What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-07 · 235 added, 325 removed, 460 unchanged (55% of the section changed)

2 unchanged sentences

in Thousands, except Common Stock par value)

September 30,

Current Assets:

Cash and Cash Equivalents

Accounts Receivable - less allowances of $ 1,229 and $ 1,410 , respectively

Accounts Receivable - less allowances of $ 1,111

Inventories - Net

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authorized 20,000,000 shares:

10,153,633 shares issued and 10,094,322 shares outstanding as of September 30, 2022 and December 31, 2021, respectively

10,153,633 shares issued and 10,094,322 shares outstanding as of March 31, 2023 and December 31, 2022, respectively

Treasury Stock

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For the three-months ended

For the nine months ended

September 30,

Cost of Goods Sold

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Income Tax Expense

Net (Income) Loss attributable to the Noncontrolling Interest

Net Loss (Income) attributable to the Noncontrolling Interest

Net Income attributable to Omega Flex, Inc.

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For the three-months ended

For the nine months ended

September 30,

Other Comprehensive (Loss):

Other Comprehensive Income (Loss):

Foreign Currency Translation Adjustment

Other Comprehensive (Loss)

Other Comprehensive Income (Loss)

Comprehensive Income

Comprehensive (Income) Loss Attributable to the Noncontrolling Interest

Comprehensive Income Attributable to the Noncontrolling Interest

Total Comprehensive Income

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in Thousands, Except Share Amounts)

the three months ended September 30, 2022

Common Stock Outstanding

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Shareholders’

Cumulative Translation Adjustment

Dividends Declared

September 30, 2022

the three months ended September 30, 2021

Common Stock Outstanding

Paid In Capital

Retained Earnings

Comprehensive

Income (Loss)

Noncontrolling

Shareholders’

Cumulative Translation Adjustment

Dividends Declared

September 30, 2021

Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

in Thousands, Except Share Amounts)

the nine months ended September 30, 2022

Common Stock Outstanding

Paid In Capital

Retained Earnings

Comprehensive

Income (Loss)

Noncontrolling

Shareholders’

January 1, 2023

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Dividends Declared

September 30, 2022

the nine months ended September 30, 2021

March 31, 2023

Common Stock Outstanding

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January 1, 2022

Beginning balance, value

Balance, value

Cumulative Translation Adjustment

Dividends Declared

September 30, 2021

Ending balance, value

March 31, 2022

Balance, value

accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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in Thousands)

For the nine months ended

September 30,

For the three-months ended

Cash Flows from Operating Activities:

Adjustments to Reconcile Net Income to

Net Cash Provided by Operating Activities:

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

Net Cash Provided by (Used in) Operating Activities:

Non-Cash Compensation

Non-Cash Lease Expense

Depreciation and Amortization

Provision for Losses on Accounts Receivable, net of

write-offs and recoveries

Provision for Losses on Accounts Receivable, net of write-offs and

Deferred Taxes

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Accounts Receivable

Right-Of-Use Assets

Accounts Payable

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Accrued Commissions and Sales Incentives

Lease Liabilities

Lease Liability - Operating

Other Liabilities

Net Cash Provided by Operating Activities

Net Cash Provided by (Used in) Operating Activities

Cash Flows from Investing Activities:

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Net Cash Used in Financing Activities

Net (Decrease) Increase in Cash and Cash Equivalents

Net Decrease in Cash and Cash Equivalents

Translation effect on cash

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Declared Dividends

Supplemental Schedule of Non-Cash Investing and Financing Activities:

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

accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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of Presentation

accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Omega Flex, Inc.

(Omega) and its subsidiaries

(collectively the “Company”).

The Company’s Condensed Consolidated Financial Statements for the quarter ended September

30, 2022 have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and with the instructions

of Form 10-Q and Article 10 of Regulation S-X.

Certain information and note disclosures normally included in annual financial statements

prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes

that the disclosures made are adequate to make the information not misleading.

It is suggested that these Condensed Consolidated Financial

Statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest shareholders’

annual report (Form 10-K).

All material inter-company accounts and transactions have been eliminated in consolidation.

It is management’s

opinion that all adjustments necessary for a fair statement of the results for the interim periods have been made, and that all adjustments

are of a normal recurring nature, or a description is provided for any adjustments that are not of a normal recurring nature.

Company’s business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose

(also described as corrugated tubing), as well as the sale of the Company’s related proprietary fittings and a vast array of accessories.

