What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-02 compared with 2022-03-04 · 103 added, 132 removed, 668 unchanged (26% of the section changed)

2 unchanged sentences

We maintain a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures.

effectiveness of our disclosure controls and procedures.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this Annual Report on Form 10-K, were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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between Susi, LLC and the Registrant, dated January 17, 2014

Amended and Restated Employment Agreement between the Registrant and Christopher K.

Scott, dated July 8, 2021

Employment Agreement between the Registrant and John F Glenn, dated May 21, 2022

Supply Agreement between the Registrant and Fukoku Co., Ltd.

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(Principal Executive Officer)

Each person whose signature appears below constitutes and appoints Leslie McDonnell and Chris Scott as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Each person whose signature appears below constitutes and appoints Roger Susi and John Glenn as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated.

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March 2, 2023

/s/ Chris Scott

Chief Financial and Operating Officer and Secretary (Principal Financial and Accounting Officer)

/s/ John Glenn

Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

March 2, 2023

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James Hawkins

/s/ Hilda Scharen-Guivel

March 2, 2023

Hilda Scharen-Guivel

IRADIMED CORPORATION FINANCIAL STATEMENTS

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of IRADIMED CORPORATION (the Company) as of December 31, 2021 and 2020, the related statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes to the financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of IRADIMED CORPORATION (the Company) as of December 31, 2022 and 2021, the related statements of operations, comprehensive income, stockholders’ equity and cash flows for the years ended December 31, 2022 and 2021, and the related notes to the financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

We determined that there are no critical audit matters.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Deferred Revenue Recorded on the Sale of Extended Warranties

As discussed in Notes 1 and 2 to the financial statements, the Company recorded deferred revenue related to the sale of extended warranty agreements of $3,837,006 at December 31, 2022.

The Company records contract liabilities, or deferred revenue, when it has an obligation to provide a product or service to the customer and payment is received in advance.

Payments received on the sale of extended warranty agreements are deferred and recognized in revenue ratably over the agreement period, which is typically one to four years after control of the related product is transferred to the customer.

We identified deferred revenue recorded on the sale of extended warranties as a critical audit matter because of the complexities of the manual calculations performed by management in estimating the deferred revenue to recognize on the sale of extended warranties at year end.

Auditing management’s estimates of deferred revenue to record on the sale of extended warranties required auditor judgment and an increase in audit effort due to the complexities of management’s manual calculations.

Our audit procedures related to deferred revenue recorded on the sale of extended warranties included the following, among others:

● We obtained an understanding of the relevant controls related to deferred revenue recorded on the sale of extended warranties and tested such controls for design and operating effectiveness, including controls related to management’s review of the manual calculations.

● We performed a test of details by agreeing a sample of extended warranty sales transactions to underlying customer contracts.

For each selection, we recalculated the revenue recognized for the year ended December 31, 2022, and the expected deferred revenue balance at year end.

● We tested the mathematical accuracy of management’s deferred revenue calculations and the timing of revenue recognized.

/s/ RSM US LLP

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BALANCE SHEETS

As of December 31,

Current assets:

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Operating lease right-of-use asset, net

Deferred income taxes, net

Deferred tax asset, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Current portion of operating lease liability

Other current liabilities

Other current liability

Total current liabilities

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Stockholders’ equity:

Common stock;

$ 0.0001 par value;

31,500,000 shares authorized;

12,544,024 shares issued and outstanding as of December 31, 2021 and 12,308,432 shares issued and outstanding as of December 31, 2020

Additional paid-in capital

6 unchanged sentences

STATEMENTS OF OPERATIONS

For the Years Ended December 31,

For the year ended December 31,

Cost of revenue

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Total operating expenses

Income (loss) from operations

Income from operations

Other income, net

Income (loss) before provision for income taxes

Provision for income tax expense (benefit)

( 1,985,879 )

Income before income taxes

Provision for income tax expense

Net income per share

4 unchanged sentences

For the Years Ended December 31,

Other comprehensive (loss) income:

