate bonds

$

1,909,368

$

$

1,909,368

$

Our corporate bonds are valued by a third-party custodian at closing prices from secondary exchanges or pricing vendors on the valuation date.

There were no transfers into or out of any Levels during the three months ended March 31, 2021 or the year ended December 31, 2020.

9 — Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, net of tax, for the three months ended March 31, 2021 and 2020 are as follows:

Unrealized (Losses) 

Gains on

Available-For-Sale

    

Securities

Balance at December 31, 2020

 

$

37,087

Loss on available-for-sale securities, net

 

(4,869)

Balance at March 31, 2021

 

$

32,218

Balance at December 31, 2019

$

30,374

Gains on available-for-sale securities, net

 

10,433

Balance at March 31, 2020

$

40,807

10 — Stock-Based Compensation

In December 2020, the Company granted 11,891 Performance-Based Restricted Stock Units ("PSUs") to certain employees under a new Long-Term Incentive Plan ("LTIP") for the three-year cycle ending December 7, 2023, which was adopted under the Company's Amended and Restated 2014 Equity Incentive Plan. Each PSU represents the right to receive one share of the Company's common stock.

15

Payouts of the PSUs for the cycle ending December 7, 2023 will be based on the Company's total shareholder return compared to a pre-defined peer group. For purposes of the LTIP, total shareholder return is calculated as the share price at the end of the performance period, including the reinvestment of any dividends during the performance period, as compared to the share price at the beginning of the performance period. The payout range for participants will be between 0% and 200%, depending on the Company's performance against the peer group.

The grant date fair value of the PSUs was $29.53 per unit, which was calculated using a Monte-Carlo simulation model with an expected term of three years and a risk-free interest rate of 0.2%. The Monte-Carlo simulation incorporated the volatility and dividend yield for the Company and each member of the peer group individually. Peer group volatilities ranged from 39.9% to 89.4% and dividend yields ranged from 0.0% to 1.23%. The volatility and dividend yield used for the Company was 51.0% and 0.0%, respectively.

Stock-based compensation was recognized as follows in the Condensed Statements of Operations:

Three Months Ended

March 31,

    

2021

    

2020

    

(unaudited)

Cost of revenue

$

54,211

$

58,254

General and administrative

 

180,204

 

362,152

Sales and marketing

 

81,935

 

130,955

Research and development

 

31,391

 

17,597

Total

$

347,741

$

568,958

As of March 31, 2021, we had $2,867,766 of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.7 years. As of March 31, 2021, we had $247,002 of unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted-average period of 2.7 years.

The following table presents a summary of our stock-based compensation activity for the three months ended March 31, 2021 (shares):

Performance

Based

Stock

Restricted

Restricted

    

Options

    

Stock Units

    

Stock Units

Outstanding beginning of period

230,510

151,139

11,891

Awards granted

8,920

Awards exercised/vested

(250)

(5,157)

Awards canceled

(9,346)

(2,546)

Outstanding end of period

230,260

145,556

9,345

11 — Income Taxes

For the three months ended March 31, 2021, we recorded a provision for income tax expense of $384,494. Our effective tax rate was 21.7 percent and differed from the U.S. Federal statutory rate primarily due to U.S. state income tax expense, partially offset by benefits from foreign derived intangible income and research and development tax credits.

For the three months ended March 31, 2020, we recorded a provision for income tax benefit of $(933,474). Our effective tax rate was (111.7) percent and differed from the U.S. Federal statutory rate primarily due to discrete items related to tax benefits associated with stock-based compensation and a U.S. state tax benefit. Additionally, we recognized a benefit in our effective tax rate resulting from the Coronavirus Aid, Relief, and Economic Security Act, which allowed us to carryback the net operating loss to years prior to the enactment of the Tax Cuts and Jobs Act.

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As of March 31, 2021, and December 31, 2020, we had not identified or accrued for any uncertain tax positions. We are currently unaware of any uncertain tax positions that could result in significant payments, accruals or other material deviations in this estimate over the next 12 months. We believe that our tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from ours, which could result in the imposition of additional taxes and penalties.

We file tax returns in the United States Federal jurisdiction and many U.S. state jurisdictions. Our returns are not currently under examination by the Internal Revenue Service. The Company remains subject to income tax examinations for our United States Federal and certain U.S. state income taxes for 2017 and subsequent years and various other U.S. state income taxes for 2016 and subsequent years.

