What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-14 · 270 added, 347 removed, 646 unchanged (49% of the section changed)

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Report of Independent Registered Public Accounting Firm – Financial Statements (PCAOB ID:

Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting (PCAOB ID:

Report of Independent Registered Public Accounting Firm – Internal Control over Financial Reporting

Consolidated Balance Sheets as of December 31, 2022 and 2021

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Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022, 2021 and 2020

Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020

Notes to the Consolidated Financial Statements

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open claims is estimated not to exceed $7,416,000.

Due to the uncertainty of potential costs to be incurred related to the Claims,

and the uncertainty of the ultimate outcome of each Claim, management applies significant judgements and estimates in determining the

probability that a loss has been incurred and the amount to accrue for such loss.

Due to the uncertainty of potential costs to be incurred related to the Claims, and

the uncertainty of the ultimate outcome of each Claim, management applies significant judgements and estimates in determining the probability

that a loss has been incurred and the amount to accrue for such loss.

identified the accrual and disclosure of the Claims as a critical audit matter due to the significant judgments made by management when

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in Thousands, except Common Stock par value)

and Cash Equivalents

Receivable - less allowances of $ 1,111 and $ 1,410 , respectively

Current Assets

Cash and Cash Equivalents

Accounts Receivable - less allowances of $ 1,410

and $ 1,124 ,

Inventories - Net

Other Current Assets

Total Current Assets

Right-Of-Use Assets - Operating

Property and Equipment - Net

Goodwill - Net

Deferred Taxes

Other Long Term Assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Assets

Assets - Operating

and Equipment - Net

Long Term Assets

AND SHAREHOLDERS’ EQUITY

Commissions and Sales Incentives

Liability - Operating

Current Liabilities

Accounts Payable

Accrued Compensation

Accrued Commissions and Sales Incentives

Dividends Payable

Taxes Payable

Lease Liability - Operating

Other Liabilities

Total Current Liabilities

Lease Liability - Operating, net of current portion

Deferred Taxes

Tax Payable Long Term

Other Long Term Liabilities

Total Liabilities

Commitments and Contingencies (Note 10)

Liability - Operating, net of current portion

Payable Long Term

Long Term Liabilities

and Contingencies (Note 11)

Shareholders’

Shareholders’ Equity:

Stock – par value $ 0.01 share:

authorized 20,000,000 shares:

10,153,633 shares issued and 10,094,322 shares outstanding as

of December 31, 2022 and December 31, 2021, respectively

Other Comprehensive Loss

Omega Flex, Inc.

Shareholders’ Equity

Common Stock – par value $ 0.01 share:

authorized 20,000,000 shares:

10,153,633 shares issued at December 31, 2021 and 2020, respectively, and 10,094,322 outstanding at December 31, 2021 and 2020, respectively

Treasury Stock

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Omega Flex, Inc.

Noncontrolling

Shareholders’ Equity

Noncontrolling Interest

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

Liabilities and Shareholders’ Equity

accompanying Notes which are an integral part of the Consolidated Financial Statements.

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the years ended December 31,

in thousands, except per Share Data)

Cost of Goods Sold

Selling Expense

General and Administrative Expense

Engineering Expense

Operating Profit

Interest Income (Expense)

Other Income (Expense)

Income Before Income Taxes

Income Tax Expense

in Thousands, except per Common Share Data)

of Goods Sold

and Administrative Expense

Income (Expense)

Before Income Taxes

Net Income – Noncontrolling Interest

Net Income attributable to Omega Flex, Inc.

Basic and Diluted Earnings per Common Share

Cash Dividends Declared per Common Share

Basic and Diluted Weighted Average Shares Outstanding

Income attributable to Omega Flex, Inc.

and Diluted Earnings per Common Share

Dividends Declared per Common Share

Basic and Diluted

Weighted Average Shares Outstanding

accompanying Notes which are an integral part of the Consolidated Financial Statements.

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in Thousands)

Other Comprehensive (Loss) Income:

Foreign Currency Translation Adjustment

Other Comprehensive (Loss) Income

Comprehensive Income

Comprehensive (Loss) Income:

Currency Translation Adjustment

Comprehensive (Loss) Income

Comprehensive

Comprehensive Income Attributable to the Noncontrolling Interest

Total Other Comprehensive Income

Other Comprehensive Income

accompanying Notes which are an integral part of the Consolidated Financial Statements.

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in Thousands, Except Share Amounts)

Common Stock Outstanding

Paid In Capital

Retained Earnings

Stock Outstanding

Comprehensive

Income (Loss)

Noncontrolling

Shareholders’

Balance - December 31, 2018

Cumulative Translation Adjustment

Shares Reissued From Treasury Pursuant To Restricted Stock Unit Awards

Dividends Declared

Balance - December 31, 2019

Cumulative Translation Adjustment

Dividends Declared

Balance - December 31, 2020

Beginning Balance value

Cumulative Translation Adjustment

Dividends Declared

Balance - December 31, 2021

Ending Balance value

Translation Adjustment

Balance, value

Translation Adjustment

Balance, value

accompanying Notes which are an integral part of the Consolidated Financial Statements.

