10-Q 1 irmd-20220331x10q.htm FORM 10Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File No.:  001-36534

IRADIMED CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware

    

73-1408526

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number

1025 Willa Springs Drive
Winter Springs, Florida

32708

(Address of principal executive offices)

(Zip Code)

(407) 677-8022

(Registrant’s telephone number, including area code)

N/A

(Former Name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common stock, par value $0.0001

IRMD

NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 

Indicate by check mark whether the registrant has submitted electronically pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

Accelerated filer

Non-accelerated filer   

Smaller reporting company   

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 

The registrant had 12,560,767 shares of common stock, par value $0.0001 per share, outstanding as of April 30, 2022.

IRADIMED CORPORATION

Table of Contents

Page

Cautionary Note Regarding Forward-Looking Statements

3

Part I

Financial Information

5

Item 1

Condensed Financial Statements

5

(a)     Condensed Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021

5

(b)    Condensed Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

6

(c)    Condensed Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

7

(d)     Condensed Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

8

(e)     Condensed Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

9

(f)      Notes to Unaudited Condensed Financial Statements

10

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4

Controls and Procedures

24

Part II

Other Information

25

Item 1

Legal Proceedings

25

Item 1A

Risk Factors

25

Item 2

Unregistered Sale of Equity Securities and Use of Proceeds

25

Item 3

Default Upon Senior Securities

25

Item 4

Mine Safety Disclosures

25

Item 5

Other Information

25

Item 6

Exhibits

26

Signatures

27

2

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements include, but are not limited to, statements about:

our ability to receive 510(k) clearance for our products and product candidates, complete inspections conducted by the U.S. Food & Drug Administration (“FDA”) or other regulatory bodies resulting in favorable outcomes, additional actions by or requests from the FDA, including a request to cease domestic distribution of products, or other regulatory bodies and unanticipated costs or delays associated with the resolution of these matters;
the timing and likelihood of regulatory approvals or clearances from the FDA or other regulatory bodies and regulatory actions on our product candidates and product marketing activities;
unexpected costs, expenses and diversion of management attention resulting from actions or requests posed to us by the FDA or other regulatory bodies;
our primary reliance on a limited number of products;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
market and economic uncertainty caused by the COVID-19 outbreak;
our expectations regarding the sales and marketing of our products, product candidates and services;
our expectations regarding the integrity of our supply chain for our products;
the potential for adverse application of environmental, climate change, health and safety and other laws and regulations of any jurisdiction on our operations;
our expectations for market acceptance of our new products;
the potential for our marketed products to be withdrawn due to recalls, patient adverse events or deaths;
our ability to establish and maintain intellectual property on our products and our ability to successfully defend these in cases of infringement;
the implementation of our business strategies;
the potential for exposure to product liability claims;
our financial performance expectations and interpretations thereof by securities analysts and investors;
our ability to compete in the development and marketing of our products and product candidates with other companies in our industry;
difficulties or delays in the development, production, manufacturing and marketing of new or existing products and services, including difficulties or delays associated with obtaining requisite regulatory approvals or clearances associated with those activities;

3

changes in laws and regulations or in the interpretation or application of laws or regulations, as well as possible failures to comply with applicable laws or regulations as a result of possible misinterpretations or misapplications;
cost-containment efforts of our customers, purchasing groups, third-party payers and governmental organizations;
costs associated with protecting our trade secrets and enforcing our patent, copyright and trademark rights, and successful challenges to the validity of our patents, copyrights or trademarks;
actions of regulatory bodies and other government authorities, including the FDA and foreign counterparts, that could delay, limit or suspend product development, manufacturing or sales or result in recalls, seizures, consent decrees, injunctions and monetary sanctions;
costs or claims resulting from potential errors or defects in our manufacturing that may injure persons or damage property or operations, including costs from remediation efforts or recalls;
the results, consequences, effects or timing of any commercial disputes, patent infringement claims or other legal proceedings or any government investigations;
interruption in our ability to manufacture our products or an inability to obtain key components or raw materials or increased costs in such key components or raw materials;
uncertainties in our industry due to the effects of government-driven or mandated healthcare reform;
competitive pressures in the markets in which we operate;
the loss of, or default by, one or more key customers or suppliers; and
unfavorable changes to the terms of key customer or supplier relationships.

