What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-11 compared with 2023-03-10 · 568 added, 518 removed, 398 unchanged (73% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

to Consolidated Financial Statements

Omega Flex, Inc.

Index to Consolidated Financial Statements

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

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

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

Consolidated Balance Sheets as of December 31, 2023 and 2022

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liability claims

described in Notes 2 and 11 of the financial statements, the Company is subject to periodic lawsuits, investigations, and claims, primarily

relating to potential lightning damage to its flexible gas piping products (the “Claims”).

The Company accrues an estimated

product liability reserve related to the resolution cost of the Claims for which management believes a loss is probable of occurring,

and the amount of the loss is reasonably estimable, and discloses the aggregate maximum exposure for all open Claims.

As of December

31, 2022, the Company accrued a product liability reserve of $3,848,000, and disclosed that the aggregate maximum exposure for all current

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.

described in Notes 2 and 7 of the financial statements, the Company is subject to periodic lawsuits, investigations and claims,

primarily relating to potential lightning damage to its flexible gas piping products (the “Claims”).

The Company accrues

an estimated product liability reserve related to the resolution cost of the Claims for which management believes a loss is probable

of occurring, and the amount of the loss is reasonably estimable and also discloses the aggregate maximum exposure for all open

As of December 31, 2023, the Company accrued a product liability reserve of $947,000 and disclosed that the aggregate

maximum exposure for all current open Claims is estimated not to exceed $3,724,000.

Due to the uncertainty of potential costs to be

incurred related to the Claims, and the uncertainty of the ultimate outcome of each of the individual Claims, management applies significant judgments

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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audit procedures related to the Claims included the following, among others:

obtained an understanding of the relevant controls related to management’s evaluation of the Claims for accrual and disclosure

and tested such controls for design and operating effectiveness, including controls around management’s evaluation of the probability

obtained an understanding of the relevant controls related to management’s evaluation

of the Claims for accrual and disclosure and tested such controls for design and operating

effectiveness, including controls around management’s evaluation of the probability

that a loss has been incurred and management’s estimate of the amount of the loss.

tested the accuracy and completeness of the underlying data that served as the basis for management’s estimates of the probability

that a loss has been incurred and the amount of the loss, including payment activity, relevant insurance coverage, lawsuit or claim

status, and any settlement activity.

evaluated the methods and assumptions used by management to develop the estimate of the probability a loss has been incurred on individual

product liability claims and the amount of such loss through consideration of historical claim and loss experience as well as current

claim status.

performed confirmation procedures with the Company’s external legal counsel to corroborate management’s assertions regarding

claim information, claim status, the probability the Company has incurred a loss, and the estimated amount of any potential loss.

These confirmation procedures were also used to test the completeness and accuracy of the underlying source data that served as the

basis of management’s estimates.

tested claim and settlement payment activity occurring subsequent to year end to assess the reasonableness of management’s

estimates and disclosures.

tested the accuracy and completeness of the underlying data that served as the basis for

management’s estimates of the probability that a loss has been incurred and the amount

of the loss, including payment activity, relevant insurance coverage, lawsuit or claim status,

and any settlement activity.

evaluated the methods and assumptions used by management to develop the estimate of the probability

a loss has been incurred on individual product liability claims and the amount of such loss

through consideration of historical claim and loss experience as well as current claim status.

performed confirmation procedures with the Company’s external legal counsel to corroborate

management’s assertions regarding claim information, claim status, the probability

the Company has incurred a loss, and the estimated amount of any potential loss.

These confirmation

procedures were also used to test the completeness and accuracy of the underlying source

data that served as the basis of management’s estimates.

tested claim and settlement payment activity occurring subsequent to year-end to assess the

reasonableness of management’s estimates and disclosures.

have served as the Company’s auditor since 2010.

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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:

Current Assets

Assets - Operating

and Equipment - Net

Long Term Assets

AND SHAREHOLDERS’ EQUITY

Commissions and Sales Incentives

Liability - Operating

Cash and Cash Equivalents

Accounts Receivable - less allowances of $ 1,126 and $ 1,111 , respectively

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 Liabilities:

Liability - Operating, net of current portion

Payable Long Term

Long Term Liabilities

and Contingencies (Note 11)

Shareholders’

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 7)

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:

Noncontrolling

Common 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, 2023 and December 31, 2022, respectively

Treasury Stock

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Omega Flex, Inc.

