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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 September 30, 2023

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth 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 12,605,577 shares of common stock, par value $0.0001 per share, outstanding as of October 31, 2023.

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 September 30, 2023 (Unaudited) and December 31, 2022

5

(b)    Condensed Statements of Operations for the Three and Nine months Ended September 30, 2023 and 2022 (Unaudited)

6

(c)    Condensed Statements of Comprehensive Income for the Three and Nine months Ended September 30, 2023 and 2022 (Unaudited)

7

(d)    Condensed Statements of Stockholders’ Equity for the Three and Nine months Ended September 30, 2023 and 2022 (Unaudited)

8

(e)    Condensed Statements of Cash Flows for the Nine months Ended September 30, 2023 and 2022 (Unaudited)

9

(f)    Notes to Unaudited Condensed Financial Statements

10

Item 2

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

18

Item 3

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4

Controls and Procedures

25

Part II

Other Information

26

Item 1

Legal Proceedings

26

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

27

Signatures

28

2

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” 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 of Financial Condition 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 receive 510(k) clearance for our products and product candidates, complete inspections conducted by the U.S. Food & Drug Administration (“FDA”) or other regulatory bodies resulting in favorable outcomes, additional actions by or requests from the 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;
market and economic uncertainty or financial harm to us caused by any or all public health concerns such as pandemics;
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, climate change, 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;

3

our ability to compete in the development and marketing of our products and product candidates with other companies in our industry;
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 including carbon taxes;
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 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

September 30, 

    

December 31, 

2023

2022

(unaudited)

ASSETS

  

 

  

Current assets:

  

 

  

Cash and cash equivalents

$

46,745,124

$

57,960,864

Accounts receivable, net of allowance for doubtful accounts of $297,328 as of September 30, 2023, and $160,498 as of December 31, 2022

 

12,783,263

 

13,274,521

Inventory, net

 

11,667,713

 

5,369,233

Prepaid expenses and other current assets

 

735,124

 

630,960

Prepaid income taxes

 

 

254,093

Total current assets

 

71,931,224

 

77,489,671

Property and equipment, net

 

8,887,884

 

2,399,812

Intangible assets, net

 

2,459,475

 

2,069,439

Operating lease right-of-use asset

 

2,146,117

 

2,205,286

Deferred tax asset, net

 

1,803,733

 

700,867

Other assets

 

177,663

 

648,672

Total assets

$

87,406,096

$

85,513,747

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

2,782,878

$

1,799,316

Accrued payroll and benefits

 

2,290,191

 

2,871,890

Other accrued taxes

 

103,223

 

121,919

Warranty reserve

 

110,304

 

94,030

Deferred revenue

 

1,924,133

 

3,373,122

Current portion of operating lease liabilities

 

421,379

 

293,466

Other current liabilities

 

250,000

 

Total current liabilities

 

7,882,108

 

8,553,743

Deferred revenue

 

3,231,250

 

1,375,197

Operating lease liabilities, less current portion

 

1,724,738

 

1,911,820

Total liabilities

 

12,838,096

 

11,840,760

Stockholders’ equity:

 

  

 

  

Common stock; $0.0001 par value; 31,500,000 shares authorized; 12,602,851 shares issued and outstanding as of September 30, 2023, and 12,591,004 shares issued and outstanding as of December 31, 2022

 

1,260

 

1,259

Additional paid-in capital

 

27,872,275

 

26,407,446

Retained earnings

 

46,694,465

 

47,264,282

Total Stockholders' Equity

 

74,568,000

 

73,672,987

Total liabilities and stockholders’ equity

$

87,406,096

$

85,513,747

See accompanying notes to unaudited condensed financial statements.