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

particular applications.

Some of the more prominent uses include:

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;

copper-alloy corrugated piping in medical or health care facilities to carry medical gases

(oxygen, nitrogen, vacuum) or pure gases for pharmaceutical applications;

applications where the customer requires the piping to have both a degree of flexibility

and/or an ability to carry corrosive compounds or mixtures, or to carry at both very high

and very low (cryogenic) temperatures.

Company manufactures flexible metal hose at its facilities in Exton, Pennsylvania, and Houston, Texas in the United States (U.S.), and

in Banbury, Oxfordshire in the United Kingdom (U.K.), and primarily sells its products through distributors, wholesalers and to original

equipment manufacturers (“OEMs”) throughout North America and Europe, and to a lesser extent other global markets.

accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Omega Flex, Inc., and its subsidiaries (collectively

the “Company”).

The Company’s Condensed Consolidated Financial Statements for the quarter ended March 31, 2023 have

been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and with the instructions of Quarterly

Report on Form 10-Q and Article 10 of Regulation S-X.

Certain information and note disclosures normally included in annual financial

statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company

believes that the disclosures made are adequate to make the information not misleading.

It is suggested that these Condensed Consolidated

Financial Statements be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual

Report on Form 10-K for the year ended December 31, 2022 (“Form 10-K”).

All material intercompany accounts and transactions

have been eliminated in consolidation.

It is management’s opinion that all adjustments necessary for a fair statement of the results

for the interim periods have been made, and that all adjustments are of a normal recurring nature, or a description is provided for any

adjustments that are not of a normal recurring nature.

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

their particular applications.

The Company’s business is controlled as a single operating segment that consists of the manufacture

and sale of flexible metal hose and accessories.

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.

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

the customer requires the piping to have both a degree of flexibility and/or an ability to carry corrosive compounds or mixtures, or

to carry at both very high and very low (cryogenic) temperatures.

Company manufactures flexible metal hose at its facilities in Exton, Pennsylvania and Houston, Texas, in the U.S., and in Banbury, Oxfordshire

in the U.K., and sells its products through distributors, wholesalers and to original equipment manufacturers (OEMs) throughout North

America, and in certain European markets.

SIGNIFICANT ACCOUNTING POLICIES

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evidence of an arrangement for the sale of product must exist.

The Company ships product

The Company ships products

in accordance with the purchase order and standard terms as reflected within the Company’s

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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.

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terms, timing, and transfer of control of goods.

As indicated within Note 2, Significant Accounting Policies, in these Condensed Consolidated

Financial Statements, under the caption “Significant Concentration”, the majority of the Company’s sales were geographically

contained within North America, with the remainder scattered internationally.

All performance assessments and resource allocations are

generally based upon the review of the results of the Company as a whole.

As indicated in this Note 2, Significant Accounting Policies, under the caption “Significant

Concentrations”, the majority of the Company’s sales were geographically contained within North America, with the remainder

scattered internationally.

All performance assessments and resource allocations are generally based upon the review of the results of

the Company as a whole.

Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

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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

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

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, operating profit.

The allowances consider numerous quantitative and qualitative factors that include

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forecasts, when appropriate, and credit risk characteristics.

reserve for credit losses, which include future credits, discounts, and doubtful accounts, was $ 1,229,000 and $ 1,410,000 as of September

30, 2022 and December 31, 2021, respectively.

reserve for credit losses, which include future credits, discounts, and doubtful accounts, was $ 1,111,000 as of March 31, 2023 and December

31, 2022, respectively.

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

The cost of inventories is determined by the first-in, first-out (FIFO) method.

The Company generally considers inventory quantities beyond two-years usage, measured on a historical usage basis, to be excess inventory

The Company generally considers inventory quantities beyond two years of usage, measured on a historical usage basis, to be excess inventory

and reduces the carrying value of inventory accordingly.

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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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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.

following the grant date, with payment 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 7, Stock Based Compensation Plans, to the Condensed Consolidated Financial Statements included

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

grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably

certain to exercise.

lease term is for the major part of the remaining economic life of the underlying asset.

value of the sum of lease payments and any residual value guaranteed by the lessee equals or exceeds substantially

all of the fair value of the underlying asset.