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in Thousands)

Cash Flows from Operating Activities:

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

Non-Cash Compensation Expense

Depreciation and Amortization

Provision for Losses on Accounts

Receivable, net of write-offs and recoveries

Deferred Taxes

Provision for Inventory Reserves

Changes in Assets and Liabilities:

Accounts Receivable

Right-Of-Use Assets

Accounts Payable

Accrued Compensation

Accrued Commissions and Sales Incentives

Lease Liabilities

Other Liabilities

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

Purchase of Investments

Net Proceeds from Sale of Investments

Capital Expenditures

Net Cash (Used In) Provided by Investing Activities

Cash Flows from Financing Activities:

Dividends Paid

Net Cash Used In Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Translation effect on cash

Cash and Cash Equivalents - Beginning of Year

Cash and Cash Equivalents - End of Year

Supplemental Disclosure of Cash Flow Information

Cash paid for Income Taxes

Cash paid for Interest

Declared Dividend

Additions to Right-Of-Use Assets obtained from new operating Lease Liabilities

Flows from Operating Activities:

to Reconcile Net Income to

Cash Provided by Operating Activities:

Compensation Expense

and Amortization

for Losses on Accounts Receivable,

net of write-offs and recoveries

for Inventory Reserves

in Assets and Liabilities:

Commissions and Sales Incentives

Cash Provided by Operating Activities

Flows from Investing Activities:

Cash Used In Investing Activities

Flows from Financing Activities:

Cash Used In Financing Activities

Increase in Cash and Cash Equivalents

effect on cash

and Cash Equivalents - Beginning of Year

and Cash Equivalents - End of Year

Disclosure of Cash Flow Information

paid for Income Taxes

paid for Interest

to Right-Of-Use Assets obtained from new operating Lease Liabilities

accompanying Notes which are an integral part of the Consolidated Financial Statements.

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The Company’s audited Consolidated Financial Statements for the years ended December 31, 2022, 2021 and

2019 have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB), and with the

instructions of Form 10-K and Article 5 of Regulation S-X.

All material inter-company accounts and transactions have been eliminated

in consolidation.

2020 have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB) and Article 5

of Regulation S-X.

All material intercompany accounts and transactions have been eliminated in consolidation.

Company is a leading manufacturer of flexible metal hose, which is used in a variety of applications to carry gases and liquids within

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and sale of flexible metal hose and accessories.

These applications include carrying liquefied gases in certain processing applications,

fuel gases within residential and commercial buildings, medical gases in health care facilities, and vibration absorbers in high vibration

applications.

These applications

include carrying fuel gases within residential and commercial buildings;

gasoline and diesel gasoline products (both above and below

the ground) in a double containment piping to contain any possible leaks, which is used in automotive and marina refueling, and fueling

for back-up generation;

and medical gases in health care facilities.

The Company’s flexible metal piping is also used to carry other types of gases and fluids in a number of industrial

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for the sale of product must exist.

The Company ships product in accordance with the purchase order and standard terms as reflected

The Company ships products in accordance with the purchase order and standard terms as reflected

within the Company’s order acknowledgments and sales invoices.

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As the seller, the Company can determine that the shipped goods meet the agreed-upon

specifications in the contract or customer purchase order (e.g.

items, quantities, and prices) with the buyer, so customer acceptance

specifications in the contract or customer purchase order (e.g., items, quantities, and prices) with the buyer, so customer acceptance

would be deemed a formality, as noted in ASC 606-10-55-86.

As a result, the Company has a legal right to payment upon shipment of the

upon the above, the Company has concluded that transfer of control substantively transfers to the customer upon shipment.

upon the above, the Company has concluded that control substantively transfers to the customer upon shipment.

considerations of Topic 606 include the following:

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upon shipment of goods).

Also under Topic 606, to ensure that revenue recognized would not be probable of a significant reversal,

the four following factors are considered:

Also under Topic 606, to ensure that the related revenue recognized would not be probable of a significant

reversal, the four following factors are considered:

amount of consideration is highly susceptible to factors outside the Company’s influence.

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The Company monitors the viability of the banking institutions

carrying its assets on a regular basis and has the ability to transfer cash to various institutions during times of risk.

carrying their assets on a regular basis and has the ability to transfer cash to various institutions during times of risk.

has not experienced any losses related to these cash balances and believes its credit risk to be minimal.

Receivable and Provision for Credit Losses

accounts receivables are stated at amortized cost, net of allowances for credit losses, and adjusted for any write-offs.

maintains allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables

considering current market conditions and estimates for supportable forecasts when appropriate.

The estimate is a result of the Company’s

ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses

in its receivable portfolio.