Forward-looking statements are not guarantees of future performance and are subject to substantial risks and uncertainties that could cause the actual results to differ materially from those that we predicted in the forward-looking statements. Investors should carefully review the information contained under the caption "Risk Factors" contained in Item 1A for a description of risks and uncertainties that could cause actual results to differ from those that we predicted. All forward-looking statements are based on information available to us on the date hereof, and we assume no obligation to update forward-looking statements, except as required by Federal Securities laws.

Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “IRADIMED,” the “Company,” “we,” “our,” and “us” refer to IRADIMED CORPORATION.

4

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

IRADIMED CORPORATION

CONDENSED BALANCE SHEETS

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

50,446,484

$

61,999,550

Investments

500,090

501,855

Accounts receivable, net of allowance for doubtful accounts of $64,579 as of March 31, 2022 and $60,361 as of December 31, 2021

6,513,061

5,136,599

Inventory, net

 

4,345,042

 

4,299,799

Prepaid expenses and other current assets

 

1,020,398

 

1,000,716

Prepaid income taxes

 

2,689,237

 

3,306,438

Total current assets

 

65,514,312

 

76,244,957

Property and equipment, net

 

2,149,754

 

2,069,376

Intangible assets, net

 

1,334,670

 

1,118,584

Operating lease right-of-use asset, net

2,414,472

2,482,084

Deferred income taxes, net

 

808,019

 

765,096

Other assets

 

172,272

 

201,325

Total assets

$

72,393,499

$

82,881,422

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

1,136,651

$

782,903

Accrued payroll and benefits

 

1,877,475

 

2,814,560

Other accrued taxes

 

122,461

 

140,315

Warranty reserve

 

106,733

 

108,880

Deferred revenue

 

2,586,776

 

2,553,096

Current portion of operating lease liability

280,698

276,568

Other current liabilities

138,441

146,435

Total current liabilities

 

6,249,235

 

6,822,757

Deferred revenue

 

1,462,055

 

1,679,343

Operating lease liability, less current portion

2,133,774

2,205,516

Total liabilities

 

9,845,064

 

10,707,616

Stockholders’ equity:

Common stock; $0.0001 par value; 31,500,000 shares authorized; 12,560,469 shares issued and outstanding as of March 31, 2022 and 12,544,024 shares issued and outstanding as of December 31, 2021

 

1,256

 

1,254

Additional paid-in capital

 

25,618,544

 

25,160,618

Retained earnings

 

36,922,508

 

46,994,922

Accumulated other comprehensive income

 

6,127

 

17,012

Total stockholders’ equity

 

62,548,435

 

72,173,806

Total liabilities and stockholders’ equity

$

72,393,499

$

82,881,422

See accompanying notes to unaudited condensed financial statements.

5

IRADIMED CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

March 31, 

    

2022

    

2021

Revenue

$

12,310,710

$

9,223,996

Cost of revenue

 

2,931,186

 

2,161,680

Gross profit

 

9,379,524

 

7,062,316

Operating expenses:

General and administrative

 

2,715,950

 

2,430,369

Sales and marketing

 

3,069,556

 

2,379,124

Research and development

 

519,095

 

475,817

Total operating expenses

 

6,304,601

 

5,285,310

Income from operations

 

3,074,923

 

1,777,006

Other expense, net

 

14,915

 

5,663

Income before provision for income taxes

 

3,060,008

 

1,771,343

Provision for income tax expense

 

573,295

 

384,494

Net income

$

2,486,713

$

1,386,849

Net income per share:

Basic

$

0.20

$

0.11

Diluted

$

0.20

$

0.11

Weighted average shares outstanding:

Basic

 

12,552,817

 

12,310,577

Diluted

 

12,655,518

 

12,521,279

See accompanying notes to unaudited condensed financial statements.

6

IRADIMED CORPORATION

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

For the Three Months Ended

March 31, 

    

2022

    

2021

    

Net income

$

2,486,713

$

1,386,849

Other comprehensive loss:

Change in fair value of available-for-sale securities, net of tax benefit of $3,532 and $1,559, respectively

(10,885)

(4,869)

Other comprehensive loss

 

(10,885)

 

(4,869)

Comprehensive income

$

2,475,828

$

1,381,980

See accompanying notes to unaudited condensed financial statements.