The underlying

asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of

the lease term.

present value of the sum of lease payments and any residual value guaranteed by the lessee

equals or exceeds substantially all of the fair value of the underlying asset.

underlying asset is of such a specialized nature that it is expected to have no alternative

use to the lessor at the end of the lease term.

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

of September 30, 2022 and December 31, 2021, each of the Company’s leases are classified as operating leases.

of March 31, 2023 and December 31, 2022, 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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Company’s reporting unit in its annual impairment test as described in the FASB ASC Topic 350, Intangibles - Goodwill and Other

(ASU 2017-04) .

per Common Share

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are no dilutive securities.

Consequently, basic, and diluted earnings per share are the same.

Consequently, basic and dilutive earnings per share are the same.

and liabilities denominated in foreign currencies, most of which relate to the Company’s U.K.

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on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions.

January 1, 2022, as a result of changes made by the Tax Cuts and Jobs Act of 2017, the Company is required to capitalize certain research

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

the three and nine months ended September 30, 2022 and 2021, respectively, the components of other comprehensive income consisted solely

of foreign currency translation adjustments.

the quarters ended March 31, 2023 and 2022, respectively, the components of other comprehensive income consisted solely of foreign currency

translation adjustments.

Concentrations

Company has one significant customer which represented more than 10% of the Company’s Accounts Receivable on September 30, 2022.

No customers represented more than 10% of the Company’s Accounts Receivable on December 31, 2021.

That same customer represented

more than 10% of the Company’s total Net Sales for the three and nine months ended September 30, 2022 and 2021.

Geographically,

the Company has a significant amount of sales in the United States versus internationally.

These concentrations are consistent with those

discussed in detail in the Company’s December 31, 2021 Form 10-K.

Company has one significant customer which represented more than 10% of the Company’s Accounts Receivable as of March 31, 2023

and as of December 31, 2022.

That same customer represented more than 10% of the Company’s total Net Sales for the quarters ended

March 31, 2023 and 2022.

Geographically, the Company has a significant amount of sales in the United States versus internationally.

concentrations are consistent with those discussed in detail in the Company’s Form 10-K.

Company evaluates all events or transactions through the date of the related filing that may have a material impact on its Condensed

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Facilitation of the Effects of Reference Rate Reform

on Financial Reporting .

The ASU applies to all entities that have contracts, hedging relationships, and other transactions that reference

LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The ASU provides optional expedients and

exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain

criteria are met.

The expedients and exceptions provided by the ASU do not apply to contract modifications made and hedging relationships

entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity

has elected certain optional expedients for and that are retained through the end of the hedging relationship.

The ASU is effective for

all entities as of March 12, 2020 through December 31, 2022.

The impact of the adoption of ASU 2020-04 did not have a material impact

on the Company’s Condensed Consolidated Financial Statements.

December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

removes certain exceptions for recognizing deferred taxes for equity method investments, performing intraperiod allocation, and calculating

income taxes in interim periods.

The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes

for goodwill and allocating taxes to members of a consolidated group, among others.

The amendments in ASU 2019-12 are effective for public

business entities for fiscal years beginning after December 15, 2020, including interim periods therein.

The Company adopted this new

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

net of reserves of $ 78,000 and $ 505,000 on September 30, 2022 and December 31, 2021, respectively, consisted of the following:

SCHEDULE OF INVENTORIES, NET OF RESERVES

September 30,

on Financial Reporting, updated in December 2022 by ASU No.

2022-06, Deferral of Sunset Date of Topic 848 .

The ASUs apply

to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected

to be discontinued because of reference rate reform.

The ASUs provide optional expedients and exceptions for applying GAAP to contracts,

hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The expedients and exceptions

provided by the ASUs do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31,

2024, except for hedging relationships existing as of December 31, 2024, that an entity has elected certain optional expedients for and

that are retained through the end of the hedging relationship.

ASU 2020-04, as updated by ASU 2022-06, is effective for all entities

as of March 12, 2020, through December 31, 2024.

The impact of the adoption did not have a material impact on the Company’s Condensed

Consolidated Financial Statements.

net of reserves of $ 773,000 and $ 571,000 as of March 31, 2023 and December 31, 2022, respectively, consisted of the following:

OF INVENTORIES, NET OF RESERVES

(in thousands)

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Inventories - Net

OTHER LONG TERM ASSETS

long term assets were as follows:

SCHEDULE OF OTHER LONG TERM ASSETS

(in thousands)

Inventories, net

Cash surrender value of life insurance policies

Other Long Term Assets

Company maintains inventories, net of reserves of $ 250,000 and $ 0 as of March 31, 2023 and December 31, 2022, respectively, which are

estimated to be used beyond the next twelve months, mainly for the new corrugated medical tubing (“CMT”) products.