12 — Leases

We have one material lease contract outstanding. In January 2014, we entered into a non-cancelable operating lease, commencing July 1, 2014, for our manufacturing and headquarters facility in Winter Springs, Florida owned by Susi, LLC, an entity controlled by our President, Chief Executive Officer, and Chairman of the Board, Roger Susi. Pursuant to the terms of our lease for this property, the monthly base rent is $34,133, adjusted annually for changes in the consumer price index. Under the terms of the lease, we are responsible for property taxes, insurance and maintenance expenses. Prior to May 31, 2019, the expiration date of the initial lease term, and pursuant to the terms of the lease contract, we renewed the lease for an additional five years, resulting in a new lease expiration date of May 31, 2024. Unless advance written notice of termination is timely provided, the lease will automatically renew for one additional successive term of five years beginning in 2024, and thereafter, will be renewed for successive terms of one year each.We concluded that we would exercise the remaining five-year option, resulting in a remaining lease term of 8.2 years as of March 31, 2021. This lease agreement does not contain any residual value guarantee or material restrictive covenants.

Operating lease cost recognized in the Condensed Statements of Operations is as follows:

Three Months Ended

March 31,

2021

2020

Cost of revenue

$

51,095

$

46,535

General and administrative

 

50,556

46,044

Sales and marketing

 

2,859

2,604

Research and development

 

7,922

7,215

Total

$

112,432

$

102,398

Lease costs for short-term leases were immaterial for the three months ended March 31, 2021 and 2020.

Maturity of operating lease liability as of March 31, 2021 is as follows:

Nine months ending December 31, 2021

    

$

307,197

2022

409,596

2023

 

409,596

2024

 

409,596

2025

 

409,596

Thereafter

 

1,399,454

Total lease payments

 

3,345,035

Imputed interest

 

(692,502)

Present value of lease liability

$

2,652,533

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13 — Commitments and Contingencies

Purchase commitments. We had various purchase orders for goods or services totaling $3,185,649 and $3,089,103 as of March 31, 2021 and December 31, 2020, respectively. No amounts related to these purchase orders have been recognized in our balance sheet.

Legal matters. We may from time to time become party to various legal proceedings or claims that arise in the ordinary course of business.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed financial statements and the related notes to those statements included in this Quarterly Report, the discussion of certain risks and uncertainties contained in Part II, Item 1A of this Quarterly Report, the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” included in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2020 and the cautionary information regarding forward-looking statements at the beginning of this Quarterly Report.

Our Business

We develop, manufacture, market and distribute Magnetic Resonance Imaging (“MRI”) compatible medical devices and accessories and services relating to them.

We are a leader in the development of innovative MRI compatible medical devices. We are the only known provider of a non-magnetic intravenous (“IV”) infusion pump system that is specifically designed to be safe for use during MRI procedures. We were the first to develop an infusion delivery system that largely eliminates many of the dangers and problems present during MRI procedures. Standard infusion pumps contain magnetic and electronic components which can create radio frequency interference and are dangerous to operate in the presence of the powerful magnet that drives an MRI system. Our patented MRidium® MRI compatible IV infusion pump system has been designed with a non-magnetic ultrasonic motor, uniquely designed non-ferrous parts and other special features to safely and predictably deliver anesthesia and other IV fluids during various MRI procedures. Our pump solution provides a seamless approach that enables accurate, safe and dependable fluid delivery before, during and after an MRI scan, which is important to critically ill patients who cannot be removed from their vital medications, and children and infants who must generally be sedated to remain immobile during an MRI scan.

Each IV infusion pump system consists of an MRidium® MRI compatible IV infusion pump, non-magnetic mobile stand, proprietary disposable IV tubing sets and many of these systems contain additional optional upgrade accessories.

Our 3880 MRI compatible patient vital signs monitoring system has been designed with non-magnetic components and other special features to safely and accurately monitor a patient’s vital signs during various MRI procedures. The IRADIMED 3880 system operates dependably in magnetic fields up to 30,000 gauss, which means it can operate virtually anywhere in the MRI scanner room. The IRADIMED 3880 has a compact, lightweight design allowing it to travel with the patient from their critical care unit, to the MRI and back, resulting in increased patient safety through uninterrupted vital signs monitoring and decreasing the amount of time critically ill patients are away from critical care units. The features of the IRADIMED 3880 include: wireless ECG with dynamic gradient filtering; wireless SpO2 using Masimo® algorithms; non-magnetic respiratory CO2; invasive and non-invasive blood pressure; patient temperature, and; optional advanced multi-gas anesthetic agent unit featuring continuous Minimum Alveolar Concentration measurements. The IRADIMED 3880 MRI compatible patient vital signs monitoring system has an easy-to-use design and allows for the effective communication of patient vital signs information to clinicians.