For accounts receivables, the Company uses historical loss experience rates and applies them to a related

aging analysis while also considering customer and/or economic risk where appropriate.

Determination of the proper amount of allowances

requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision

accounts receivable is stated at amortized cost, net of allowances for credit losses, and adjusted for any write-offs.

The Company maintains

allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering

current market conditions and estimates for supportable forecasts when appropriate.

The estimate is a result of the Company’s ongoing

assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its

receivable portfolio.

For accounts receivable, the Company uses historical loss experience rates and applies them to a related aging

analysis while also considering customer and/or economic risk where appropriate.

Determination of the proper amount of allowances requires

management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision

for credit losses and, as a result, net earnings.

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31, 2022 and 2021, respectively.

Company invests excess funds in liquid interest earning instruments including U.S.

Treasury bills and bank time deposits, with maturities

typically of one year or less.

These investments are stated at fair value, which approximates amortized cost, and are classified as available-for-sale

in accordance with ASC 320, Investments – Debt and Equity Securities .

The Company did not have any investments as of December

31, 2021 or 2020.

are valued at the lower of cost or net realizable value.

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did not indicate any impairment of goodwill.

Compensation Plans

Based Compensation Plans

2006, the Company adopted a Phantom Stock Plan (the “Plan”), which allows the Company to grant phantom stock units (“Units”)

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The Units follow a vesting

schedule of three years from the grant date and are then paid upon maturity.

schedule over three years from the grant date and are then paid upon maturity.

In accordance with FASB ASC Topic 718, Compensation

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the period the Units are forfeited.

Further details of the Plan are provided in Note 11, Stock-Based Compensation Plans, to the Consolidated

Financial Statements included in this report.

Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year cliff vesting

following the grant date, with full value paid upon maturity.

Additionally, for grants made starting January 1, 2023, upon retirement

at age 67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate on

a pro-rata basis, 1/3 per year from the grant date.

details of the Plan are provided in Note 12, Stock Based Compensation Plans, to the Consolidated Financial Statements included in

Liability Reserves

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The Company is vigorously defending against all known claims.

January 1, 2019, the Company adopted the requirements of FASB ASU 2016-02, Leases (Topic 842) which defines a lease as any contract

that conveys the right to use a specific asset for a period of time in exchange for consideration.

Leases are classified as a finance

lease, formerly called a capital lease, if any of the following criteria are met:

Company applies the requirements of FASB ASU 2016-02, Leases (Topic 842) which defines a lease as any contract that conveys the

right to use a specific asset for a period of time in exchange for consideration.

Leases are classified as a finance lease, formerly

called a capital lease, if any of the following criteria are met:

lease transfers ownership of the underlying asset to the lessee by the end of the lease term.

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any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases.

of December 31, 2021, each of the Company’s leases are classified as operating leases.

of December 31, 2022 and 2021, each of the Company’s leases are classified as operating leases.

finance and operating leases are reflected on the balance sheet as lease or “right-of-use” assets and lease liabilities.

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and development expenses are charged to operations as incurred.

Such charges totaled $ 627,000 , $ 831,000 , and $ 1,191,000 for the years

ended December 31, 2021, 2020 and 2019, respectively and are included in engineering expense in the accompanying consolidated statements

of operations.

Such charges totaled $ 653,000 , $ 627,000 , and $ 831,000 for the years ended

December 31, 2022, 2021 and 2020, respectively and are included in engineering expense in the accompanying consolidated statements of

costs are included in selling expense on the consolidated statements of operations.

The expense relating to shipping was $ 3,548,000 ,

$ 2,801,000 ,

and $ 2,862,000 for

the years ended December 31, 2021, 2020 and 2019, respectively.

$ 3,814,000 , and $ 2,801,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

per Common Share

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dollars at exchange rates prevailing on the balance sheet dates.

The statements of income

The statements of operations

are translated into U.S.

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Exchange gains

and losses resulting from foreign currency transactions are included in the statements of income (other expense) in the period in which

and losses resulting from foreign currency transactions are included in the statements of operations in the period in which they occur.

Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes .

Under this method the Company recorded

Under this method the Company records

tax expense, related deferred taxes and tax benefits, and uncertainties in tax positions.

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The tax law changes in the CARES Act did not have a material impact on the Company’s income tax

a result of changes made by the Tax Cuts and Jobs Act of 2017, which became effective as of January 1, 2022, the Company is required

to capitalize certain re search and development expenses for tax purposes, and amortize those expenses over a five year

period, resulting in a deferred tax asset for the capitalized amounts.

Comprehensive Income

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for approximately 7% to 19% of the Accounts Receivable balance over the last two years.

No other customer represented more that 10% of

No other customer represented more than 10% of

Accounts Receivable or Sales.

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business entities for fiscal years beginning after December 15, 2021, including interim periods therein.

Early adoption of the standard

is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued.