7

IRADIMED CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income

    

Equity

Balances, December 31, 2021

 

12,544,024

$

1,254

$

25,160,618

$

46,994,922

$

17,012

$

72,173,806

Net income

 

 

 

 

2,486,713

 

 

2,486,713

Dividends paid ($1.00 per share)

(12,559,127)

(12,559,127)

Other comprehensive loss

 

 

 

 

 

(10,885)

 

(10,885)

Stock-based compensation expense

 

 

 

453,360

 

 

 

453,360

Net share settlement of restricted stock units

 

3,879

 

1

 

(67,381)

 

 

 

(67,380)

Exercise of stock options

 

12,566

 

1

 

71,947

 

 

 

71,948

Balances, March 31, 2022

 

12,560,469

$

1,256

$

25,618,544

$

36,922,508

$

6,127

$

62,548,435

Accumulated

 

Additional

Other

 

Common Stock

Paid-in

Retained

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income

    

Equity

Balances, December 31, 2020

 

12,308,432

$

1,231

$

23,676,843

$

37,669,451

$

37,087

$

61,384,612

Net income

 

 

 

 

1,386,849

 

 

1,386,849

Other comprehensive loss

 

 

 

 

 

(4,869)

 

(4,869)

Stock-based compensation expense

 

 

 

347,741

 

 

 

347,741

Net share settlement of restricted stock units

 

3,502

 

 

(38,707)

 

 

 

(38,707)

Exercise of stock options

 

250

 

 

2,460

 

 

 

2,460

Balances, March 31, 2021

 

12,312,184

$

1,231

$

23,988,337

$

39,056,300

$

32,218

$

63,078,086

See accompanying notes to unaudited condensed financial statements.

8

IRADIMED CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended

March 31, 

    

2022

    

2021

    

Operating activities:

Net income

$

2,486,713

$

1,386,849

Adjustments to reconcile net income to net cash provided by operating activities:

Change in allowance for doubtful accounts

4,219

1,728

Change in provision for excess and obsolete inventory

 

12,254

 

(1,992)

Depreciation and amortization

 

433,925

 

331,794

Gain on disposal of property and equipment

 

(4,894)

 

Stock-based compensation

 

453,360

 

347,741

Deferred income taxes, net

(52,043)

288,895

Changes in operating assets and liabilities:

Accounts receivable

 

(1,380,681)

 

9,032

Inventory

 

82,909

 

(668,361)

Prepaid expenses and other current assets

 

(369,791)

 

(560,508)

Other assets

 

39,481

 

32,059

Accounts payable

 

186,340

 

(75,805)

Accrued payroll and benefits

 

(937,085)

 

(482,099)

Other accrued taxes

 

(17,854)

 

(26,388)

Warranty reserve

 

(2,147)

 

6,394

Deferred revenue

 

(117,726)

 

250,359

Other current liabilities

(7,994)

Prepaid income taxes

617,201

103,383

Net cash provided by operating activities

 

1,426,187

 

943,081

Investing activities:

Purchases of property and equipment

 

(183,352)

 

(132,318)

Capitalized intangible assets

 

(241,342)

 

(41,615)

Net cash used in investing activities

 

(424,694)

 

(173,933)

Financing activities:

Dividends paid

(12,559,127)

Proceeds from exercises of stock options

71,948

2,460

Taxes paid related to the net share settlement of equity awards

(67,380)

(38,707)

Net cash used in financing activities

 

(12,554,559)

 

(36,247)

Net (decrease) increase in cash and cash equivalents

 

(11,553,066)

 

732,901

Cash and cash equivalents, beginning of period

 

61,999,550

 

50,068,728

Cash and cash equivalents, end of period

$

50,446,484

$

50,801,629

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

8,137

$

5,195

Operating and short-term lease payments recorded within cash flow provided by operating activities

$

128,083

$

118,067

See accompanying notes to unaudited condensed financial statements.