5

IRADIMED CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

    

For the Nine Months Ended

September 30, 

September 30, 

2023

    

2022

2023

    

2022

Revenue

$

16,504,640

$

13,407,272

$

48,110,120

$

38,439,551

Cost of revenue

 

3,667,256

 

2,864,534

 

11,364,791

 

8,377,526

Gross profit

 

12,837,384

 

10,542,738

 

36,745,329

 

30,062,025

Operating expenses:

 

  

 

  

 

  

 

  

General and administrative

 

3,615,020

 

2,881,590

 

10,848,611

 

8,000,335

Sales and marketing

 

2,864,469

 

3,037,209

 

8,812,872

 

9,014,553

Research and development

 

452,555

 

491,643

 

2,208,221

 

1,673,337

Total operating expenses

 

6,932,044

 

6,410,442

 

21,869,704

 

18,688,225

Income from operations

 

5,905,340

 

4,132,296

 

14,875,625

 

11,373,800

Other income, net

 

503,192

 

105,183

 

1,180,988

 

103,371

Income before provision for income taxes

 

6,408,532

 

4,237,479

 

16,056,613

 

11,477,171

Provision for income tax expense

 

1,341,352

 

810,375

 

3,403,523

 

2,322,301

Net income

$

5,067,180

$

3,427,104

$

12,653,090

$

9,154,870

Net income per share:

 

  

 

  

 

  

 

  

Basic

$

0.40

$

0.27

$

1.00

$

0.73

Diluted

$

0.40

$

0.27

$

0.99

$

0.72

Weighted average shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

12,602,581

 

12,564,636

 

12,597,250

 

12,559,465

Diluted

 

12,735,837

 

12,631,129

 

12,716,988

 

12,637,325

See accompanying notes to unaudited condensed financial statements.

6

IRADIMED CORPORATION

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

For the Three Months Ended

    

For the Nine Months Ended

September 30, 

September 30, 

2023

    

2022

2023

    

2022

Net income

$

5,067,180

$

3,427,104

$

12,653,090

$

9,154,870

Other comprehensive (loss) income:

 

  

 

  

 

  

 

  

Change in fair value of available-for-sale securities, net of tax expense (benefit) of $0 and $0 for the three months ended September 30, 2023 and 2022, respectively and $0 and $9,098 for the nine months ended September 30, 2023 and 2022, respectively

 

 

 

 

(10,953)

Realized (gain) loss on available-for-sale securities reclassified to net income, net of tax expense (benefit) of $0 and $0 for the three months ended September 30, 2023 and 2022, respectively, and $0 and $1,966 for the nine months ended September 30, 2023 and 2022, respectively

 

 

 

 

(6,059)

Other comprehensive loss

 

 

 

 

(17,012)

Comprehensive income

$

5,067,180

$

3,427,104

$

12,653,090

$

9,137,858

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, 2022

 

12,591,004

$

1,259

$

26,407,446

$

47,264,282

$

$

73,672,987

Net income

 

 

 

 

3,406,070

 

 

3,406,070

Dividends paid $1.05 per share

 

 

 

 

(13,222,907)

 

 

(13,222,907)

Stock-based compensation expense

 

 

 

533,643

 

 

 

533,643

Net share settlement of restricted stock units

 

3,572

 

 

(49,878)

 

 

 

(49,878)

Balances, March 31, 2023

 

12,594,576

$

1,259

$

26,891,211

$

37,447,445

$

$

64,339,915

Net income

 

 

 

 

4,179,840

 

 

4,179,840

Stock-based compensation expense

 

 

 

568,453

 

 

 

568,453

Net share settlement of restricted stock units

 

5,965

 

1

 

(97,106)

 

 

 

(97,105)

Exercise of stock options

1,000

7,339

7,339

Balances, June 30, 2023

 

12,601,541

$

1,260

$

27,369,898

$

41,627,285

$

$

68,998,442

Net income

 

 

 

 

5,067,180

 

 

5,067,180

Stock-based compensation expense

 

 

 

533,749

 

 

 

533,749

Net share settlement of restricted stock units

 

1,310

 

 

(31,372)

 

 

 

(31,372)

Balances, September 30, 2023

 

12,602,851

$

1,260

$

27,872,275

$

46,694,465

$

$

74,568,000

    

  

    

  

    

  

    

  

    

Accumulated

    

  

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

Shares

Amount

Capital

Earnings

Income

Equity

Balances, December 31, 2021

 

12,544,024

$

1,254

$

25,160,618

$

46,994,922

$

17,012

$

72,173,806

Net income

 

 

 

 

2,486,713

 

 

2,486,713

Dividends paid $1.00 per share

 

 

 

(12,559,127)

 

 

(12,559,127)

Other comprehensive loss

 