Shareholders’ Equity

Liabilities and Shareholders’ Equity

Noncontrolling Interest

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

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

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in Thousands, except per Common Share Data)

of Goods Sold

and Administrative Expense

Income (Expense)

Before Income Taxes

Net Income – Noncontrolling Interest

Income attributable to Omega Flex, Inc.

and Diluted Earnings per Common Share

Dividends Declared per Common Share

Basic and Diluted

Weighted Average Shares Outstanding

Cost of Goods Sold

Selling Expense

General and Administrative Expense

Engineering Expense

Operating Profit

Interest Income

Other Income (Expense)

Income Before Income Taxes

Income Tax Expense

Net Loss (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

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

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in Thousands)

Comprehensive (Loss) Income:

Currency Translation Adjustment

Comprehensive (Loss) Income

Comprehensive

Comprehensive Income Attributable to the Noncontrolling Interest

Other Comprehensive Income

Other Comprehensive Income (Loss):

Foreign Currency Translation Adjustment

Other Comprehensive Income (Loss)

Comprehensive Income

Comprehensive Loss (Income) Attributable to the Noncontrolling Interest

Total Other Comprehensive Income

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

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in Thousands, Except Share Amounts)

Stock Outstanding

Common Stock Outstanding

Paid In Capital

Retained Earnings

Comprehensive

Income (Loss)

Noncontrolling

Shareholders’

Translation Adjustment

Balance, value

Translation Adjustment

Balance, value

December 31, 2020

Cumulative Translation Adjustment

Dividends Declared

December 31, 2021

Cumulative Translation Adjustment

Dividends Declared

December 31, 2022

Cumulative Translation Adjustment

Dividends Declared

December 31, 2023

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

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in Thousands)

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

Cash Flows from Operating Activities:

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

Non-Cash Compensation Expense

Non-Cash Lease 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

Accounts Payable

Accrued Compensation

Accrued Commissions and Sales Incentives

Lease Liabilities

Other Liabilities

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

Capital Expenditures

Net Cash Used In Investing Activities

Cash Flows from Financing Activities:

Dividends Paid

Net Cash Used In Financing Activities

Net Increase 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

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

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BASIS OF PRESENTATION AND CONSOLIDATION

of Presentation

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

(Omega) and its subsidiaries (collectively the

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

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.

and its subsidiaries (collectively the “Company”).

The Company’s audited Consolidated Financial Statements for the years ended December 31, 2023, 2022 and 2021 have been prepared

in accordance with accounting standards set by the Financial Accounting Standards Board (FASB) and Article 5 of Regulation S-X.

amounts from prior years have been reclassified to conform to current year presentation.

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 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;

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

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’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

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Actual amounts could differ significantly from these estimates.

Company applies the requirements of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) .

standard requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects

the consideration expected to be received in exchange for those goods or services.

Company applies the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

Topic 606, Revenue from Contracts with Customers (“Topic 606”).

The standard requires revenue to be recognized in

a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received

in exchange for those goods or services.

principle of Topic 606 was achieved through applying the following five-step approach:

● Identification

of the contract, or contracts, with a customer — a contract with a customer exists when the Company enters into an enforceable

contract with a customer, typically a purchase order initiated by the customer, that defines each party’s rights regarding

the goods to be transferred and identifies the payment terms related to these goods.

of the contract, or contracts, with a customer — a contract with a customer exists

when the Company enters into an enforceable contract with a customer, typically a purchase

order initiated by the customer, that defines each party’s rights regarding the goods

to be transferred and identifies the payment terms related to these goods.

● Identification

of the performance obligations in the contract — performance obligations promised in a contract are identified based on

the goods that will be transferred to the customer that are distinct, whereby the customer can benefit from the goods on their own

or together with other resources that are readily available from third parties or from us.

Persuasive evidence of an arrangement

for the sale of product must exist.

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

within the Company’s order acknowledgments and sales invoices.

of the performance obligations in the contract — performance obligations promised

in a contract are identified based on the goods that will be transferred to the customer

that are distinct, whereby the customer can benefit from the goods on their own or together

with other resources that are readily available from third parties or from us.

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

The Company ships products

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

order acknowledgments and sales invoices.