The Company adopted

this new guidance, and it did not have a material impact on its Consolidated Financial Statements.

net of reserves of $ 505,000 and $ 407,000 , respectively, were as follows at December 31:

SCHEDULE OF INVENTORIES, NET OF RESERVES

(in thousands)

Finished Goods

Raw Materials

Total Inventories - Net

The Company adopted this new

guidance in 2021, and it did not have a material impact on its Consolidated Financial Statements.

net of reserves of $ 571,000 and $ 505,000 , respectively, were as follows on December 31:

OF INVENTORIES, NET OF RESERVES

Note 5, Other Long Term Assets, for details on inventories which are estimated to be used beyond the next twelve months.

PROPERTY AND EQUIPMENT

and equipment consisted of the following on December 31:

SCHEDULE OF PROPERTY AND EQUIPMENT

Depreciation and Amortization Est.

(in thousands)

Leasehold Improvements

OF PROPERTY AND EQUIPMENT

and Amortization Est.

Years (Lesser of Life or Lease)

Property and Equipment - Gross

Accumulated Depreciation

Property and Equipment - Net

and Equipment - Gross

and Equipment - Net

above amounts include capital related items of $ 535,000 and $ 112,000 as of December 31, 2022 and 2021, respectively, which had not yet

been placed in service by the Company, and therefore no depreciation was recorded in the related periods for those assets.

and amortization expense was approximately $ 1,020,000 , $ 870,000 , and $ 719,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

and amortization expense was approximately $ 1,096,000 , $ 1,020,000 , and $ 870,000 for the years ended December 31, 2022, 2021 and 2020,

respectively.

OTHER LONG TERM ASSETS

long term assets were as follows on December 31:

SCHEDULE OF OTHER LONG TERM ASSETS

surrender value of life insurance policies

Long Term Assets

Company maintains inventories, which are estimated to be used beyond the next twelve months, mainly for the new corrugated medical tubing

(“CMT”) products.

Higher amounts of materials for the new CMT products were initially purchased for cost considerations and

because of longer required lead times.

cash surrender value of life insurance policies where the Company is beneficiary is further described in Note 11, Commitments and Contingencies.

LINE OF CREDIT AND OTHER BORROWINGS

December 1, 2017, the Company agreed to a new Amended and Restated Revolving Line of Credit Note (the “Line”) and Third Amendment

December 1, 2017, the Company agreed to an Amended and Restated Revolving Line of Credit Note (the “Line”) and Third Amendment

to the Loan Agreement with Santander Bank, N.A.

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amount of $ 15,000,000 , maturing on December 1, 2022 , with funds available for working capital purposes and other cash needs.

is unsecured.

The loan agreement provides for the payment of any borrowings under the agreement at an interest rate range of either LIBOR

plus 0.75% to plus 1.75% (for borrowings with a fixed term of 30, 60, or 90 days), or, Prime Rate up to Prime Rate plus 0.50% (for borrowings

with no fixed term other than the December 1, 2022 maturity date), depending upon the Company’s then existing financial ratios.

Currently, the Company’s ratio would allow for the most favorable rate under the agreement’s range, which would be a rate

The Company is also required to pay on a quarterly basis an unused facility fee of 10 basis points of the average unused balance

The Company may terminate the line at any time during the five-year term, as long as there are no amounts outstanding.

is unsecured and has been extended maturing on June 1, 2023.

The loan agreement provides for the payment of any borrowings under the agreement

at an interest rate range of either LIBOR plus 0.75% to plus 1.75% (for borrowings with a fixed term of 30, 60, or 90 days), or Prime

Rate up to Prime Rate plus 0.50% (for borrowings with no fixed term other than the June 1, 2023 extended maturity date), depending upon

the Company’s then existing financial ratios.

Currently, the Company’s ratio would allow for the most favorable rate under

the agreement’s range, which would be a rate of 5.14% .

The Company is also required to pay on a quarterly basis an unused facility

fee of 10 basis points of the average unused balance of the note .

The Company may terminate the line at any time during the five-year

term and extension period, as long as there are no amounts outstanding .

the quarter ended June 30, 2020, in an effort to ensure liquidity and secure all available resources during the COVID-19 pandemic, the

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As of December 31, 2022

the Company also had no outstanding borrowings on its line of credit.

and as of December 31, 2021, the Company also had no outstanding borrowings on its line of credit.

Company was in compliance with all debt covenants as of December 31, 2022 and 2021.

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Treasury Department

issued new guidance on the PPP program, and advised that publicly traded companies that had access to other sources of financing may

not be appropriate candidates for the PPP Loans, and provided a grace period until May 7, 2020 for such companies to repay the previously

issued new guidance on the PPP program and advised that publicly traded companies that had access to other sources of financing may not

be appropriate candidates for the PPP Loans, and provided a grace period until May 7, 2020 for such companies to repay the previously

issued PPP Loans.