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 6, 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.

of September 30, 2022 and December 31, 2021, the Company had no outstanding borrowings on its line of credit and was in compliance with

all debt covenants.

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 to 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 5.61% .

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 .

of March 31, 2023 and December 31, 2022, the Company had no outstanding borrowings on its line of credit and was in compliance with all

debt covenants.

stated above, borrowings under our line of credit facility bear interest at variable rates based on LIBOR.

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The payment benefits range from $ 1,000

per month to $ 3,000 per month with the term of such payments limited to 15 years after the employee’s retirement .

The agreements

also provide for survivorship benefits if the employee dies before attaining age 65, and severance payments if the employee is terminated

without cause;

to $ 3,000 per month with the term of such payments limited to 15 years after the employee’s retirement.

The agreements also provide

for survivorship benefits if the employee dies before attaining age 65, and severance payments if the employee is terminated without

the amount of which is dependent on the length of company service at the date of termination.

The net present value of

the retirement payments associated with these agreements is $ 382,000 on September 30, 2022, of which $ 334,000 is included in Other Long

Term Liabilities, and the remaining current portion of $ 48,000 is included in Other Liabilities, associated with the applicable retirement

benefit payments over the next twelve months.

The December 31, 2021 liability of $ 447,000 had $ 399,000 reported in Other Long Term Liabilities,

and a current portion of $ 48,000 in Other Liabilities.

The net present value of the retirement

payments associated with these agreements is $ 359,000 as of March 31, 2023, of which $ 311,000 is included in Other Long Term Liabilities,

and the remaining current portion of $ 48,000 is included in Other Liabilities, associated with the applicable retirement benefit payments

over the next twelve months.

The December 31, 2022 liability of $ 357,000 had $ 309,000 reported in Other Long Term Liabilities, and a

current portion of $ 48,000 in Other Liabilities.

Company has obtained and is the beneficiary of life insurance policies with respect to current and/or past employees.

The cash surrender

value of such policies (included in Other Long Term Assets) amounts to $ 1,509,000 at September 30, 2022 and $ 1,651,000 at December 31,

value of such policies (included in Other Long Term Assets) amounts to $ 1,591,000 at March 31, 2023 and $ 1,546,000 at December 31, 2022.

addition to the above, the Company has other contractual employment and or change of control agreements in place with key employees,

as previously disclosed and noted in the Exhibit Index to the Company’s December 31, 2021 Form 10-K.

Obligations related to these

arrangements are currently indeterminable due to the variable nature and timing of possible events required to incur such obligations.

as previously disclosed and noted in the Exhibit Index to the Company’s Form 10-K.

Obligations related to these arrangements are

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

disclosed in detail in Note 8, Leases, to the Condensed 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.

as provided in Item 7 under “Liquidity and Capital Resources”, of the Company’s December 31, 2021 Form 10-K, the Company

has numerous purchase obligations in place for the forthcoming year, largely related to the Company’s core material inventory components.

lease obligations in place that will be paid over time.

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

manufacturing, warehousing, and distribution functions.

as provided in Item 7 under “Liquidity and Capital Resources”, of the Company’s Form 10-K, the Company has numerous

contractual obligations in place for the current year, mainly related to purchase obligations for the Company’s raw material inventories.

Contingencies

the ordinary and normal conduct of the Company’s business, it is subject to periodic lawsuits, investigations, and claims (collectively,

the ordinary and normal conduct of the Company’s business, it is subject to lawsuits, investigations, and claims (collectively,

the “Claims”).

The Claims generally relate to potential lightning damage to our flexible gas piping products, which impact

legal and product liability related expenses.

The Company does not believe the Claims have legal merit, and therefore has commenced a

vigorous defense in response to the Claims.

It is possible that the Company may incur increased litigation costs in the future due to

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

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

Omega Flex Limited (“OFL”), was the claimant.

After withdrawing the claim, the court determined that OFL was responsible

for the defendant’s costs (including a portion of its attorneys’ fees).

The Company reached an initial agreement during the

fourth quarter of 2020 and made a payment of £ 320,000 accordingly.

