What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-01 · 37 added, 41 removed, 147 unchanged (35% of the section changed)

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See “CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS” for a discussion of the uncertainties, risks and assumptions associated with these statements.

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

We develop, manufacture, market and distribute MRI compatible medical devices and accessories, disposables 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 are the only known provider of a non-magnetic 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.

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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.

Each IV infusion pump system generally 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.

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Internationally, we have distribution agreements with independent distributors selling our products.

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 lingering pandemic issues.

Selling cycles for our devices have varied widely and have historically ranged between three and six months in duration.

We also enter into agreements with IDNs and healthcare supply contracting companies, which are commonly referred to as GPOs in the U.S., which enable us to sell and distribute our products to their member hospitals.

GPOs negotiate volume

purchase prices for hospitals, group practices, and other clinics that are members of a GPO.

Under our GPO agreements, we are required to pay the GPOs a fee of three percent of the sales of our products to members of the GPO.

GPOs negotiate volume purchase prices for hospitals, group practices, and other clinics that are members of a GPO.

GPO agreements, we are required to pay the GPOs a fee of three percent of the sales of our products to members of the GPO.

Sales to participating IDNs do not have an associated fee.

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Our cash provided by operations was $25.6 million in 2024, and $13.5 million in 2023.

Our estimated installed base of medical devices is as follows:

Our estimated cumulative unit sales of medical devices are as follows:

IV Infusion Pump Systems

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We recognize a receivable at the point in time we have an unconditional right to payment.

Payment terms are typically within 45 days after transferring control to U.S.

terms are typically within 45 days after transferring control to U.S.

Most international distributors are required to pay a portion of the transaction price in advance and the remaining amount within 30 days of receiving the related products.

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Percent of Revenue

Year Ended December 31,

Cost of revenue

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Total revenue

Revenue increased $12.3 million, or 23.0 percent, to $65.6 million from $53.3 million for the same period in 2022.

Revenue from sales in the U.S.

For the year ended December 31, 2024, total revenue increased $7.6 million, or 12 percent, to $73.2 million from $65.6 million for the same period in 2023.

For the year ended December 31, 2024, revenue from sales in the U.S.

increased $8.1 million, or 15.4 percent, to $60.6 million from $52.5 million for the same period in 2023.

Revenue from sales internationally increased $3.6 million, or 38.6 percent, to $13.0 million from $9.4 million for the same period in 2022.

Revenue from sales internationally decreased $0.4 million, or 3.1 percent, to $12.6 million from $13.0 million for the same period in 2023.

Domestic sales accounted for 83 percent of total revenue for the year ended December 31, 2024, compared to 80 percent for the same period in 2023.

Revenue from sales of devices increased $9.5 million, or 25.9 percent, to $46.0 million from $36.5 million for the same period in 2022.

For the year ended December 31, 2024, revenue from sales of devices increased $6.0 million, or 13.0 percent, to $51.9 million from $45.9 million for the same period in 2023.

This increase was the result of higher overall unit sales, particularly our IV infusion pump systems.

Revenue from sales of our disposables, service and other increased $3.0 million, or 20.2 percent, to $17.6 million from $14.6 million for the same period in 2022.

Revenue from the amortization of our extended warranty agreements decreased $0.2 million, or 7.5%, to $2.0 million from $2.2 million for the same period in 2022.

The increase in ancillary product sales aligns with the increased sales of our devices.

The decline in revenue from the amortization of deferred revenue year-over-year is primarily due to a higher initial volume of deferred revenue during the pandemic, as more companies were purchasing extended warranties at that time.

For the year ended December 31, 2024, revenue from sales of our disposables, service and other increased $1.5 million, or 8.5 percent, to $19.1 million from $17.6 million for the same period in 2023.

Revenue from the amortization of our extended warranty agreements increased $0.2 million, or 11.7 percent, to $2.2 million from $2.0 million for the same period in 2023.

The increase in ancillary product sales and revenue from amortization aligns with the increased gross sales of our devices.

Cost of Revenue and Gross Profit

Years Ended December 31,

Cost of revenue

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Gross profit margin was 76.9 percent and 76.5 percent for the years ended December 31, 2024 and 2023, respectively.

The increase in gross profit margin is the result of favorable overhead variance adjustments and higher average selling prices in 2023 compared to 2022, offset by increased raw material costs due to inflation.

in year over year sales also positively impacts the Company’s ability to favorably absorb overhead costs and increase gross profit margin.

The increase in gross profit margin is the result of favorable overhead variance adjustments and higher average selling prices in 2024 compared to 2023, a reduction in raw material costs, and increased management oversight of inventory.

The increase in year over year sales also positively impacts the Company’s ability to favorably absorb overhead costs and increase gross profit margin.

Operating Expenses

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General and Administrative

General and administrative expense increased approximately $4.4 million, or 41.4 percent, to $15.1 million for the year ended December 31, 2023, from $10.7 million for the same period last year.

General and administrative expense increased approximately $0.8 million, or 5.4 percent, to $15.9 million for the year ended December 31, 2024, from $15.1 million for the same period in 2023.

This increase is primarily due to higher expenses for legal and professional costs, regulatory approval and consulting costs, and payroll and employee benefits costs.

These increases are a direct result of the continuous growth of the Company and need for additional support resources.

These increases are a direct result of the continued growth of the Company and need for additional support resources.