9

IRADIMED CORPORATION

Notes to Unaudited Condensed Financial Statements

1 — Basis of Presentation

The accompanying interim condensed financial statements of IRADIMED CORPORATION (“IRADIMED”, the “Company”, “we”, “our”) have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The interim financial information is unaudited, but reflects all normal adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The accompanying interim condensed financial statements should be read with the financial statements and related footnotes to financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. The accounting policies followed in the preparation of these interim condensed financial statements, except as described in Note 1, are consistent in all material respects with those described in Note 1 of our Form 10-K.

We operate in one reportable segment which is the development, manufacture and sale of MRI compatible medical devices, related accessories, disposables and service for use by hospitals and acute care facilities during MRI procedures.

Certain Significant Risks and Uncertainties

We market our products to end users in the United States and to third-party distributors internationally. Sales to end users in the United States are generally made on open credit terms. Management maintains an allowance for potential credit losses.

We have deposited our cash and cash equivalents with various financial institutions. Our cash and cash equivalents balances exceed federally insured limits periodically throughout the year. We have not incurred any losses related to these balances.

Our medical devices require clearance from the Food and Drug Administration and international regulatory agencies prior to commercialized sales. Our future products may not receive required approvals. If we were denied such approvals, or if such approvals were revoked or delayed or if we were unable to timely renew certain approvals for existing products, it would have a materially adverse impact on our business, results of operations and financial condition.

Certain key components of our products essential to their functionality are sole-sourced. Any disruption in the availability of these components would have a materially adverse impact on our business, results of operations and financial condition.

COVID-19 Considerations

The COVID-19 pandemic has negatively impacted, and may continue to negatively impact, the macroeconomic environment in the United States and globally. From the beginning of this global health crisis, our priority has been the safety and well-being of our employees and continuing to supply our customers with access to our therapeutic and diagnostic device solutions. Due to the evolving and uncertain nature of COVID-19, it is reasonably possible that it could materially impact our estimates, particularly those that require consideration of forecasted financial information, in the near to medium term. These estimates relate to certain accounts including, but not limited to, intangible assets, and other long-lived assets. The magnitude of the impact will depend on numerous evolving factors that we may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer, supplier and hospital behavior in response to the pandemic and such governmental actions, and the economic and operating conditions that we may face in the aftermath of COVID-19.

10

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements to be Implemented

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the Company to measure and recognize expected credit losses for financial assets held and not accounted for at fair value through net income. In November 2018, April 2019 and May 2019, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief, which provided additional implementation guidance on ASU 2016-03. The previously mentioned ASUs are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We do not expect the adoption of these ASUs to have a material impact on our financial condition, results of operations or cash flows.

Accounting Pronouncements Implemented in 2021

In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. We adopted ASU 2009-12 as of January 1, 2021 and it did not have an impact on our financial condition, results of operations or cash flows.

2 — Revenue Recognition

Disaggregation of Revenue

We disaggregate revenue from contracts with customers by geographic region and revenue type as we believe it best depicts the nature, amount, timing and uncertainty of our revenue and cash flow.

Revenue information by geographic region is as follows:

Three Months Ended

March 31, 

    

2022

    

2021

(unaudited)

United States

 

$

9,979,340

 

$

7,272,830

International

 

2,331,370

 

1,951,166

Total revenue

 

$

12,310,710

 

$

9,223,996

Revenue information by type is as follows:

Three Months Ended

March 31, 

    

2022

    

2021

(unaudited)

Devices:

MRI compatible IV infusion pump system

 

$

3,281,939

 

$

3,503,347

MRI compatible patient vital signs monitoring systems

 

5,194,751

 

2,603,830

Total Devices revenue

 

8,476,690

 

6,107,177

Disposables, services and other

 

3,318,902

 

2,635,466

Amortization of extended warranty agreements

 

515,118

 

481,353

Total revenue

 

$

12,310,710

 

$

9,223,996

11

Contract Liabilities

Our contract liabilities consist of:

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

Advance payments from customers

 

$

665,721

 

$

551,267

 

Shipments in-transit

 

65,882

 

70,295

Extended warranty agreements

 

3,317,228

 

3,610,877

Total

 

$

4,048,831

 