An additional payment of £ 110,000 was made on January

5, 2022, which was recorded as an accrued liability as of December 31, 2021 and represented the remaining amount of the liability as

part of the final arrangement.

This matter is now closed.

The Claims generally relate to potential lightning damage to our flexible gas piping products and may result

in legal and product liability related expenses.

The Company does not believe the Claims have legal merit and vigorously defends them.

It is possible that the Company may incur increased litigation costs in the future due to a variety of factors, including a higher number

of Claims, higher legal and expert costs, and higher insurance deductibles or retentions.

Company has in place commercial general liability insurance policies that cover most Claims, which are subject to deductibles or retentions,

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The aggregate maximum exposure for all current open Claims

as of September 30, 2022 is estimated to not exceed approximately $ 7,840,000 , which represents the potential costs that may be incurred

over time for the Claims within the applicable insurance policy deductibles or retentions.

From time to time, depending upon the nature

of a particular case, the Company may decide to spend in excess of a deductible or retention to enable more discretion regarding the

defense, although this is not common.

as of March 31, 2023 is estimated to not exceed approximately $ 4,635,000 , which represents the potential costs that may be incurred over

time for the Claims within the applicable insurance policy deductibles or retentions.

From time to time, depending upon the nature of

a particular case, the Company may decide to spend in excess of a deductible or retention to enable more discretion regarding the defense,

although this is not common.

It is possible that the results of operations or liquidity of the Company, as well as the Company’s

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The liabilities

recorded on the Company’s books as of September 30, 2022 and December 31, 2021 were $ 3,513,000 and $ 262,000 , respectively, and

are included in Other Liabilities.

recorded in the Company’s books as of March 31, 2023 and December 31, 2022 were $ 2,092,000 and $ 3,848,000 , respectively, and are

included in Other Liabilities.

STOCK BASED COMPENSATION PLANS

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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 Topic 718 .

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 payment.

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 ).

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 payment.

Units granted whose value at the maturity

date will equal the closing price of the Company’s common stock as of the maturity date are defined as Full Value Units.

stated otherwise, all Units described herein are Full Value Units.

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.

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.

cliff vesting following the grant date, with payment 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, 2021, the Company had 8,358 unvested units outstanding, all of which were granted

at Full Value .

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

In August 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 September 30, 2022, the Company had 6,653 unvested units outstanding.

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

In February 2023, the Company

paid $ 673,000 for 5,120 fully vested and matured Units that were granted during 2019, including their respective earned dividend values.

On March 8, 2023, the Company granted an additional 2,536 Units with a fair value of $ 108.47 per Unit on grant date, using historical

In March 2023, 597 unvested Units were forfeited.

As of March 31, 2023, the Company had 5,840 nonvested and unmatured Units

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

During the three and nine months ended September 30, 2022, no awards were forfeited.

However, for the three and nine months

ended September 30, 2021, a reversal of $ 56,000 of previously recognized compensation expense was recognized on 1,212 nonvested forfeited

total Phantom Stock related liability as of September 30, 2022 was $ 1,238,000 of which $ 656,000 is included in Other Liabilities, as

it is expected to be paid within the next twelve months, and the balance of $ 582,000 is included in Other Long Term Liabilities.

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

expense of approximately $ 51,000 and $ 579,000 for the nine months ended September 30, 2022 and 2021, respectively.

The company recorded

compensation income of approximately $ 81,000 for the three months ended September 30, 2022 and compensation expense of $ 102,000 for the

three months ended September 30, 2021, respectively.

Compensation income or 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 and for the nine months ended September

SUMMARY OF NONVESTED PHANTOM STOCK UNITS

Weighted Average Grant Date Fair Value

Number of Phantom Stock Unit Awards:

Nonvested on December 31, 2021

Nonvested on September 30, 2022

Phantom Stock Unit Awards Expected to Vest

total unrecognized compensation costs calculated on September 30, 2022 are $ 469,000 which will be recognized through August of 2025.

During the three months ended March 31, 2023, a reversal of $ 22,000 of previously recognized compensation expense was recognized

on 597 nonvested forfeited Units.

total liability related to the Units as of March 31, 2023 was $ 1,080,000 of which $ 721,000 is included in Other Liabilities, as it is

expected to be paid within the next twelve months, and the balance of $ 359,000 is included in Other Long Term Liabilities.