 

 

 

 

(10,885)

 

(10,885)

Stock-based compensation expense

 

 

 

453,360

 

 

 

453,360

Net share settlement of restricted stock units

 

3,879

 

1

 

(67,381)

 

 

 

(67,380)

Exercise of stock options

 

12,566

 

1

 

71,947

 

 

 

71,948

Balances, March 31, 2022

 

12,560,469

$

1,256

$

25,618,544

$

36,922,508

$

6,127

$

62,548,435

Net income

 

 

 

 

3,241,052

 

 

3,241,052

Other comprehensive loss

 

 

 

 

 

(6,127)

 

(6,127)

Stock-based compensation expense

 

 

 

121,003

 

 

 

121,003

Net share settlement of restricted stock units

 

556

 

 

(5,726)

 

 

 

(5,726)

Balances, June 30, 2022

 

12,561,025

$

1,256

$

25,733,821

$

40,163,560

$

$

65,898,637

Net income

 

 

 

 

3,427,104

 

 

3,427,104

Stock-based compensation expense

 

 

 

393,187

 

 

 

393,187

Net share settlement of restricted stock units

 

1,265

 

 

(22,417)

 

 

 

(22,417)

Exercise of stock options

 

3,000

 

 

74,760

 

 

 

74,760

Balances, September 30, 2022

 

12,565,290

$

1,256

$

26,179,351

$

43,590,664

$

$

69,771,271

See accompanying notes to unaudited condensed financial statements.

8

IRADIMED CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

    

Nine Months Ended

September 30, 

2023

    

2022

Operating activities:

 

  

 

  

Net income

$

12,653,090

$

9,154,870

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

 

  

 

  

Change in allowance for doubtful accounts

 

136,830

 

56,118

Change in provision for excess and obsolete inventory

 

219,928

 

29,227

Depreciation and amortization

 

559,805

 

1,363,578

Loss (Gain) on disposal of property and equipment

 

12,535

 

(3,000)

Stock-based compensation

 

1,635,845

 

967,551

Deferred income taxes, net

 

(1,102,866)

 

(227,133)

Loss on maturities of investments

 

 

(8,025)

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

343,054

 

(5,570,783)

Inventory

 

(6,130,592)

 

(903,792)

Prepaid expenses and other current assets

 

(40,055)

 

(306,031)

Other assets

 

418,274

 

6,660

Accounts payable

 

519,648

 

37,338

Accrued payroll and benefits

 

(581,699)

 

(464,788)

Other accrued taxes

 

(18,696)

 

3,395

Warranty reserve

 

16,274

 

(13,593)

Deferred revenue

 

407,064

 

(452,822)

Other current liabilities

 

250,000

 

(9,508)

Prepaid income taxes

 

254,093

 

3,344,605

Net cash provided by operating activities

 

9,552,532

 

7,003,867

Investing activities:

 

  

 

  

Proceeds from maturities of investments

 

 

500,000

Purchases of property and equipment

 

(6,908,607)

 

(564,883)

Capitalized intangible assets

 

(465,744)

 

(838,438)

Net cash used in investing activities

 

(7,374,351)

 

(903,321)

Financing activities:

 

  

 

  

Dividends paid

 

(13,222,907)

 

(12,559,127)

Proceeds from exercises of stock options

 

7,341

 

146,707

Taxes paid related to the net share settlement of equity awards

 

(178,355)

 

(95,523)

Net cash used in financing activities

 

(13,393,921)

 

(12,507,943)

Net decrease in cash and cash equivalents

 

(11,215,740)

 

(6,407,398)

Cash and cash equivalents, beginning of period

 

57,960,864

 

61,999,550

Cash and cash equivalents, end of period

$

46,745,124

$

55,592,152

Supplemental disclosure of cash flow information:

 

  

 

  

Cash paid for income taxes

$

4,136,152

$

757,137

ROU asset recognized in exchange for new lease obligation

$

227,983

$

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

$

492,528

$

364,825

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 Securities and Exchange Commission (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 and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, and other interim periods, or future years or periods.

The accompanying interim condensed financial statements should be read in conjunction 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, 2022. 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 Magnetic Resonance Imaging (“MRI”) compatible medical devices, related accessories, disposables and service for use primarily by hospitals and acute care facilities during MRI procedures.