$

4,232,439

 

Changes in the contract liabilities during the periods presented are as follows:

    

Deferred 

Revenue

Contract liabilities, December 31, 2021

 

$

4,232,439

Increases due to cash received from customers

 

1,065,095

Decreases due to recognition of revenue

 

(1,248,703)

Contract liabilities, March 31, 2022

 

$

4,048,831

    

Deferred 

    

Revenue

Contract liabilities, December 31, 2020

$

4,254,672

Increases due to cash received from customers

 

681,433

Decreases due to recognition of revenue

 

(649,174)

Contract liabilities, March 31, 2021

$

4,286,931

Capitalized Contract Costs

Our capitalized contract costs totaled $318,329 and $357,810 as of March 31, 2022 and December 31, 2021, respectively.

3 — Basic and Diluted Net Income per Share

Basic net income per share is based upon the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Stock options, restricted stock units and performance-based restricted stock units granted by us represent the only dilutive effect reflected in diluted weighted-average shares outstanding.

The following table presents the computation of basic and diluted net income per share:

Three Months Ended March 31, 

    

2022

    

2021

    

(unaudited)

Net income

$

2,486,713

$

1,386,849

Weighted-average shares outstanding — Basic

 

12,552,817

 

12,310,577

Effect of dilutive securities:

Stock options

26,293

189,933

Restricted stock units

53,864

20,769

Performance-based restricted stock units

22,544

Weighted-average shares outstanding — Diluted

 

12,655,518

 

12,521,279

Basic net income per share

$

0.20

$

0.11

Diluted net income per share

$

0.20

$

0.11

12

Stock options and restricted stock units excluded from the calculation of diluted net income per share because the effect would have been anti-dilutive are as follows:

Three Months Ended

March 31, 

    

2022

    

2021

    

(unaudited)

Anti-dilutive stock options and restricted stock units

 

593

4,902

 

4 — Inventory, net

Inventory consists of:

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

Raw materials

$

3,715,070

$

3,777,846

Work in process

 

383,947

 

191,722

Finished goods

 

441,829

 

513,782

Inventory before allowance for excess and obsolete

4,540,846

4,483,350

Allowance for excess and obsolete

(195,804)

(183,551)

Total

$

4,345,042

$

4,299,799

5 — Property and Equipment, net

Property and equipment consist of:

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

Computer software and hardware

$

903,144

$

837,826

Furniture and fixtures

 

1,329,308

 

1,252,434

Leasehold improvements

 

240,016

 

237,086

Machinery and equipment

 

2,071,503

 

2,066,003

Tooling in-process

 

601,669

 

537,043

 

5,145,640

 

4,930,392

Accumulated depreciation

 

(2,995,886)

 

(2,861,016)

Total

$

2,149,754

$

2,069,376

Depreciation expense of property and equipment was $134,870 and $127,139 for the three months ended March 31, 2022 and 2021, respectively.

Property and equipment, net, information by geographic region is as follows:

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

United States

 

$

1,957,027

 

$

1,855,012

 

International

 

192,727

 

214,364

Total property and equipment, net

 

$

2,149,754

 

$

2,069,376

 

Long-lived assets held outside of the United States consist principally of tooling and machinery and equipment, which are components of property and equipment, net.

13

6 — Intangible Assets, net

The following table summarizes the components of intangible asset balances:

March 31, 

December 31, 

    

2022

    

2021

    

(unaudited)

Patents — in use

$

372,502

$

372,502

Patents — in process

 

115,139

 

111,593

Internally developed software — in use

 

872,218

 

872,218

Internally developed software — in process

706,237

468,441

Trademarks

27,697

27,697

 

2,093,793

 

1,852,451

Accumulated amortization

 

(759,123)

 

(733,867)

Total

$

1,334,670

$

1,118,584

Amortization expense of intangible assets was $25,256 and $26,118 for the three months ended March 31, 2022 and 2021, respectively.