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dividends, as set forth in the following table:

SCHEDULE OF REGULAR QUARTER DIVIDEND PAYMENTS

Dividend Declared

Dividend Paid

Price Per Share

OF REGULAR QUARTER DIVIDEND PAYMENTS

September 30, 2022

October 24, 2022

June 10, 2022

March 29, 2022

April 25, 2022

December 9, 2021

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April 17, 2020

December 16, 2019 ( S )

December 30, 2019

December 14, 2019

January 3, 2020

indicates special dividend

addition to the above dividend amounts, there were dividends approved by the Company’s foreign subsidiary during September 2021

December 2019, and July 2019, which amounted to outlays of cash of $ 129,000 , $ 65,000 , and $ 137,000 to the foreign subsidiary’s

noncontrolling interest respectively.

which amounted to an outlay of cash of $ 129,000 to the foreign subsidiary’s noncontrolling interest respectively.

should be noted that from time to time, the Board may elect to pay special dividends, in addition to or in lieu of the regular quarterly

dividends, depending upon the financial condition of the Company.

Board approved and granted a total of 2,500 restricted stock unit awards (the “Awards”) to be allocated to the existing non-employee

directors of the Company.

The Awards were approved by the shareholders of the Company at the annual meeting on June 11, 2019 and distributed

on June 20, 2019.

A Form S-8 registration statement, and the restricted stock unit award agreements, were filed with the SEC on December

13, 2018 ( 2,000 units) and May 24, 2019 ( 500 units).

The related director compensation cost of approximately $ 217,000 was recognized

during June 2019.

April 4, 2014, the Board authorized an extension of its stock repurchase program without expiration, up to a maximum amount of $ 1,000,000 .

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tax expense consisted of the following:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

(in thousands)

Federal Income Tax:

State Income Tax:

Foreign Income Tax:

Income Tax Expense

OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

income included foreign income of $ 437,000 , $ 1,500,000 , and $ 1,341,000 in 2022, 2021 and 2020, respectively.

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before income tax, as follows:

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

(in thousands)

Computed Statutory Income Tax Expense

State Income Tax, Net of Federal Tax Benefit

Foreign Tax Rate Differential

Executive Compensation Limitation

Foreign Derived Intangible Income Deduction

Research Credit

Income Tax Expense

OF EFFECTIVE INCOME TAX RATE RECONCILIATION

Statutory Income Tax Expense

Income Tax, Net of Federal Tax Benefit

Tax Rate Differential

Compensation Limitation

Derived Intangible Income Deduction

deferred income tax (expense) benefit results from temporary timing differences in the recognition of income and expense for income tax

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deferred income tax (expense) benefit for the years ended December 31, 2022 and 2021 are as follows:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

OF DEFERRED TAX ASSETS AND LIABILITIES

(in thousands)

Deferred Tax Assets:

Compensation Assets

Inventory Valuation

Accounts Receivable Valuation

Deferred Litigation Costs

Foreign Net Operating Losses

Valuation Allowance for Loss Carryover

Compensation Liabilities

Total Deferred Assets

Deferred Tax Liabilities:

Prepaid Expenses

Depreciation and Amortization

Total Deferred Liabilities

Total Deferred Tax Liability

Receivable Valuation

Litigation Costs

Research Costs

Product Liability

Net Operating Losses

Allowance for Loss Carryover

Deferred Assets

Tax Liabilities:

and Amortization

Deferred Liabilities

Deferred Tax Asset (Liability)

believes it is more likely than not that the Company will have sufficient taxable income when these timing differences reverse and that

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Company also has operations in other locations that are leased, as well as other leased assets.

In conjunction with the new guidance

for leases, as defined by the FASB with ASU 2016-02, Leases (Topic 842), the Company has described the existing leases, which

are all classified as operating leases, pursuant to the below.

In conjunction with the guidance for

leases, as defined by the FASB with ASU 2016-02, Leases (Topic 842), the Company has described the existing leases, which are

all classified as operating leases, pursuant to the below.

the U.S., the Company leases a facility in Houston, Texas, which currently provides manufacturing, stocking, and sales operations, with

the lease term running through October 2024.

Additionally, the Company leases its corporate office space in Middletown, Connecticut,

with the lease term expiring in June 2022.

the lease term running through October 2024, and a facility in Malvern, Pennsylvania, which was consummated effective January 1, 2022,

with a three year term ending in December 2024, that provides warehousing.

Also in 2022, the Company extended its operating lease agreement

for its corporate office space in Middletown, Connecticut, with the lease term ending in June 2027.

the U.K., the Company leases a facility in Banbury, England, which serves manufacturing, warehousing, and other operational functions.

The lease in Banbury was effective April 1, 2006 and had a 15-year term which ended in March 2021.

A new lease for Banbury was recently

consummated, effective April 1, 2021, with a 15-year term ending in March 2036.