Change in fair value of available-for-sale securities, net of tax (benefit) expense of $( 11,486 ), $ 5,097 and $ 24,713 respectively

Other comprehensive (loss):

Change in fair value of available-for-sale securities, net of tax expense (benefit) of $ 9,098 and $( 11,486 ), respectively

Realized gain on available-for-sale securities reclassified to net income, net of tax expense of $ 1,966 and $ 4,545 , respectively

Other comprehensive (loss) income

Other comprehensive loss

Comprehensive income

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Balances, December 31, 2020

Other comprehensive income

Other comprehensive loss

Stock-based compensation

Net share settlement of restricted stock units

Exercise of stock options and warrants

Exercise of stock options

Balances, December 31, 2021

Other comprehensive income

Stock-based compensation

Net share settlement of restricted stock units

Dividends paid

( 12,559,127 )

Exercise of stock options

Balances, December 31, 2020

Other comprehensive loss

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( 8,240,688 )

Prepaid expenses and other current assets

( 1,308,956 )

Prepaid expenses and other current assets

( 1,038,047 )

6 unchanged sentences

Prepaid income taxes

( 1,106,264 )

Net cash provided by operating activities

3 unchanged sentences

Capitalized intangible assets

Net cash provided by investing activities

( 1,051,978 )

Net cash (used in) provided by investing activities

( 1,374,997 )

Financing activities:

Proceeds from stock option and warrant exercises

Taxes paid for the net share settlement of restricted stock units

( 12,559,127 )

Net cash provided by financing activities

Net increase in cash and cash equivalents

Proceeds from stock option exercises

Taxes paid for net share settlement of restricted stock units

Net cash (used in) provided by financing activities

( 12,706,400 )

Net (decrease) increase in cash and cash equivalents

( 4,038,686 )

Cash and cash equivalents, beginning of year

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invasive and non-invasive blood pressure;

patient temperature, and;

optional advanced multi-gas anesthetic agent unit featuring continuous Minimum Alveolar Concentration measurements.

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.

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As of December 31, 2022 and 2021, our allowance for doubtful accounts was $ 160,498 and $ 60,361 , respectively.

Our investments consist of corporate debt securities and are considered available-for-sale.

Our investments consisted of corporate debt securities and are considered available-for-sale.

The specific identification method is used to determine the cost basis of investments sold.

Our investments are recorded in our Balance Sheets at fair value.

We classify our investments as current based on the nature of the investments and their availability for use in current operations.

We classified our investments as current based on the nature of the investments and their availability for use in current operations.

Unrealized gains and losses on our investments are included in accumulated other comprehensive income (loss), net of tax.

Realized gains or losses and impairment losses that are determined to be other-than-temporary are recorded in other income, net in our Statements of Operations.

We currently do not own any corporate bonds but should direct debt securities be utilized in the future, we would treat them as described above.

Fair Value Measurements

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Impairment is considered to have occurred when the estimated undiscounted future cash flows related to the asset groups are less than its carrying value.

Estimates of future cash flows involve consideration of many factors including the marketability of new products, product acceptance and lifecycle, competition, appropriate discount rates and operating margins.

An impairment is recognized as the amount by which the carrying value is greater than the fair value of the asset or asset group.

We provide for the estimated cost of product warranties at the time revenue is recognized.

The Company provides for the estimated cost of product warranties at the time revenue is recognized.

While we engage in product quality programs and processes, including actively monitoring and evaluating the quality of our suppliers, the estimated warranty obligation is affected by ongoing product failure rates, material usage costs and direct labor incurred in correcting a product failure.

5 unchanged sentences

Historically, warranty expenses have not been material to our financial statements.

Advertising and Marketing

For the years ended December 31, 2021, 2020 and 2019, these costs were $ 95,933 , $ 6,959 and $ 155,983 , respectively.

Advertising and marketing costs are expensed as incurred and included in sales and marketing expense.

Stock-Based Compensation

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Expense related to our performance-based restricted stock units is recognized straight-line over the requisite performance period, which is three years.

The maximum contractual life of our stock options is ten years from the grant date.

We utilize the Black-Scholes option pricing model to estimate the grant date fair value of those awards.