Expected annual amortization expense for the remaining portion of 2022 and the next five years related to intangible assets is as follows (excludes in process intangible assets):

Nine months ending December 31, 2022

    

$

75,052

2023

    

$

99,797

2024

$

99,395

2025

$

96,225

2026

$

84,508

2027

$

10,796

7 — Investments

Our investments consist of bonds that we have classified as available-for-sale and are summarized in the following tables:

March 31, 2022

    

    

Gross

    

Gross

    

 

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

U.S. corporate bonds

 

$

491,975

 

$

8,115

 

$

 

$

500,090

December 31, 2021

    

    

Gross

    

Gross

    

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

U.S. corporate bonds

$

491,975

 

$

9,880

 

$

 

$

501,855

14

8 — Fair Value Measurements

The fair values of cash equivalents, accounts receivables, net and accounts payable approximate their carrying amounts due to their short duration.

The fair value of our assets and liabilities subject to recurring fair value measurements are as follows:

Fair Value at March 31, 2022

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Market for

Observable

Unobservable

Fair

Identical Assets

Inputs

Inputs

    

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

U.S. corporate bonds

$

500,090

$

$

500,090

$

Fair Value at December 31, 2021

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Market for

Observable

Unobservable

Fair

Identical Assets

Inputs

Inputs

    

Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

U.S. corporate bonds

$

501,855

$

$

501,855

$

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

9 — Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, net of tax, for the three months ended March 31, 2022 and 2021 are as follows:

Unrealized (Losses) 

Gains on

Available-For-Sale

    

Securities

Balance at December 31, 2021

 

$

17,012

Losses on available-for-sale securities, net

 

(10,885)

Balance at March 31, 2022

 

$

6,127

Balance at December 31, 2020

$

37,087

Losses on available-for-sale securities, net

 

(4,869)

Balance at March 31, 2021

$

32,218

10 — Stock-Based Compensation

Stock-based compensation was recognized as follows in the Condensed Statements of Operations:

Three Months Ended

March 31, 

2022

    

2021

(unaudited)

Cost of revenue

$

79,425

$

54,211

General and administrative

 

196,769

 

180,204

Sales and marketing

 

137,422

 

81,935

Research and development

 

39,744

 

31,391

Total

$

453,360

$

347,741

15

As of March 31, 2022, we had $3,270,056 of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 2.6 years. As of March 31, 2022, we had $617,609 of unrecognized compensation cost related to unvested performance-based restricted stock units, which is expected to be recognized over a weighted-average period of 2.4 years.

The following table presents a summary of our stock-based compensation activity for the three months ended March 31, 2022 (shares):

Performance

Based

Stock

Restricted

Restricted

    

Options

    

Stock Units

    

Stock Units

Outstanding beginning of period

39,576

131,182

18,301

Awards granted

1,099

Awards exercised/vested

(12,566)

(5,480)

Awards canceled

(517)

Outstanding end of period

27,010

126,284

18,301

11 — Income Taxes

For the three months ended March 31, 2022, we recorded a provision for income tax expense of $573,295. Our effective tax rate was 18.7 percent and differed from the U.S. Federal statutory rate primarily due to benefits from foreign derived intangible income, stock compensation and research and development tax credits, partially offset by U.S. state income tax expense.

For the three months ended March 31, 2021, we recorded a provision for income tax expense of $384,494. Our effective tax rate was 21.7 percent and differed from the U.S. Federal statutory rate primarily due to U.S. state income tax expense, partially offset by benefits from foreign derived intangible income and research and development tax credits.

As of March 31, 2022, and December 31, 2021, we had not identified or accrued for any uncertain tax positions. We are currently unaware of any uncertain tax positions that could result in significant payments, accruals or other material deviations in this estimate over the next 12 months. We believe that our tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from ours, which could result in the imposition of additional taxes and penalties.

We file tax returns in the United States Federal jurisdiction and many U.S. state jurisdictions. Our returns are not currently under examination by the Internal Revenue Service. The Company remains subject to income tax examinations for our United States Federal and certain U.S. state income taxes for 2017 and subsequent years and various other U.S. state income taxes for 2016 and subsequent years.

12 — Leases

We have entered into operating lease contracts for our office and various office equipment.