We generate revenue from the sale of MRI compatible medical devices and accessories, extended warranty agreements, services related to maintaining our products and the sale of disposable products used with our devices. The principal customers for our MRI compatible products include hospitals and acute care facilities, both in the U.S. and internationally.

Selling cycles for our devices have varied widely and have historically ranged between three and six months in duration with more recent trends lengthening beyond this historical range due to the COVID-19 pandemic. We also enter into agreements with healthcare supply contracting companies, commonly referred to as Group Purchasing Organizations (“GPOs”), in the U.S., which facilitates our ability to sell and distribute our products to their member hospitals. Under these agreements, we are required to pay these GPOs a fee of three percent of the sales of our products to their member hospitals.

Financial Highlights

Our revenue increased $0.5 million, or 6.3 percent, to $9.2 million for the first quarter ended March 31, 2021, compared to $8.7 million for the first quarter last year. Income before the provision for income taxes increased $1.0 million, or 111.9%, to $1.8 million for the first quarter ended March 31, 2021, compared to $0.8 million for the first quarter last year. Net income was $1.4 million, or $0.11 per diluted share in the first quarter ended March 31, 2021, compared to net income of $1.8 million, or $0.14 per diluted share in the first quarter last year.

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Effects of the COVID-19 Pandemic

The COVID-19 global pandemic caused disruption in global supply and distribution channels and dramatically changed the way companies do business. From the beginning of this global health crisis, our first priority has been the safety and well-being of our employees.

We continue to monitor the developments associated with the COVID-19 pandemic and its effects on our employees, customers, supply chain and distribution channels. The ongoing impact of the pandemic depends on a number of factors including the severity and duration of the pandemic and the extent and severity of the impact on our customers, which is uncertain and unpredictable. Our future results of operations and cash flows may suffer adverse effects from delays in payments on outstanding accounts receivable, potential manufacturing, distribution and supply chain disruptions and uncertain demand, and effects of any actions we may take to address financial and operational challenges our customers may face. Our future results will be heavily determined by timely rollout of the vaccines, effectiveness of the vaccines, the duration of the pandemic, its geographic spread, further business disruptions and the overall impact on the global economy. Other risks and uncertainties that we face include, but are not limited to:

postponement or cancellation of MRI medical procedures and their uncertain return which adversely impacts our business;
potential temporary or prolonged closure of our office and production facility;
the health of our employees and ability to meet staffing needs;
potential new or continued governmental actions that may limit employees’ ability to work;
civil unrest relating to government, corporate and societal responses to the pandemic;
volatility in economic conditions and the financial markets, and
other unanticipated effects that remain unknown.

We are actively managing our response to the COVID-19 pandemic and work with our customers, distributors, vendors, and suppliers, and we are assessing the potential effects to our financial position, results of operations and cash flows. As of the date of the issuance of these financial statements, the extent to which COVID-19 may materially impact our financial condition, liquidity, or results of operations in future periods remains uncertain.

Application of Critical Accounting Policies

We prepare our financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and use assumptions that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

We believe that the following critical accounting policies require the use of significant estimates, assumptions, and judgments:

Revenue recognition;
Accounts receivable and allowance for doubtful accounts;
Inventory carried at the lower of cost or net realizable value;
Stock-based compensation; and
Income taxes.

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These critical accounting policies are described in more detail in our Annual Report filed on Form 10-K, under Management’s Discussion and Analysis and Results of Operations. Except as disclosed in Note 1 to the unaudited condensed financial statements contained herein related to the adoption of recent accounting pronouncements, there have been no changes to these policies during the three months ended March 31, 2021.

The use of different estimates, assumptions, and judgments could have a material effect on the reported amounts of assets, liabilities and related disclosures as of the date of the financial statements and revenue and expenses during the reporting period.

Results of Operations

The following table sets forth selected statements of operations data as a percentage of total revenue for the periods indicated. Our historical operating results are not necessarily indicative of the results for any future period.

Percent of Revenue

    

Three Months

Ended March 31,

    

2021

    

2020

    

Revenue

 

100.0

%  

100.0

%  

Cost of revenue

 

23.4

 

25.5

 

Gross profit

 

76.6

 

74.5

 

Operating expenses:

 

 

 

General and administrative

 

26.3

 

33.0

 

Sales and marketing

 

25.8

 

28.0

 

Research and development