The Black-Scholes option pricing model requires the input of certain assumptions including stock price, dividend yield, expected volatility, risk-free interest rate, and expected option life.

Changes in these assumptions can materially affect the estimated fair value of our employee stock options.

The grant date stock price was based on our closing stock price on the date of grant;

dividend yield was based on our expectation of dividend payments over the expected life of the option;

expected volatility was based on a study of our volatility and comparable, publicly traded companies with similar products and product life cycles;

risk-free interest rate was the rate available on zero coupon U.S.

government obligations with a term approximating the expected option life;

the expected option life was calculated using the simplified method.

The grant date fair value of our restricted stock units is based on the closing price of our common stock on the date of grant.

In December 2022 and 2021, the Company granted Performance-Based Restricted Stock Units (“PSUs”) to certain employees under the Company’s Long-Term Incentive Pan (“LTIP”), which was adopted under the Company’s Amended and Restated 2014 Equity Incentive Plan.

Payouts of the PSUs will be based on the Company's total shareholder return compared to a pre-defined peer group.

Payouts of the PSUs will be based on the Company’s total shareholder return compared to a peer group or index total shareholder return.

For purposes of the LTIP, total shareholder return is calculated as the share price at the end of the performance period, which is three years, 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 percent and 200 percent, depending on the Company's performance against the peer group.

The payout range for participants will be between 0 percent and 200 percent, depending on the Company’s performance.

The grant date fair value of our PSUs is based on a Monte Carlo simulation, the closing price of our common stock, and other pertinent factors on the grant date.

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In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

A valuation allowance is recorded to offset net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

A valuation allowance is recorded

to offset net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We recognize the tax benefit of uncertain tax positions in the financial statements based on the technical merits of the position.

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Comprehensive income includes net income and other comprehensive income items that are excluded from net income under U.S.

Comprehensive income includes unrealized gains and losses on our investments classified as available for sale.

Comprehensive income included unrealized gains and losses on our investments classified as available for sale while those investments were held.

Basic and Diluted Net Income per Share

1 unchanged sentence

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.

The Underwriters’ warrants, 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.

See the Warrants portion of Note 9.

The 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:

2 unchanged sentences

Effect of dilutive securities:

Underwriters’ warrants

Stock options

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Diluted net income per share

Stock options and warrants to purchase shares of our common stock 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:

Stock options to purchase shares of our common stock 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:

As of December 31,

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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, and related governmental and societal responses thereto, continue to cause disruption in global supply and distribution channels and significantly change the way companies manage their business.

From the beginning of this global health crisis, our priority has been the safety and well-being of our employees and continuing to supply our customers with access to our therapeutic and diagnostic device solutions.

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 several 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.

Pandemic Considerations

We continue to monitor developments associated with the recent evolving pandemic and its effects on our employees, customers, supply chain and distribution channels.

The ongoing impact of the recent and potential future pandemics depends on several 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 disruptions in our supply chain and manufacturing operations, delays in payments on outstanding accounts receivable, uncertain demand for our products, and effects of any actions we may take to address financial and operational challenges our customers may face.

Our future results may potentially be heavily determined by global vaccination rates, 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:

● disruptions in our supply chain that may limit our ability to procure materials necessary to manufacture our products or procuring materials at elevated costs resulting in diminished financial results;

● 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 our 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, or its variants, may materially impact our financial condition, liquidity, or results of operations in future periods remains uncertain.

We are actively managing our response to the recent pandemic and continue to work 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 a pandemic, may materially impact our financial condition, liquidity, or results of operations in future periods remains uncertain.

Recent Accounting Pronouncements

Accounting Pronouncements Implemented in 2022

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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 2009-12 as of January 1, 2021 and it did not have an impact on our financial condition, results of operations or cash flows.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the option to deduct research and experimental expenditures in the current year and requires taxpayers to amortize them over five years pursuant to IRC Section 174.

This change is applied from 2022 onward prospectively and impacts the timing of the related cash tax payments as the deductions are disallowed for tax in the year incurred but allowed for tax purposes to be amortized and deducted over 5 years .