Certain Significant Risks and Uncertainties

We market our products to end users in the United States and to third-party distributors internationally. Sales to end users in the United States 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 regularly throughout the year. We have not incurred any losses related to these balances.

Our medical devices require clearance from the FDA 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.

10

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued 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. We have adopted previously mentioned ASU starting January 1, 2023 and it did not result in a material 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

    

Nine Months Ended

September 30, 

September 30, 

2023

    

2022

2023

    

2022

(unaudited)

(unaudited)

United States

$

13,948,368

$

10,810,370

$

38,876,418

$

31,606,401

International

 

2,556,272

 

2,596,902

 

9,233,702

 

6,833,150

Total revenue

$

16,504,640

$

13,407,272

$

48,110,120

$

38,439,551

Revenue information by type is as follows:

Three Months Ended

    

Nine Months Ended

September 30, 

September 30, 

2023

    

2022

2023

    

2022

(unaudited)

(unaudited)

Devices:

  

 

  

 

  

 

  

MRI Compatible IV Infusion Pump Systems

$

3,905,520

$

3,866,535

$

13,966,905

$

11,001,490

MRI Compatible Patient Vital Signs Monitoring Systems

 

7,738,549

 

5,519,045

 

18,564,085

 

15,635,415

Ferro Magnetic Detection Systems

 

138,760

 

62,982

 

619,539

 

62,982

Total Devices revenue

 

11,782,829

 

9,448,562

 

33,150,529

 

26,699,887

Disposables, services and other

 

4,213,666

 

3,410,015

 

13,464,278

 

10,158,922

Amortization of extended warranty agreements

 

508,145

 

548,695

 

1,495,313

 

1,580,742

Total revenue

$

16,504,640

$

13,407,272

$

48,110,120

$

38,439,551

11

Contract Liabilities

Our contract liabilities consist of:

September 30, 

    

December 31, 

2023

2022

(unaudited)

Advance payments from customers

$

519,835

$

896,617

Shipments in-transit

 

11,374

 

14,696

Extended warranty agreements

 

4,624,174

 

3,837,006

Total

$

5,155,383

$

4,748,319

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

Deferred

Revenue

(unaudited)

Contract liabilities, December 31, 2022

$

4,748,319

Increases due to cash received from customers

 

3,716,326

Decreases due to recognition of revenue

 

(3,309,262)

Contract liabilities, September 30, 2023

$

5,155,383

Deferred

Revenue

(unaudited)

Contract liabilities, December 31, 2021

$

4,232,439

Increases due to cash received from customers

 

2,927,868

Decreases due to recognition of revenue

 

(3,391,557)

Contract liabilities, September 30, 2022

$

3,768,750

Capitalized Contract Costs

Our capitalized contract costs totaled $125,278 and $340,044 as of September 30, 2023 and December 31, 2022, respectively, and are classified as other assets on the unaudited condensed balance sheets.

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, restricted stock units and performance-based restricted stock units granted by us represent the only dilutive effect reflected in diluted weighted-average shares outstanding.

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

12

Three Months Ended September 30, 

    

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

(unaudited)

(unaudited)

Net income

$

5,067,180

$

3,427,104

$

12,653,090

$

9,154,870

Weighted-average shares outstanding — Basic

 

12,602,581

 

12,564,636

 

12,597,250

 

12,559,465

Effect of dilutive securities:

 

  

 

  

 

  

 

  

Stock options

 

18,727

 

18,196

 

18,860

 

21,198

Restricted stock units

 

73,478

 

48,297

63,300

 

56,662

Performance-based restricted stock units

 

41,051

 

 

37,578

 

Weighted-average shares outstanding — Diluted

 

12,735,837

 

12,631,129

 

12,716,988

 

12,637,325

Basic net income per share

$

0.40

$

0.27

$

1.00

$

0.73

Diluted net income per share

$

0.40

$

0.27

$

0.99

$

0.72

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

    

Nine Months Ended

September 30, 

September 30, 

2023

2022

2023

2022

(unaudited)

(unaudited)

Anti-dilutive stock options and restricted stock units

438

 

26,402

 

352

 