The lease in Banbury has a 15-year term ending in March 2036 .

addition to property rentals, the Company also has lease agreements in place for various fleet vehicles and equipment with various lease

the December 31, 2021 consolidated balance sheet, the Company has recorded right-of-use assets of $ 3,374,000 , and a lease liability of

$ 3,373,000 , of which $ 383,000 is reported as a current liability.

The respective weighted average remaining lease term and discount rate

are approximately 12.95 years and 1.07 %.

December 31, 2022, the Company has right-of-use assets of $ 3,205,000 , and a lease liability of $ 3,210,000 , of which $ 447,000 was reported

as a current liability.

On December 31, 2021, the Company has right-of-use assets of $ 3,374,000 , and a lease liability of $ 3,373,000 ,

of which $ 383,000 was reported as a current liability.

The respective weighted average remaining lease term and discount rate are approximately

11.02 years and 1.06 % as of December 31, 2022.

expense for operating leases was approximately $ 504,000 , $ 421,000 , and $ 301,000 for the years ended December 31, 2022, 2021 and 2020,

respectively.

minimum lease payments, inclusive of interest, under non-cancelable leases as of December 31, 2021 is as follows:

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES

Year Ending December 31,

Operating Leases

(Amounts in thousands)

Total Minimum Lease Payments

minimum lease payments, inclusive of interest of $ 178,000 , under non-cancelable leases as of December 31, 2022 is as follows:

OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES

Ending December 31,

Minimum Lease Payments

EMPLOYEE BENEFIT PLANS

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percent ( 6 %) of the excess over the OASDI limit, subject to the maximum allowed under the Employee Retirement Income Security Act (ERISA).

Participants vest over six years.

Participant balances vest over six years.

Company also maintains a savings and retirement plan qualified under Internal Revenue Code Section 401(k) for all employees.

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indemnity obligations under the indemnity agreements are subject to certain conditions and limitations set forth in each of the agreements.

Under the terms of the indemnity agreements, the Company is contingently liable for costs which may be incurred by the officers and directors

in connection with claims arising by reason of these individuals’ roles as officers and directors.

Under the terms of the agreement, the Company is contingently liable for costs which may be incurred by the officers and directors in

connection with claims arising by reason of these individuals’ roles as officers and directors.

The Company has obtained directors’

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due to the variable nature and timing of possible events required to incur such obligations.

disclosed in detail in Note 8, under the caption “Leases”, the Company has several lease obligations in place that will be

paid out over time.

Most notably, the Company leases a facility in Banbury, England that serves the manufacturing, warehousing, and distribution

as provided earlier in Item 7 under “Liquidity and Capital Resources”, the Company has numerous purchase obligations in place

for the forthcoming year, largely related to the Company’s core material inventory components, totaling $ 31,846,000 .

disclosed in detail in Note 9, Leases, to the Consolidated Financial Statements included in this report, the Company has several lease

obligations in place that will be paid out over time.

Most notably, the Company leases a facility in Banbury, England that serves the

manufacturing, warehousing, and distribution functions.

Lastly, as provided earlier in Item 7 under “Liquidity and Capital Resources”, the Company has numerous contractual obligations in place for the forthcoming year, mainly related to purchase obligations for the Company’s raw material inventories, totaling $ 16,755,000 .

Contingencies

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a variety of factors, including a higher number of Claims, higher legal costs, and higher insurance deductibles or retentions.

September 2017, a putative class action case was filed against the Company and other parties in Missouri state court.

The Company successfully

removed the case to federal court, and in August 2020, the court granted the defendants’ joint summary judgement motion, and dismissed

The parties have fully resolved the plaintiffs appeal of that decision, and the case has been dismissed by the plaintiffs,

thus concluding the matter.

Company was made aware of a potential legal liability regarding a legal dispute in the U.K., in which the Company’s subsidiary,

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from future claims or claims that have not yet come to our attention, and accordingly, the liability in the Consolidated Financial Statements

primarily represents an accrual for legal costs for services previously rendered, and outstanding or anticipated settlements for Claims.

The liabilities recorded on the Company’s books as of December 31, 2021 and December 31, 2020 were $ 262,000 and $ 642,000 , respectively,

and are included in Other Liabilities.

primarily represents an accrual for legal costs for services previously rendered, outstanding settlements for Claims not yet paid, and

anticipated settlements for Claims within the Company’s remaining retention under its insurance policies.

The liabilities recorded

in the Company’s books as of December 31, 2022 and December 31, 2021 were $ 3,848,000 and $ 262,000 , respectively, and are included

in Other Liabilities.

STOCK BASED COMPENSATION PLANS

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incidents of ownership to the Company’s common stock

Units are granted to participants upon the recommendation of the Company’s CEO, and the approval of the Compensation Committee.

Each of the Units that are granted to a participant will be initially valued by the Compensation Committee, at an amount equal to the

closing price of the Company’s common stock on the grant date, but are recorded at fair value using the Black-Scholes method as

described below.