● Determination

of the transaction price —the transaction price is determined based on the consideration to which the Company will be entitled

in exchange for transferring goods to the customer.

This would be the agreed upon quantity and price per product type in accordance

with the customer purchase order, which is aligned with the Company’s internally approved pricing guidelines.

of the transaction price to the performance obligations in the contract — if the contract contains a single performance

obligation, the entire transaction price is allocated to the single performance obligation.

This applies to the Company as there

is only one performance obligation to ship the goods.

of revenue when, or as, the Company satisfies a performance obligation — the Company satisfies performance obligations

at a point in time when control of the goods transfers to the customer.

Determining the point in time when control transfers requires

Indicators considered in determining whether the customer has obtained control of a good include:

of the transaction price —the transaction price is determined based on the consideration

to which the Company will be entitled in exchange for transferring goods to the customer.

This would be the agreed upon quantity and price per product type in accordance with the

customer purchase order, which is aligned with the Company’s internally approved pricing

of the transaction price to the performance obligations in the contract — if the

contract contains a single performance obligation, the entire transaction price is allocated

to the single performance obligation.

This applies to the Company as there is only one performance

obligation to ship the goods.

● Recognition

of revenue when, or as, the Company satisfies a performance obligation — the Company

satisfies performance obligations at a point in time when control of the goods transfers

to the customer.

Determining the point in time when control transfers requires judgment.

Indicators considered in determining whether the customer has obtained control of a good

Company has a present right to payment

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customer purchase order) include sales commissions.

Under Topic 606, these costs may

be expensed as incurred for contracts with a duration of one year or less.

The majority of the Company’s customer purchase

orders are fulfilled (e.g.

Under Topic 606, these costs may be expensed as incurred for contracts with a duration of

one year or less.

The majority of the Company’s customer purchase orders are fulfilled

goods are shipped) within two days of receipt.

- the Company does not offer a warranty as a separate component for customers to purchase.

A warranty is generally included with

each purchase, providing assurance that the goods comply with agreed-upon specifications, and the cost is therefore accrued accordingly,

but contracts do not include any requirement for additional distinct services.

Therefore, there is not a separate performance obligation,

and there is no impact of warranties under Topic 606 upon the financial reporting of the Company.

Goods - from time to time, the Company provides authorization to customers to return goods.

If deemed to be material, the Company

would record a “right of return” asset for the cost of the returned goods which would reduce cost of sales.

Rebates (Promotional Incentives) - volume rebates are variable (dependent upon the volume of goods purchased by our eligible

customers) and, under Topic 606, must be estimated and recognized as a reduction of revenue as performance obligations are satisfied

upon shipment of goods).

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:

A warranty is generally included with each purchase, providing assurance that the goods comply

with agreed-upon specifications, and the cost is therefore accrued accordingly, but contracts

do not include any requirement for additional distinct services.

Therefore, there is not

a separate performance obligation, and there is no impact of warranties under Topic 606 upon

the financial reporting of the Company.

Goods - from time to time, the Company provides authorization to customers to return

If deemed to be material, the Company would record a “right of return”

asset for the cost of the returned goods which would reduce cost of sales.

Rebates (Promotional Incentives) - volume rebates are variable (dependent upon the volume

of goods purchased by our eligible customers) and, under Topic 606, must be estimated and

recognized as a reduction of revenue as performance obligations are satisfied (e.g.

shipment of goods).

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.

uncertainty about the amount of consideration is not expected to be resolved for a long period of time.

uncertainty about the amount of consideration is not expected to be resolved for a long period

Company’s experience with similar types of contracts is limited.

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terms, timing, and transfer of control of goods.

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

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

As indicated in this Note 2, Significant Accounting Policies, in these Consolidated

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

contained within North America, with the remainder scattered internationally.

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Treasury bills, notes, and bonds, and/or

repurchase agreements, backed by such obligations.

Carrying value approximates fair value.

Cash and cash equivalents are deposited at

various area banks, which at times may exceed federally insured limits.

The Company monitors the viability of the banking institutions

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.

repurchase agreements, backed by such obligations, and in U.S.

Treasury bills and certificates of deposit.

Carrying value approximates

fair value except for U.S.

Treasury bills and certificates of deposit where amortized cost approximates fair value.

Cash and cash equivalents

are deposited at various area banks, which at times may exceed federally insured limits.