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

of $ 678,000 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 $ 409,000 and $ 280,000 for the quarters ended March 31, 2023 and 2022, 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 quarter ended March

OF NONVESTED PHANTOM STOCK UNITS

Average Grant Date Fair Value

Number of Units:

Nonvested and Unmatured as of

December 31, 2022

Nonvested and Unmatured

as of March 31, 2023

Expected to Vest and Mature

total unrecognized compensation costs calculated as of March 31, 2023 were $ 583,000 which will be recognized through February of 2026.

The Company will recognize the related expense over the weighted average period of 1.9 years.

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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 and a facility in Malvern, Pennsylvania, which was consummated, effective January 1, 2022,

with a 3-year term ending in December 2024 , that provides warehousing.

Additionally, the Company extended its operating lease agreement

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

the lease term running through October 2024, and a facility in Malvern, Pennsylvania, with a three year term ending in December 2024,

that provides warehousing.

Additionally, the Company has an 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.

1 unchanged sentence

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

September 30, 2022, the Company has recorded right-of-use assets of $ 3,095,000 , and a lease liability of $ 3,099,000 , of which $ 431,000

is reported as a current liability.

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

of March 31, 2023, the Company recorded right-of-use assets of $ 3,141,000 , and a lease liability of $ 3,148,000 , of which $ 444,000 is

reported as a current liability.

On December 31, 2022, the Company recorded 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.

The respective weighted average remaining lease term and discount

rate are approximately 11.01 years and 1.05 % as of September 30, 2022.

expense for the operating leases was approximately $ 119,000 and $ 384,000 for the three and nine months ended September 30, 2022 and $ 108,000

and $ 312,000 for the three and nine months ended September 30, 2021.

minimum lease payments, inclusive of interest, under non-cancelable leases as of September 30, 2022 are as follows:

rate are approximately 10.98 years and 1.05 % as of March 31, 2023.

expense for operating leases was approximately $ 122,000 and $ 135,000 for the three months ended March 31, 2023 and 2022, respectively.

minimum lease payments, under non-cancelable leases as of March 31, 2023, are as follows:

OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES

Twelve Months Ending September 30,

Operating Leases

Months Ending March 31,

(in thousands)

Minimum Lease Payments

Total Future Minimum Lease Payments

Lease Liability

Current Portion

of Lease Liability

Lease Liability –

Net of Current Portion

SHAREHOLDERS’ EQUITY

of September 30, 2022 and December 31, 2021, the Company had authorized 20,000,000 common stock shares with par value of $ 0.01 per share.

of March 31, 2023 and December 31, 2022, the Company had 20,000,000 shares of common stock, with par value of $ 0.01 per share, authorized.

For both periods, the total number of outstanding shares was 10,094,322 , shares held in Treasury was 59,311 , and total shares issued

was 10,153,633 .

2022 and 2021, upon approval of the Board of Directors (the “Board”) the Company has declared and paid dividends, as set

forth in the following table:

OF DIVIDEND PAYMENTS

Price Per Share

September 30, 2022

October 24, 2022

June 24, 2022

March 29, 2022

April 25, 2022

December 9, 2021

December 30, 2021

September 15, 2021

October 4, 2021

March 24, 2021

April 14, 2021

December 11, 2020

January 5, 2021

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

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

2023 and 2022, upon approval of the Board of Directors (the “Board”) the Company has declared and paid regular quarterly

dividends, as set forth in the following table:

OF REGULAR QUARTER DIVIDEND PAYMENTS

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.

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

The original program established in December 2007 authorized the purchase of up to $ 5,000,000 of its common stock.

The purchases may

be made from time-to-time in the open market or in privately negotiated transactions, depending on market and business conditions.

Board retained the right to cancel, extend, or expand the share buyback program, at any time and from time-to-time.

Since inception,

the Company has purchased a total of 61,811 shares for approximately $ 932,000 , or approximately $ 15 per share, which were held as treasury

The Company has not made any stock repurchases since 2014.

The most recent special dividend was declared and paid in December

RELATED PARTY TRANSACTIONS

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 the remaining 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 duties.

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

In all cases, these RPTs have been determined to be arms length

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

SUBSEQUENT EVENTS

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During this period, no events came to the

Company’s attention that would impact the Condensed Consolidated Financial Statements for the period ended September 30, 2022.

Company’s attention that would impact the Condensed Consolidated Financial Statements for the period ended March 31, 2023.

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-Q

Item 1. Financial Statements