The Units follow a vesting schedule, with a maximum vesting of three years after the grant date.

Upon vesting, the Units

represent a contractual right of payment for the value of the Unit and therefore are stated as liabilities in accordance with FASB ASC

Topic 718 , Compensation - Stock Compensation .

The Units will be paid on their maturity date, one year after all of the Units granted

in a particular award have fully vested, unless an acceptable event occurs under the terms of the Plan prior to one year, which would

allow for earlier payment.

The amount to be paid to the participant on the maturity date is dependent on the type of Unit granted to

the participant.

Units may be Full Value, in which the value of each Unit at the maturity date, will equal the closing price of the Company’s

common stock as of the maturity date;

or Appreciation Only , in which the value of each Unit at the maturity date will be equal

to the closing price of the Company’s common stock at the maturity date minus the closing price of the Company’s common

stock at the grant date.

December 9, 2009, the Board of Directors authorized an amendment to the Plan to pay an amount equal to the value of any cash or stock

dividend declared by the Company on its common stock to be accrued to the phantom stock units outstanding as of the record date of the

common stock dividend.

The dividend equivalent will be paid at the same time the underlying phantom stock units are paid to the participant.

Units are granted to participants upon the recommendation of the Company’s President, and the approval of the Compensation

Each of the Units that are granted to a participant will be initially valued by the Compensation Committee at an amount

equal to the closing price of the Company’s common stock on the grant date but are recorded at fair value using the

Black-Sholes method as described below.

The Units follow a vesting schedule, with a maximum vesting of three years after the grant

Grants made on or after January 1, 2023, will fully vest three years from the grant date.

Upon vesting, the Units represent a

contractual right of payment for the value of the Unit and therefore are stated as liabilities in accordance with FASB ASC Topic

718 , Compensation - Stock Compensation .

The Units will be paid on their maturity date, one year after all the Units granted

in a particular award have fully vested, unless a specified event occurs under the terms of the Plan, which would allow for earlier

The value of each Unit at the maturity date will equal the closing price of the Company’s common stock as of the

maturity date (Full Value).

2009, the Board of Directors authorized an amendment to the Plan to pay an amount equal to the value of any cash or stock dividend declared

by the Company on its common stock to be accrued to the Units outstanding as of the record date of the common stock dividend.

equivalent will be paid at the same time the underlying Units are paid to the participant.

addition, the Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year

cliff vesting following the grant date, with full value paid upon maturity.

Additionally, for grants made starting January 1, 2023, upon

retirement at age 67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate

on a pro-rata basis, 1/3 per year from the grant date.

certain circumstances, the Units may be immediately vested upon the participant’s death or disability.

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employees” as defined in Section 409A of the Internal Revenue Code will be paid approximately 181 days after termination.

of Phantom Stock Units.

As of December 31, 2020, the Company had 13,252 unvested units outstanding, all of which were granted

As of December 31, 2021, the Company had 8,358 nonvested and unmatured Units outstanding, all of which were granted

at Full Value.

On February 18, 2021, the Company granted an additional 2,412 Full Value Units with a fair value of $ 146.06

per unit on grant date, using historical volatility.

In February 2021, the Company paid $ 1,214,000 for the 7,750 fully vested and matured

units that were granted during 2017, including their respective earned dividend values.

In August 2021, the Company paid $ 195,000 for

the 1,250 fully vested and matured units that were granted during August 2017, including their respective earned dividend values.

August 25, 2021, the Company granted an additional 808 Full Value Units with a fair value of $ 144.81 per unit on grant date, using

historical volatility.

On August 27, 2021, 1,212 unvested Full Value Units were forfeited.

As of December 31, 2021, the Company

had 8,358 unvested units outstanding.

On February 22, 2022, the Company granted an additional 2,471 Full Value Units with a fair value of $ 148.03 per Unit on

grant date, using historical volatility.

In February 2022, the Company paid $ 838,000 for 5,450 fully vested and matured Units that were

granted during 2018, including their respective earned dividend values.

In March 2022, the Company paid $ 295,000 for 1,870 fully vested

Units that were granted during 2018, 2019 and 2020, including their respective earned dividend values.

On August 19, 2022, the Company

granted an additional 1,022 Full Value Units with a fair value of $ 113.63 per Unit on grant date, using historical volatility.

2022, the Company paid $ 107,000 for the 950 fully vested and matured Units that were granted during August 2018, including their respective

earned dividend values.

As of December 31, 2022, the Company had 6,653 nonvested and unmatured Units outstanding.

Company uses the Black-Scholes option pricing model as its method for determining fair value of the Units.

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The compensation expense (including adjustment

of the liability to its fair value) from the Units is recognized over the vesting period of each grant or award.

of the liability to its fair value) from the Units is recognized over the vesting and maturity periods of each grant.