The Company monitors the viability of the banking

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

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

Receivable and Provision for Credit Losses

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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.

for credit losses and, as a result, operating profit.

The allowances consider numerous quantitative and qualitative factors that include

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significant improvements are capitalized.

accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles – Goodwill and Other (ASU

2017-04) , using the simplified method as adopted, the Company performed an annual impairment test as of December 31, 2022.

This analysis

did not indicate any impairment of goodwill.

Based Compensation Plans

accordance with FASB ASC Topic 350, Intangibles – Goodwill and Other , using the simplified method as adopted, the Company

performed an annual impairment test as of December 31, 2023.

This analysis did not indicate any impairment of goodwill.

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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In accordance with FASB ASC Topic 718, Compensation

- Stock Compensation (“Topic 718”), the Company uses the Black-Scholes option pricing model as its method for determining

the fair value of the Units.

The liabilities for the Units are adjusted to market value over time from the grant dates to the related

maturity dates.

The Company recognizes the reversal of any previously recognized compensation expense on forfeited nonvested Units in

the period the Units are forfeited.

- Stock Compensation , the Company uses the Black-Scholes option pricing model as its method for determining the fair value of the

The liabilities for the Units are adjusted to market value over time from the grant dates to the related maturity dates.

recognizes the reversal of any previously recognized compensation expense on forfeited nonvested Units in the period the Units are forfeited.

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

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 8, Stock-Based Compensation Plans, to the Consolidated Financial Statements included in this

Liability Reserves

liability reserves represent the estimated unpaid amounts under the Company’s insurance policies with respect to existing claims.

liability reserves represent the estimated unpaid amounts under the Company’s insurance policy deductibles or self-insured retention

limits, with respect to existing claims.

The Company uses the most current available data to estimate claims.

As explained more fully under Note 11, Commitments and Contingencies,

to the Consolidated Financial Statements included in this report for various product liability claims covered under the Company’s

general liability insurance policies, the Company must pay certain defense and settlement costs within its deductible or self-insured

retention limits, ranging primarily from $ 25,000 to $ 3,000,000 per claim, depending on the terms of the policy in the applicable policy

year, up to an aggregate amount.

As explained more fully

under Note 7, Commitments and Contingencies, to the Consolidated Financial Statements included in this report for various product liability

claims covered under the Company’s general liability insurance policies, the Company must pay certain defense and settlement costs

within its deductible or self-insured retention limits, ranging primarily from $ 250,000 to $ 3,000,000 per claim, depending on the terms

of the policy and the applicable policy year, up to an aggregate amount.

The Company is vigorously defending against all known claims.

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:

Company applies the requirements of FASB ASC Topic 842, Leases 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.

lease 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.

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

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

of December 31, 2023 and 2022, each of the Company’s leases is classified as an operating lease.

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

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are no dilutive securities.

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.

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

and liabilities denominated in foreign currencies are translated into U.S.

dollars at exchange rates prevailing on the balance sheet

The assets and liabilities denominated in foreign currencies relate to the Company’s U.K.

subsidiary whose functional currency

is the British Pound, are translated into U.S.

dollars at exchange rates prevailing on the balance sheet dates.

The statements of operations

are translated into U.S.

is the British Pound and the U.K.

subsidiary’s France subsidiary whose functional currency is the Euro.

The Consolidated Statements

of Operations are translated into U.S.

dollars at average exchange rates for the period.

Adjustments resulting from the translation of financial statements

are excluded from the determination of income and are accumulated in a separate component of shareholders’ equity.

Exchange gains

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

Adjustments resulting from the translation of

financial statements are excluded from the determination of income and are accumulated in a separate component of shareholders’

Exchange gains 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 records

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

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

tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement

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to be recognized in the financial statements.

Company follows the provisions of ASC 740-10 relative to accounting for uncertainties in tax positions.

These provisions provide guidance

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

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal

Revenue Code.

The changes include but are not limited to increasing the limitation on the amount of deductible interest expense, allowing

companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations

can use to offset taxable income.

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.

Company follows the provisions of FASB ASC Subtopic 740-10 relative to accounting for uncertainties in tax positions.

These provisions

provide guidance 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

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customer represented 12% to 14% of sales during each of the fiscal years in the period from 2021 to 2023, and that same customer accounted

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

No other customer represented more than 10% of

Accounts Receivable or Sales.