Sales and Marketing

Sales and marketing expenses decreased approximately $0.6 million, or 4.3 percent, to $12.1 million for the year ended December 31, 2023, from $12.7 million for the same period in 2022.

This decrease is primarily the result of lower expenses for sales commissions, partially offset by higher expenses for payroll and benefits.

Lower commissions are related to the sales cycle, and not necessarily in line with revenue growth.

The increases are a direct result of the continuing growth of the Company.

Sales and marketing expenses increased approximately $3.5 million, or 28.6 percent, to $15.6 million for the year ended December 31, 2024, from $12.1 million for the same period in 2023.

This increase is primarily the result of increased expenses for sales commissions, sales-related travel costs, and higher expenses for payroll and benefits.

Higher commissions are related to the sales cycle, and in line with revenue growth.

The increases are a direct result of the continued growth of the Company.

Research and Development

Research and development expense increased approximately $0.6 million, or 25.5 percent, to $2.9 million for the year ended December 31, 2023, from $2.3 million for the same period in 2022.

Research and development expense remained relatively consistent at $2.8 million for the year ended December 31, 2024, compared to $2.9 million for the same period in 2023.

This is primarily due to higher payroll and benefits costs, offset by lower prototype design and consulting expenses.

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This increase is primarily the result of higher interest income during the year ended December 31, 2024 compared to the same period in 2023.

We recorded a provision for income tax expense of approximately $4.5 million for the year ended December 31, 2023, compared to a tax expense of approximately $3.4 million for the year ended December 31, 2022.

We recorded a provision for income tax expense of approximately $5.0 million for the year ended December 31, 2024, compared to a tax expense of approximately $4.5 million for the same period in 2023.

Our effective tax rate for the year ended December 31, 2024 was 20.8 percent compared to 20.9 percent for the same period in 2023.

The increase in our effective tax rate is primarily the result of higher book income before the provision for income taxes.

The decrease in our effective tax rate is negligible and attributable to a number of immaterial factors.

Liquidity and Capital Resources

Our principal sources of liquidity have historically been our cash and cash equivalents balances, our investments, cash flow from operations and access to the financial markets.

Our principal uses of cash are operating expenses, working capital requirements and capital expenditures.

Our principal uses of cash are operating expenses, working capital requirements, capital expenditures and dividend payments.

As of December 31, 2024, we had cash and investments of $52.2 million, stockholders’ equity of $86.8 million, and working capital of $66.2 million, compared to cash and cash equivalents and investments of $49.8 million, stockholders’ equity of $71.4 million, and working capital of $59.7 million as of December 31, 2023.

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For the year ended December 31, 2024, cash provided by operations increased $12.1 million to $25.6 million, from $13.5 million in 2023.

During 2023, cash provided by operations was positively impacted by higher net income, accounts receivable, stock compensation, and deferred revenue.

Cash provided by operations was negatively impacted by inventory, accounts payable, and deferred income taxes.

During 2024, cash provided by operations was positively impacted by higher net income, lower inventory, lower accounts receivable, and increased stock compensation.

Cash provided by operations was negatively impacted by higher accounts payable and other accruals, higher deferred revenue, and higher deferred income taxes.

Investing Activities

For the year ended December 31, 2023, cash related to investing activities decreased $6.6 million to a use of $8.0 million, from $1.4 million used in 2022.

During 2023, cash related to investing activities was impacted by purchases of property and equipment, specifically the purchase of land.

During 2022, cash related to investing activities was impacted by maturities of investments, purchases of property and equipment, and capitalized intangible assets.

For the year ended December 31, 2024, cash used in investing activities increased $0.8 million to $8.8 million, from $8.0 million used in 2023.

During 2024, cash related to investing activities was impacted by purchases of property and equipment, specifically ongoing construction costs for our new corporate office and manufacturing facility in Orange County, Florida.

Financing Activities

For the year ended December 31, 2023, cash related to financing activities decreased $1.0 million to a use of $13.7 million, from $12.7 million used in 2022.

During 2023, cash used in financing activities was related to a cash payment for a dividend and taxes paid for the net share settlement of restricted stock units.

For the year ended December 31, 2024, cash used in financing activities increased $0.6 million to $14.3 million, from $13.7 million used in 2023.

During 2024, cash used in financing activities was related to cash payments for dividends and taxes paid for the net share settlement of restricted stock units.

Sales to end users in the United States are generally made on open credit terms.

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This facility has been leased from Susi, LLC, an entity controlled by our President, Chief Executive Officer, and Chairman, Roger Susi.

Pursuant to the terms of our lease, the monthly base rent is $34,133, adjusted annually for changes in the consumer price index.

We believe our sources of liquidity, including cash flow from operations, existing cash, and available financing sources will be sufficient to meet our projected cash requirements for at least the next 12 months from the date the financial statements are issued.

Pursuant to the terms of the Amended Lease Amendment, the monthly base rent is $34,133, adjusted annually for changes in the consumer price index.

Any equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants that increase our costs.

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From time to time, we may explore additional financing sources to meet our working capital requirements, make continued investment in research and development, expand our business and acquire products or businesses that complement our current business.

These actions would likely affect our future capital

requirements and the adequacy of our available funds.

These actions would likely affect our future capital requirements and the adequacy of our available funds.

Our future liquidity and capital requirements will depend on numerous factors, including the:

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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 7. Management’s Discussion and Analysis