The mandatory capitalization requirement increases our deferred tax assets and cash tax liabilities by approximately $ 0.5 million .

In the future, Congress may consider legislation that would defer the amortization requirement to later years, possibly with a retroactive effect.

In the meantime, we expect to continue to make additional Federal tax payments based on current Section 174 tax law.

The impact on Section 174 on our cash from operations depends on the amount of research and experimental expenditures incurred by the company and whether the IRS issues guidance on the provision which differs from current interpretation, among other things.

Recently Issued Accounting Pronouncements to be Implemented

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MRI compatible patient vital signs monitoring systems

Ferro Magnetic Detection Systems

Total Devices revenue

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Patents — in use

Patents — Fully Amortized

Patents — in process

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Accumulated amortization

Amortization expense of intangible assets was $ 101,735 , $ 92,945 and $ 89,963 for the years ended December 31, 2021, 2020 and 2019, respectively.

Amortization expense of intangible assets was $ 101,122 and $ 101,735 for the two years ended December 31, 2022, and 2021, respectively.

Expected annual amortization expense for the next five years related to intangible assets is as follows (excludes in-process intangible assets):

3 unchanged sentences

As of December 31, 2021

As of December 31, 2021, the scheduled maturities of our investments are as follows:

Less than 1 year

7 — Fair Value Measurements

7 unchanged sentences

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

There were no transfers into or out of any Levels during the years ended December 31, 2021 or 2020.

8 — Accumulated Other Comprehensive Income

The only component of accumulated other comprehensive income relates to unrealized gains and (losses) on our investments and activity is as follows:

The only component of accumulated other comprehensive income related to unrealized gains and (losses) on our investments was as follows:

Unrealized Gains

5 unchanged sentences

Balance at December 31, 2022

Reclassification realized in net earnings

Balance at December 31, 2021

9 — Stock-Based Compensation

24 unchanged sentences

No options were granted during the years ended December 31, 2022 and December 31, 2021.

The weighted-average grant-date fair value of options granted during the year ended December 31, 2019 was $ 11.84 .

We estimated the fair value of options granted during the year ended December 31, 2019 using a Black-Scholes option pricing model with the following weighted average assumptions:

Expected term (years)

Risk-free interest rate

Dividend yield

Restricted Stock Units

2 unchanged sentences

Unvested at December 31, 2021

Cancelled/Forfeited

Unvested at December 31, 2022

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Unvested at December 31, 2021

Cancelled/Forfeited

Unvested at December 31, 2022

2 unchanged sentences

During the year ended December 31, 2021, the Company awarded 8,956 PSUs.

The 9,345 remaining outstanding awards will vest three years from the award date based on the achievement of certain performance criteria approved by the Compensation Committee.

The awards will vest three years from the award date based on the achievement of certain performance criteria approved by the Compensation Committee.

Based on the level of achievement of the performance criteria at the end of the three years for each of the PSUs awarded, the number of shares earned can range from 0 percent to 200 percent of the remaining shares outstanding;

therefore, the maximum number of shares that can be issued under these awards is twice the original remaining outstanding awards of 27,884 PSUs, or 55,768 shares.

For the year ended December 31, 2021, the grant date fair value of the PSUs was $ 57.69 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 1.0 %.

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 38.4 % to 94.0 % and dividend yields ranged from 0.0 % to 1.1 %.

The volatility and dividend yield used for the Company was 50.7 % and 0.0 %, respectively.

Currently, for accounting purposes, we assume the full 55,768 are probable.

For the year ended December 31, 2022, the Company recognized $ 12,249 in stock compensation expense related to the 18,819 PSUs granted in December 2022 compared to $ 11,775 in stock compensation expense for the same period recognized in 2021 related to the 8,956 PSUs granted in December 2021.

The fair value of the December 2022 grants will be calculated using a Monte-Carlo simulation model with a three-year term and an applicable risk-free interest rate.

The resulting difference in stock compensation expense is expected to be immaterial and will be recorded in the first quarter of 2023.