Geographically, North America accounted for approximately 93% to 95% of the Company’s sales during

the last three years.

for approximately 19% of the accounts receivable balance over the last two years.

No other customer represented more than 10% of accounts

receivable or sales.

Geographically, North America accounted for approximately 93% to 96% of the Company’s sales during the last

three years .

The remaining portion of sales for each respective year was scattered among other countries, with the U.K.

the Company’s most dominant market outside North America .

being the Company’s

most dominant market outside North America.

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

Financial Statements.

Refer to Note 14.

Refer to Note 14, Subsequent Events.

Accounting Pronouncements

March 2021, the FASB issued ASU No.

March 2020, the FASB issued Accounting Standards Update (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

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

of the Effects of Reference Rate Reform 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 ASU provides optional expedients and

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 ASU do not apply to contract modifications made and hedging relationships

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.

The ASU is effective for

all entities as of March 12, 2021 through December 31, 2022.

The impact of the adoption of ASU 2021-04 did not have a material impact

on the Company’s Consolidated Financial Statements.

December 2020, the FASB issued ASU 2020-12, 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 2020-12 are effective for public

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

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

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 Consolidated Financial Statements.

December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The ASU expands

public entities tax disclosures including improving disclosures surrounding the company’s rate reconciliation, cash taxes paid,

and disaggregation of income tax expense (or benefit) from continuing operations.

The amendment is effective for annual periods beginning

after December 15, 2024.

The Company is in the process of evaluating the impact of ASU No.

2023-09 on its Consolidated Financial Statements.

net of reserves of $ 692,000 and $ 571,000 as of December 31, 2023 and 2022, respectively, consisted of the following:

INVENTORIES, NET OF RESERVES

(in thousands)

Finished Goods

Raw Materials

Inventories - Net

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:

and equipment consisted of the following As of December 31:

OF PROPERTY AND EQUIPMENT

and Amortization Est.

Depreciation and Amortization Est.

(in thousands)

Leasehold Improvements

3 - 10 Years (Lesser of Life or Lease)

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.

Property and Equipment - Gross

Accumulated Depreciation

Property and Equipment - Net

above amounts include capital related items of $ 1,349,000 and $ 535,000 as of December 31, 2023 and 2022, 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 $ 1,099,000 , $ 1,096,000 , and $ 1,020,000 for the years ended December 31, 2023, 2022 and 2021,

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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.

long term assets were as follows as of December 31:

OF OTHER LONG TERM ASSETS

(in thousands)

Cash surrender value of life insurance policies

Other Long Term Assets

Company maintains inventories, net of reserves of $ 1,000,000 and $ 0 as of December 31, 2023 and 2022, respectively, which are estimated

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

Higher amounts of materials

for the CMT products were initially purchased for cost considerations and because of longer required lead times.

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

LINE OF CREDIT AND OTHER BORROWINGS

July 3, 2023, the Company agreed to an Amended and Restated Loan Agreement with Santander Bank, N.A.

(the “Bank”), and a

Second Amended and Restated Committed Revolving Line of Credit Note to the Bank (both documents together, the “Facility”).

The Facility is an unsecured revolving credit facility in the maximum amount of $ 15,000,000 , with a $ 1,000,000 letter of credit sublimit,

expiring June 1, 2028 , with funds available for working capital and other corporate purposes.

The interest rate payable on any borrowings

is either the Term SOFR Reference Rate or the Bank’s Prime Rate, as specified by the Company, plus the Applicable Margin.

The Applicable

Margin for the Term SOFR Reference Rate is plus 0.75% to plus 1.75%, and for Prime Rate, up to plus 0.50%, depending upon the Company’s

then existing specified financial ratios.

As of December 31, 2023, the Company’s ratio would allow for the most favorable rate

under the Facility’s ranges or 6.09%.

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 and an annual commitment fee of $ 5,000 due and payable on each anniversary date of the

The Company may terminate the Facility at any time as long as there are no amounts outstanding and may prepay any borrowings.

Prior to this, the Company had been operating in adherence with the December 1, 2017 agreement, as discussed below.

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.

(the “Bank”).

The Company established a line of credit facility in the maximum

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

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

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

to the Loan Agreement with the Bank.

The Company established a line of credit facility in the maximum amount of $ 15,000,000 , maturing

on December 1, 2022 , with funds available for working capital purposes and other cash needs.

The Line was unsecured and extended through

the effective date of the Facility of July 3, 2023.

The loan agreement provided 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

Company borrowed the full amount of its capacity on the line of $ 15,000,000 at the prime rate of 3.25 % .

The Company repaid this amount

in full prior to the end of such quarter, and as of December 31, 2020, had no borrowings on its line of credit.

As of December 31, 2022

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.

Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the U.S.

On April 7, 2020,

the Company received a loan from the U.S.

Small Business Administration (“SBA”) to fund the Company’s request for a

loan under the SBA’s Paycheck Protection Program (“PPP” and “PPP Loan”) created as part of the recently

enacted CARES Act administered by the SBA.

In connection with the PPP Loan, the Company entered into a promissory note filed as Exhibit

10.2 attached to Form 10-Q for the quarter ended March 31, 2020.

Pursuant to the terms of the PPP Loan, the Company received total proceeds

of $ 2,453,000 from the Bank at an interest rate of just below 1 % per annum.

After the issuance of the PPP Loan, the U.S.

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 PPP Loans.

Accordingly, in light of this guidance, the Company repaid the PPP Loan by May 7, 2020 .

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

Currently, the Federal

Reserve Bank is considering options and transitioning away from LIBOR, and as such, has formed the Alternative Rates Committee (ARRC).

The ARRC selected the Secured Overnight Financing Rate (SOFR) as an appropriate replacement.

SOFR is based on transactions in the overnight

repurchase markets, which reflects a transaction-based rate on a large number of transactions, better reflecting current financing costs.

Discussions are ongoing with the Bank with regards to transitioning the rate for the Line from LIBOR to another appropriate rate such

SHAREHOLDERS’ EQUITY

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

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, 2021, and 2020, 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

September 30, 2022

October 24, 2022

June 10, 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

September 23, 2020

October 13, 2020

June 24, 2020

July 13, 2020

March 31, 2020

April 17, 2020

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 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.

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.

tax expense consisted of the following:

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.

income tax expense differed from statutory income tax expense, computed by applying the U.S.

federal income tax rate of 21 % to earnings

before income tax, as follows:

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

and financial reporting purposes.

The components of and changes in the net deferred tax assets (liabilities) which give rise to this

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

OF DEFERRED TAX ASSETS AND LIABILITIES

(in thousands)

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

the deferred tax assets will be realized with the exception of a carryover of foreign operating losses.

Due to the uncertainty of future

income in the foreign subsidiary, the Company has recognized a valuation allowance related to the foreign operating losses carrying forward.

Company is currently subject to audit by the Internal Revenue Service for the calendar years ended 2019 through 2021.

The Company and

its Subsidiaries’ state income tax returns are subject to audit for the calendar years ended 2018 through 2021.

of December 31, 2022, the Company had no liability for unrecognized tax benefits related to various federal and state income tax matters.

the U.S., the Company owns its two main operating facilities located in Exton, Pennsylvania.

In addition to the owned facilities, the

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

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, 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 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

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 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

Contribution and 401(K) Plans

Company maintains a qualified non-contributory profit-sharing plan (the “Plan”) covering all eligible employees.

$ 474,000 , $ 441,000 , and $ 430,000 of contributions accrued for the Plan in 2022, 2021 and 2020 respectively, which were charged to expense

in those respective years.

Contributions

to the Plan are defined as three percent ( 3 %) of gross wages up to the current Old Age, Survivors, and Disability (OASDI) limit and six

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

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.

are eligible to participate in the Plan the first day of the month following date of hire.

Participants may elect to have up to fifty

percent ( 50 %) of their compensation withheld, up to the maximum allowed by the Internal Revenue Code.

After completing one year of service,

the Company contributed an additional amount equal to 50 % of all employee contributions, up to a maximum of 6 % of an employee’s

Contributions are funded on a current basis.

Contributions to the Plan charged to expense for the years ended December 31,

2022, 2021 and 2020 were $ 319,000 , $ 315,000 , and $ 295,000 , respectively.

The participant’s Company contribution vests ratably over

Rate up to Prime Rate plus 0.50% (for borrowings with no fixed term other than to the effective date of the Facility of July 3, 2023),

depending upon the Company’s then existing financial ratios.

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

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

of December 31, 2023 and as of December 31, 2022, the Company had no outstanding borrowings on the Facility or the Line, as applicable,

and was in compliance with all debt covenants.

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

and officers’ insurance policies to fund certain obligations under the indemnity agreements.

Company has salary continuation agreements with current and/or past employees.

These agreements provide for monthly payments to each

of the employees or their designated beneficiary upon the employee’s retirement or death.

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;

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 $ 357,000 as of December 31, 2022, of which $ 309,000 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.

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 $ 1,546,000 at December 31, 2022 and $ 1,651,000 at December 31,

Company has salary continuation agreements with past employees.

These agreements provide for monthly payments to each of the employees

or their designated beneficiary upon the employee’s retirement or death.

The payment benefits range from $ 1,000 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;

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 $ 326,000 as of December 31, 2023, of which $ 278,000 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.

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

3 unchanged sentences

disclosed in detail in Note 10, 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 .

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.

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 $ 12,895,000 .

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 or other electrical 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 self-insured retention limits (or “retentions”).

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

ranging primarily from $ 25,000 to $ 3,000,000 per claim (depending on the terms of the policy and the applicable policy year), up to an

aggregate amount.

Litigation is subject to many uncertainties and management is unable to predict the outcome of the pending suits and

ranging primarily from $ 250,000 to $ 3,000,000 per claim (depending on the terms of the policy and the applicable policy year), up to

an aggregate amount.

Litigation is subject to many uncertainties and management is unable to predict the outcome of the pending suits

The potential liability for a given claim could range from zero to a maximum of $ 3,000,000 , depending upon the circumstances,

11 unchanged sentences

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.

anticipated, probable, 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, 2023 and December 31, 2022 were $ 947,000 and $ 3,848,000 , respectively, and are

included in Other Liabilities.

STOCK BASED COMPENSATION PLANS

7 unchanged sentences

interest in the Company;

■ shareholder

voting rights;

incidents of ownership to the Company’s common stock

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).

Units are granted to participants upon the recommendation of the Company’s President, 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-Sholes method as described

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

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 payment.

Units granted with value at the maturity date

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

Unless 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

2 unchanged sentences

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.

6 unchanged sentences

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

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 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.

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.

On August 25, 2023, the Company granted an additional 1,500 Units with

a fair value of $ 76.04 per Unit on grant date, using historical volatility.

In September 2023, the Company paid $ 133,000 for 1,508 fully

vested and matured Units that were granted during 2019, and $ 72,000 for the 575 fully vested and matured Units that were granted during

2020, 2021, and 2022, including their respective earned dividend values.

In October 2023, the Company paid $ 132,000 for 1,149 fully vested

and matured Units that were granted during 2020 and 2021, including their respective earned dividend values.

In December 2023, the Company

paid $ 96,000 for 1,125 fully vested and matured Units that were granted during 2020, including their respective earned dividend values.

As of December 31, 2023, the Company had 6,440 nonvested and unmatured Units outstanding.

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

8 unchanged sentences

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, 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.

For the year ended December 31, 2023, a reversal of $ 22,000 of previously recognized compensation expense was recognized on

597 nonvested forfeited Units.

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

total liability related to the Units as of December 31, 2023 was $ 530,000 of which $ 206,000 is included in Other Liabilities, as it is

expected to be paid within the next twelve months, and the balance of $ 324,000 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 $ 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.

of approximately $ 292,000 , $ 156,000 , and $ 506,000 for the years ended December 31, 2023, 2022 and 2021, 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

SUMMARY OF NONVESTED PHANTOM STOCK UNITS

Weighted Average Grant Date Fair Value

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.

RELATED PARTY TRANSACTIONS

Nonvested and Unmatured as of December 31, 2022

Nonvested and Unmatured as of December 31, 2023

Units Expected to Vest and Mature

total unrecognized compensation costs calculated as of December 31, 2023 were $ 316,000 which will be recognized through August of 2026.

The Company will recognize the related expense over the weighted average period of 1.5 years.

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

income included foreign income of $ 458,000 , $ 437,000 , and $ 1,500,000 in 2023, 2022 and 2021, respectively.

income tax expense differed from statutory income tax expense, computed by applying the U.S.

federal income tax rate of 21 % to earnings

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

Valuation Allowance

Executive Compensation Limitation

Foreign Derived Intangible Income Deduction

Research Credit

Income Tax Expense

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

and financial reporting purposes.