We have one material lease contract outstanding. In January 2014, we entered into a non-cancelable operating lease, commencing July 1, 2014, for our manufacturing and headquarters facility in Winter Springs, Florida owned by Susi, LLC, an entity controlled by our President, Chief Executive Officer, and Chairman of the Board, Roger Susi. Pursuant to the terms of our lease for this property, the monthly base rent is $34,133, adjusted annually for changes in the consumer price index. For the year ended December 31, 2021, the Company paid Susi, LLC $461,874 related to this lease. Under the terms of the lease, we are responsible for property taxes, insurance and maintenance expenses. Prior to May 31, 2019, the expiration date of the initial lease term, and pursuant to the terms of the lease contract, we renewed the lease for an additional five years, resulting in a new lease expiration date of May 31, 2024. Unless advance written notice of termination is timely provided, the lease will automatically renew for one additional successive term of five years beginning in 2024, and thereafter, will be renewed for successive terms of one year each. At the time we adopted ASU 2016-02, Leases (Topic 842), we concluded that we would exercise the remaining five-year option, resulting in a remaining lease term of 7.2 years as of March 31, 2022. This lease agreement does not contain any residual value guarantee or material restrictive covenants.

16

Operating lease cost recognized in the Condensed Statements of Operations is as follows:

Three Months Ended

March 31, 

    

2022

    

2021

Cost of revenue

$

53,854

$

51,095

General and administrative

54,710

 

50,556

Sales and marketing

3,014

 

2,859

Research and development

8,350

 

7,922

Total

$

119,928

$

112,432

Lease costs for short-term leases were immaterial for the three months ended March 31, 2022 and 2021.

Maturity of our operating lease liability as of March 31, 2022 is as follows:

Nine months ending December 31, 2022

    

$

311,470

2023

    

415,294

2024

 

415,294

2025

 

415,294

2026

 

411,008

Thereafter

 

989,856

Total lease payments

 

2,958,216

Imputed interest

 

(543,744)

Present value of lease liability

$

2,414,472

13 — Commitments and Contingencies

Purchase commitments. We had various purchase orders for goods or services totaling $5,532,627 and $5,604,456 as of March 31, 2022 and December 31, 2021, respectively. No amounts related to these purchase orders have been recognized in our balance sheet.

Legal matters. We may from time to time become a party to various legal proceedings or claims that arise in the ordinary course of business. As of March 31, 2022 and December 31, 2021, we accrued approximately $138,000 and $146,000, respectively, related to various matters.

17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our condensed financial statements and the related notes to those statements included in this Quarterly Report, the discussion of certain risks and uncertainties contained in Part II, Item 1A of this Quarterly Report, the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” included in our Annual Report filed on Form 10-K for the fiscal year ended December 31, 2021 and the cautionary information regarding forward-looking statements at the beginning of this Quarterly Report.

Our Business

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

We are a leader in the development of innovative MRI compatible medical devices. We are the only known provider of a non-magnetic intravenous (“IV”) infusion pump system that is specifically designed to be safe for use during MRI procedures. We were the first to develop an infusion delivery system that largely eliminates many of the dangers and problems present during MRI procedures. Standard infusion pumps contain magnetic and electronic components which can create radio frequency interference and are dangerous to operate in the presence of the powerful magnet that drives an MRI system. Our patented MRidium® MRI compatible IV infusion pump system has been designed with a non-magnetic ultrasonic motor, uniquely designed non-ferrous parts and other special features to safely and predictably deliver anesthesia and other IV fluids during various MRI procedures. Our pump solution provides a seamless approach that enables accurate, safe and dependable fluid delivery before, during and after an MRI scan, which is important to critically ill patients who cannot be removed from their vital medications, and children and infants who must generally be sedated to remain immobile during an MRI scan.

Each IV infusion pump system consists of an MRidium® MRI compatible IV infusion pump, non-magnetic mobile stand, proprietary disposable IV tubing sets and many of these systems contain additional optional upgrade accessories.