31,254

4 — Inventory, net

Inventory consists of:

September 30, 

    

December 31, 

2023

2022

(unaudited)

Raw materials

$

9,508,117

$

4,827,113

Work in process

 

938,534

 

369,761

Finished goods

 

1,680,277

 

411,647

Inventory before allowance for excess and obsolete

 

12,126,928

 

5,608,521

Allowance for excess and obsolete

 

(459,215)

 

(239,288)

Total

$

11,667,713

$

5,369,233

13

5 — Property and Equipment, net

Property and equipment consist of:

September 30, 

    

December 31, 

2023

2022

(unaudited)

Land

$

6,253,790

$

Computer software and hardware

1,332,580

1,121,455

Furniture and fixtures

 

1,721,860

 

1,573,587

Leasehold improvements

 

270,486

 

259,146

Machinery and equipment

 

2,430,448

 

2,210,181

Fixed assets in-process

 

784,513

 

665,773

 

12,793,677

 

5,830,142

Accumulated depreciation

 

(3,905,793)

 

(3,430,330)

Total

$

8,887,884

$

2,399,812

Depreciation expense of property and equipment was $164,595 and $142,389 for the three months ended September 30, 2023 and 2022, respectively, and $484,094 and $419,970 for the nine months ended September 30, 2023 and 2022, respectively.

Land Acquisition

On February 2, 2023, the Company entered into a reinstatement and amendment (“Reinstatement”) to the previously announced sale and purchase agreement with O Property, Ltd., a Florida limited partnership dated as of November 1, 2022, pursuant to which the parties agreed to consummate a sale of real property located in Orange County, Florida. Pursuant to the terms of the Reinstatement, the parties consummated the sale of approximately 26.5 acres of land to the Company for a purchase price of $6,200,000. The property was acquired as a site for future development of manufacturing, research labs, and office space to accommodate our increased operations and anticipated growth.

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

September 30, 

    

December 31, 

2023

2022

(unaudited)

United States

$

8,541,457

$

2,248,308

International

 

346,427

 

151,504

Total property and equipment, net

$

8,887,884

$

2,399,812

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.

14

6 — Intangible Assets, net

The following table summarizes the components of intangible asset balances:

September 30, 

    

December 31, 

2023

2022

(unaudited)

Patents — in use

$

321,874

$

321,873

Patents — fully amortized

 

70,164

 

70,164

Patents — in process

 

127,785

 

123,153

Internally developed software — in use

 

872,218

 

872,218

Internally developed software — in process

 

1,950,434

 

1,489,322

Trademarks

 

27,697

 

27,697

 

3,370,172

 

2,904,427

Accumulated amortization

 

(910,697)

 

(834,988)

Total

$

2,459,475

$

2,069,439

Amortization expense of intangible assets was $25,236 and $25,236 for the three months ended September 30, 2023 and 2022, respectively, and $75,708 and $75,886 for the nine months ended September 30, 2023 and 2022, respectively.

Expected annual amortization expense for the remaining portion of 2023 and the next five years related to intangible assets is as follows (excludes in process intangible assets):

Three months ending December 31, 2023

$

25,236

2024

$

100,544

2025

$

97,374

2026

$

85,658

2027

$

11,945

2028

$

9,343

7 — Fair Value Measurements

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

As of September 30, 2023, we did not have any asset or liabilities subject to recurring fair value measurements.

15

8 — Accumulated Other Comprehensive Income

There was no accumulated other comprehensive income for the three months ended September 30, 2023 and 2022.

There was no accumulated other comprehensive income for the nine months ended September 30, 2023. The components of accumulated other comprehensive income, net of tax, for the nine months ended September 30, 2022 are as follows:

Unrealized (Losses)

Gains on

Available-For-Sale

Securities

(unaudited)

Balance at December 31, 2021

$

17,012

(Gain) Loss on available-for-sale securities, net

 

(10,953)

Reclassification realized in net earnings

 

(6,059)

Balance at September 30, 2022

$

9 — Stock-Based Compensation

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

Three Months Ended

    

Nine Months Ended

September 30, 

September 30, 

2023

    

2022

    

2023

    

2022

(unaudited)

(unaudited)

Cost of revenue

$

63,119

$

50,007

$

187,292