The components of and changes in the net deferred tax assets (liabilities) which give rise to this

deferred income tax (expense) benefit for the years ended December 31, 2023 and 2022 are as follows:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

(in thousands)

Deferred Tax Assets:

Compensation Assets

Inventory Valuation

Accounts Receivable Valuation

Deferred Litigation Costs

Capitalized Research Costs

Accrued Product Liability

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 Asset

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

the deferred tax assets will be realized except for a carryover of foreign operating losses incurred by one of its foreign subsidiaries.

Due to the uncertainty of future income in the foreign subsidiary, the Company has recognized a valuation allowance related to the foreign

operating losses carrying forward.

Company is currently subject to audit by the Internal Revenue Service for the calendar years ended 2020 through 2022.

The Company and

its Subsidiaries’ state income tax returns are subject to audit for the calendar years ended 2019 through 2022.

of December 31, 2023, the Company had no liability for unrecognized tax benefits related to various federal and state income tax matters.

the U.S., the Company owns its two main operating facilities located in Exton, Pennsylvania.

In addition to the owned facilities, the

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

In conjunction with the guidance for

leases, as defined by FASB ASC Topic 842, Leases , 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, 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.

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

a lease commencement date of January 1, 2024, the Company leased a facility in West Chester, Pennsylvania providing approximately 28,000

square feet of warehousing and storage, quality control, distribution, and corporate office space.

Subsequent Events to

the Consolidated Financial Statements included in this report.

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

of December 31, 2023, the Company has right-of-use assets of $ 2,940,000 , and a lease liability of $ 2,946,000 , of which $ 454,000 is reported

as a current liability.

As of 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

10.57 years and 1.07 % as of December 31, 2023.

expense for operating leases was $ 467,000 , $ 504,000 , and $ 421,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

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

SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES

Twelve Months Ending December 31,

Operating Leases

(in thousands)

Total Future Minimum Lease Payments

Lease Liability

Current Portion of Lease Liability

Lease Liability – Net of Current Portion

EMPLOYEE BENEFIT PLANS

Contribution and 401(K) Plans

Company maintains a qualified non-contributory profit-sharing plan (the “Plan”) covering all eligible employees.

$ 484,000 , $ 474,000 , and $ 441,000 of contributions accrued for the Plan in 2023, 2022 and 2021 respectively, which were charged to expense

in those respective years.

Contributions

to the Plan are defined as three percent ( 3 %) of gross wages up to the current Old Age, Survivors, and Disability (OASDI) limit and six

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

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.

are eligible to participate in the Plan the first day of the month following date of hire.

Participants may elect to have up to fifty

percent ( 50 %) of their compensation withheld, up to the maximum allowed by the Internal Revenue Code.

After completing one year of service,

the Company contributed an additional amount equal to 50 % of all employee contributions, up to a maximum of 6 % of an employee’s

Contributions are funded on a current basis.

Contributions to the Plan charged to expense for the years ended December 31,

2023, 2022 and 2021 were $ 330,000 , $ 319,000 , and $ 315,000 , respectively.

The participant’s Company contribution vests ratably over

SHAREHOLDERS’ EQUITY

of December 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 .

2023, 2022, and 2021, 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:

SCHEDULE OF REGULAR QUARTER DIVIDEND PAYMENTS

Dividend Declared

Dividend Paid

Price Per Share

December 6, 2023

January 4, 2024

September 11, 2023

October 6, 2023

June 13, 2023

March 28, 2023

April 24, 2023

December 7, 2022

January 4, 2023

September 30, 2022

October 24, 2022

June 10, 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

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.

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.

The most recent special dividend was declared and paid in December

PARTY TRANSACTIONS

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

4 unchanged sentences

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

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

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

Company evaluated all events or transactions that occurred through the date of this filing.

During this period, no events came to the

Company’s attention that would impact the Consolidated Financial Statements for 2022.

During this period, one event came to the

Company’s attention that would impact the Consolidated Financial Statements as of and for the period ended December 31, 2023.

a lease commencement date of January 1, 2024, the Company leased a facility in West Chester, Pennsylvania providing approximately 28,000

square feet of warehousing and storage, quality control, distribution, and corporate office space.

9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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