Our 3880 MRI compatible patient vital signs monitoring system has been designed with non-magnetic components and other special features to safely and accurately monitor a patient’s vital signs during various MRI procedures. The IRADIMED 3880 system operates dependably in magnetic fields up to 30,000 gauss, which means it can operate virtually anywhere in the MRI scanner room. The IRADIMED 3880 has a compact, lightweight design allowing it to travel with the patient from their critical care unit, to the MRI and back, resulting in increased patient safety through uninterrupted vital signs monitoring and decreasing the amount of time critically ill patients are away from critical care units. The features of the IRADIMED 3880 include: wireless ECG with dynamic gradient filtering; wireless SpO2 using Masimo® algorithms; non-magnetic respiratory CO2; invasive and non-invasive blood pressure; patient temperature, and; optional advanced multi-gas anesthetic agent unit featuring continuous Minimum Alveolar Concentration measurements. The IRADIMED 3880 MRI compatible patient vital signs monitoring system has an easy-to-use design and allows for the effective communication of patient vital signs information to clinicians.

We generate revenue from the sale of MRI compatible medical devices and accessories, extended warranty agreements, services related to maintaining our products and the sale of disposable products used with our devices. The principal customers for our MRI compatible products include hospitals and acute care facilities, both in the United States and internationally. As of December 31, 2021, our direct U.S. sales force consisted of 21 field sales representatives, 3 regional sales directors and supplemented by 4 clinical application specialists. Internationally, we have distribution agreements with independent distributors selling our products.

Selling cycles for our devices have varied widely and have historically ranged between three and six months in duration with more recent trends lengthening beyond this historical range due to the COVID-19 pandemic. We also enter into agreements with integrated delivery health systems and healthcare supply contracting companies in the U.S. Our agreements with healthcare supply contracting companies enable us to sell and distribute our products and services to their member hospitals. Under these agreements, we are required to pay these group purchasing organizations (“GPOs”) a fee of three percent of the sales of our products to their member hospitals.

18

Financial Highlights

For the first quarter ended March 31, 2022, our revenue increased $3.1 million, or 33.5 percent, to $12.3 million, compared to $9.2 million for the first quarter last year. Income before the provision for income taxes was $3.1 million for the first quarter 2022, compared to $1.8 million for the first quarter last year. Net income was $2.5 million, or $0.20 per diluted share in the first quarter ended March 31, 2022, compared to $1.4 million, or $0.11 per share in the first quarter last year.

For the remainder of 2022, we expect higher revenue when compared to the same period in 2021 due to higher sales of our medical devices, related accessories, disposables, and services. We also expect higher operating expenses compared to the same period in 2021 primarily due to higher sales and marketing, and general and administrative expenses.

Application of Critical Accounting Policies

We prepare our financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and use assumptions that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

We believe that the following critical accounting policies require the use of significant estimates, assumptions, and judgments:

Revenue recognition;
Accounts receivable and allowance for doubtful accounts;
Inventory carried at the lower of cost or net realizable value;
Product warranties;
Stock-based compensation; and
Income taxes.

These critical accounting policies are described in more detail in our Annual Report filed on Form 10-K, under Management’s Discussion and Analysis and Results of Operations. Except as disclosed in Note 1 to the unaudited condensed financial statements contained herein related to the adoption of recent accounting pronouncements, there have been no changes to these policies during the three months ended March 31, 2022.

The use of different estimates, assumptions, and judgments could have a material effect on the reported amounts of assets, liabilities and related disclosures as of the date of the financial statements and revenue and expenses during the reporting period.

19

Results of Operations

The following table sets forth selected statements of operations data as a percentage of total revenue for the periods indicated. Our historical operating results are not necessarily indicative of the results for any future period.

Percent of Revenue

    

Three Months

Ended March 31,

    

2022

    

2021

    

Revenue

 

100.0

%  

100.0

Cost of revenue

 

23.8

 

23.4

 

Gross profit

 

76.2

 

76.6

 

Operating expenses:

 

 

 

General and administrative

 

22.1

 

26.3

 

Sales and marketing

 

24.9

 

25.8

 

Research and development

 

4.2

 

5.2

 

Total operating expenses

 

51.2

 

57.3

 

Income from operations

 

25.0

 

19.3

 

Other expense, net

 

(0.1)

 

(0.1)

 

Income before provision for income taxes

 

24.9

 

19.2

 

Provision for income tax expense

 

4.7

 

4.2

 

Net income

 

20.2

%  

15.0

%

Three Months Ended March 31, 2022 and 2021

Revenue by Geographic Region