FASB ASC Topic 718, Compensation - Stock Compensation , requires forfeitures either to be estimated at the time of grant and revised,

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Company recognizes the reversal of any previously recognized compensation expense on forfeited awards in the period that the award is

For the year ended December 31, 2021, the reversal of $ 56,000 of previously recognized compensation expense was recognized

on 1,212 nonvested forfeited Units.

total Phantom Stock related liability as of December 31, 2021 was $ 2,427,000 of which $ 1,156,000 is included in Other Liabilities, as

it is expected to be paid in February and August 2022, and the balance of $ 1,271,000 is included in Other Long Term Liabilities.

total Phantom Stock related liability as of December 31, 2020 was $ 3,331,000 of which $ 1,378,000 is included in Other Liabilities, and

the balance of $ 1,953,000 is included in Other Long Term Liabilities.

to the Phantom Stock Plan, in accordance with FASB ASC Topic 718, Compensation - Stock Compensation , the Company recorded compensation

expense of approximately $ 506,000 , $ 1,453,000 , and $ 2,255,000 related to the Phantom Stock Plan for the years ended December 31, 2021,

2020 and 2019, respectively.

Compensation expense for a given period largely depends upon fluctuations in the Company’s stock price.

following table summarizes information about the Company’s nonvested phantom stock Units as of December 31, 2021:

SUMMARY OF NONVESTED PHANTOM STOCK UNITS

Weighted Average Grant Date Fair Value

Number of Phantom Stock Unit Awards:

Nonvested as of December 31, 2020

Nonvested as of December 31, 2021

Phantom Stock Unit Awards Expected to Vest

total unrecognized compensation costs calculated on December 31, 2021 are $ 669,000 which will be recognized through August 2024 .

For the year ended December 31, 2022, no awards were forfeited.

However, for the year ended December 31, 2021, a reversal

of $ 56,000 of previously recognized compensation expense was recognized on 1,212 nonvested forfeited Units.

total liability related to the Units as of December 31, 2022 was $ 1,343,000 of which $ 665,000 is included in Other Liabilities, as it

is expected to be paid within the next twelve months, and the balance of $ 678,000 is included in Other Long Term Liabilities.

liability related to the Units as of December 31, 2021 was $ 2,427,000 of which $ 1,156,000 was included in Other Liabilities, and the

balance of $ 1,271,000 was included in Other Long Term Liabilities.

to the Plan, in accordance with FASB ASC Topic 718, Compensation - Stock Compensation , the Company recorded compensation expense

of approximately $ 156,000 , $ 506,000 , and $ 1,453,000 related to the Plan for the years ended December 31, 2022, 2021 and 2020, respectively.

Compensation expense (or income) for a given period largely depends upon fluctuations in the Company’s stock price.

following table summarizes information about the Company’s nonvested and unmatured Units as of and for the year ended December

OF NONVESTED PHANTOM STOCK UNITS

Average Grant

Number of Units:

and Unmatured as of December 31, 2021

and Unmatured as of December 31, 2022

Expected to Vest and Mature

total unrecognized compensation costs calculated on December 31, 2022 are $ 387,000 which will be recognized through August of 2025.

Company will recognize the related expense over the weighted average period of 1.2 years.

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time to time the Company may have related party transactions (“RPTs”).

In short, RPTs represent any transaction between the

Company and any Company employee, director or officer, or any related entity, or relative, etc.

RPTs represent any transaction between the Company

and any Company employee, director or officer, or any related entity, or relative, etc.

The Company performs a review of transactions

each year to determine if any RPTs exist, and if so, determines if the related parties act independently of each other in a fair transaction.

Through this investigation the Company noted a limited number of RPTs which are disclosed hereto.

First, legal and accounting fees of

$ 117,000 were paid on behalf of three affiliated shareholders during the first two quarters of 2021 for the filing of a registration

statement with the SEC (Form S-3) which allowed for the resale of up to 300,000 shares of common stock owned by the affiliated shareholders.

The legal and accounting fees are to be repaid to the Company by the three affiliated shareholders, and that amount is reported in Other

Current Assets.

Legal services for the Form S-3 and for other legal services were performed by a firm which formerly employed one member

of the board.

Second, on occasion the Company shares a small amount of services with its former parent Mestek, Inc., mostly related to

board meeting expenses.

Finally, the Company is aware of transactions between a few service providers which employ individuals with associations

to Omega Flex employees.

In all cases, these transactions have been determined to be independent transactions with no indication that

they are influenced by the related relationships.

Other than as disclosed above, the Company is currently not aware of any RPTs between

the Company and any of its current directors or officers outside the scope of their normal business functions or expected contractual

Through this investigation the Company noted a limited number of RPTs.

In all cases, these RPTs have been determined to be independent

transactions with no indication that they are influenced by the related relationships.

SUBSEQUENT EVENTS

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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 8. Financial Statements and Supplementary Data