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As of December 31, 2022, we had $ 743,237 of unrecognized compensation cost related to the unvested PSUs, which is expected to be recognized over a weighted-average period of 2.59 years.

Associated with our IPO completed on July 21, 2014, we issued Underwriters Warrants (the “Warrants”) to purchase up to a total of 201,600 shares of our common stock.

The grant date aggregate fair value of the Warrants was $ 611,000 .

The Warrants were exercisable, in whole or in part, commencing July 21, 2015 through July 21, 2017.

The Warrants were exercisable at $ 8.125 per share, or 130 percent of the public offering price per share of our common stock in the IPO.

On the grant date, we classified the Warrants as equity and incremental direct costs associated with our IPO.

Accordingly, the issuance of the Warrants had no impact on our financial statements.

On July 17, 2017, our Board of Directors approved a modification to the Warrants.

This modification extended the expiration date of the Warrants from July 17, 2017 to July 17, 2019 and revised the strike price from $ 8.125 to $ 10.05 .

During the year ended December 31, 2019, the remaining 162,031 warrants were exercised.

10 — Other Income, Net

9 unchanged sentences

Current taxes:

( 2,404,511 )

Total current tax expense (benefit)

( 2,375,017 )

Total current tax expense

Deferred taxes:

Total deferred tax expense (benefit)

Provision for income tax expense (benefit)

( 1,985,879 )

Total deferred tax expense

Provision for income tax expense

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred taxes are as follows:

The significant components of the deferred tax assets and liabilities were as follows:

As of December 31,

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Total deferred income taxes, net

As of December 31, 2021 and 2020, we recorded a state net operating loss carryforward of $ 215,133 and $ 263,974 , respectively.

Many states follow a 20-year carryforward period for net operating losses, however, certain states have a shorter expiration period.

At December 31, 2022 the Company expects to fully utilize their carryforward net operating losses for state tax purposes.

Many states follow the 20 -year carryforward period for net operating losses;

however, a select few have a shorter expiration period.

A reconciliation of the statutory U.S.

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Effective rate

As of December 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 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.

As of December 31, 2022 and December 31, 2021, we did not identify or accrue for any uncertain tax positions.

We are currently not aware of any uncertain tax positions that could result in significant payments, accruals or other material deviations in this estimate over the next 12 months.

The Company does not have any outstanding U.S.

federal income tax or material state and local tax matters for years through 2022.

There are no federal income tax returns 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.

1 unchanged sentence

state income taxes for 2017 and subsequent years.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.

Management has evaluated the need for a valuation allowance for deferred tax assets, considering the reversal of temporary differences, and believes it is more likely than not that the Company will realize the net deferred income tax assets as of December 31, 2022.

We have one material lease contract outstanding.

1 unchanged sentence

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.

For the year ended December 31, 2021, the Company paid Susi, LLC $ 461,874 related to this lease.

For the year ended December 31, 2022 and 2021, the Company paid Susi, LLC $ 492,643 and $ 461,874 respectively related to this lease.

Under the terms of the lease, we are responsible for property taxes, insurance and maintenance expenses.

15 unchanged sentences

We used a discount rate of 6.0 % to determine the present value of the operating lease liability on January 1, 2019.

We will reassess the lease accounting terms and assumptions once the details regarding completion of new manufacturing facility and planned departure of the current facility is finalized.

13 — Employee Benefit Plan

17 unchanged sentences

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

As of December 31, 2021, we accrued approximately $ 146 thousand related to various matters.

15 — Capital Stock

24 unchanged sentences

The Common Stock is not redeemable.

16 — Subsequent Event

16 — Subsequent Events

On February 2, 2023, the Board of Directors declared a special cash dividend of $ 1.05 per share on the Company’s common stock.

On February 21, 2023, we paid $ 13,222,907 to shareholders of record at the close of business on February 17, 2023.

On February 2, 2023, the Company entered into a reinstatement and amendment 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 26.518 acres of land to the Company for a purchase price of $ 6,200,000 .

The property was acquired as a site for future office space development to accommodate our increased operations and anticipated growth.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures