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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
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.:
(Exact name of Registrant as specified in its charter)
| ||
(State or other jurisdiction of | (I.R.S. Employer | |
(Address of principal executive offices) | (Zip Code) |
(
(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: |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” as defined in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | 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
IRADIMED CORPORATION
Table of Contents
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 any or all public health concerns such as pandemics; |
| ● | 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
June 30, | December 31, | ||||||
2022 | 2021 | ||||||
| (unaudited) |
| |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Investments | — | | |||||
Accounts receivable, net of allowance for doubtful accounts of $ | | | |||||
Inventory, net |
| |
| | |||
Prepaid expenses and other current assets |
| |
| | |||
Prepaid income taxes |
| |
| | |||
Total current assets |
| |
| ||||
Property and equipment, net |
| |
| ||||
Intangible assets, net |
| |
| ||||
Operating lease right-of-use asset, net | | ||||||
Deferred income taxes, net |
| |
| ||||
Other assets |
| |
| ||||
Total assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | | $ | ||||
Accrued payroll and benefits |
| |
| ||||
Other accrued taxes |
| |
| ||||
Warranty reserve |
| |
| ||||
Deferred revenue |
| |
| ||||
Current portion of operating lease liability | | ||||||
Other current liabilities | | | |||||
Total current liabilities |
| |
| | |||
Deferred revenue |
| |
| | |||
Operating lease liability, less current portion | | ||||||
Total liabilities |
| |
| ||||
Stockholders’ equity: | |||||||
Common stock; $ |
| |
| | |||
Additional paid-in capital |
| |
| ||||
Retained earnings |
| |
| ||||
Accumulated other comprehensive income |
| — |
| ||||
Total stockholders’ equity |
| |
| ||||
Total liabilities and stockholders’ equity | $ | | $ | ||||
See accompanying notes to unaudited condensed financial statements.
5
IRADIMED CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Revenue | $ | | $ | | $ | $ | ||||||
Cost of revenue |
| |
| | ||||||||
Gross profit |
| |
| | ||||||||
Operating expenses: |
| |||||||||||
General and administrative |
| |
| | ||||||||
Sales and marketing |
| |
| | ||||||||
Research and development |
| |
| | ||||||||
Total operating expenses |
| |
| | ||||||||
Income from operations |
| |
| | | |||||||
Other income (loss), net |
| |
| | ( | |||||||
Income before provision for income taxes |
| |
| | | |||||||
Provision for income tax expense |
| |
| | | |||||||
Net income | $ | | $ | | $ | $ | | |||||
Net income per share: |
| |||||||||||
Basic | $ | | $ | | $ | $ | | |||||
Diluted | $ | | $ | | $ | $ | | |||||
Weighted average shares outstanding: |
|
| ||||||||||
Basic |
| |
| | ||||||||
Diluted |
| |
| | ||||||||
See accompanying notes to unaudited condensed financial statements.
6
IRADIMED CORPORATION
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended | For the Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Net income | $ | | $ | | $ | | $ | | |||||
Other comprehensive (loss) income: | |||||||||||||
Change in fair value of available-for-sale securities, net of tax expense (benefit) of $( | ( | | ( | ( | |||||||||
Realized gain on available-for-sale securities reclassified to net income, net of tax expense of $ | ( | ( | ( | ( | |||||||||
Other comprehensive (loss) |
| ( |
| ( |
| ( |
| ( | |||||
Comprehensive income | $ | | $ | | $ | | $ | | |||||
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 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Dividends paid | — | — | — | ( | — | ( | |||||||||||
Other comprehensive loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Stock-based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Net share settlement of restricted stock units |
| |
| |
| ( |
| — |
| — |
| ( | |||||
Exercise of stock options |
| |
| |
| |
| — |
| — |
| | |||||
Balances, March 31, 2022 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income | — | — | — | | — | | |||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||
Stock-based compensation expense | — | — | | — | — | | |||||||||||
Net share settlement of restricted stock units | | — | ( | — | — | ( | |||||||||||
Balances, June 30, 2022 | $ | | $ | | $ | | $ | — | $ | | |||||||
Accumulated |
| ||||||||||||||||
Additional | Other |
| |||||||||||||||
Common Stock | Paid-in | Retained | Comprehensive | Stockholders’ | |||||||||||||
| Shares |
| Amount |
| Capital |
| Earnings |
| Income |
| Equity | ||||||
Balances, December 31, 2020 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
| — |
| — |
| — |
| |
| — |
| | |||||
Other comprehensive loss |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
Stock-based compensation expense |
| — |
| — |
| |
| — |
| — |
| | |||||
Net share settlement of restricted stock units |
| |
| — |
| ( |
| — |
| — |
| ( | |||||
Exercise of stock options |
| |
| — |
| |
| — |
| — |
| | |||||
Balances, March 31, 2021 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income | — | — | — | | — | | |||||||||||
Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||
Stock-based compensation expense | — | — | | — | — | | |||||||||||
Net share settlement of restricted stock units | | | ( | — | — | ( | |||||||||||
Exercise of stock options | | — | | — | — | | |||||||||||
Balances, June 30, 2021 | | $ | | $ | | $ | | $ | | $ | | ||||||
See accompanying notes to unaudited condensed financial statements.
8
IRADIMED CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended | |||||||
June 30, | |||||||
| 2022 |
| 2021 | ||||
Operating activities: | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Change in allowance for doubtful accounts | | ( | |||||
Change in provision for excess and obsolete inventory |
| |
| | |||
Depreciation and amortization |
| |
| | |||
Gain on disposal of property and equipment |
| ( |
| | |||
Stock-based compensation |
| |
| | |||
Deferred income taxes, net | ( | ( | |||||
Loss on maturities of investments | ( | — | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
| ( |
| | |||
Inventory |
| ( |
| ( | |||
Prepaid expenses and other current assets |
| ( |
| ( | |||
Other assets |
| |
| | |||
Accounts payable |
| ( |
| ( | |||
Accrued payroll and benefits |
| ( |
| | |||
Other accrued taxes |
| |
| | |||
Warranty reserve |
| ( |
| | |||
Deferred revenue |
| ( |
| | |||
Other current liabilities | ( | — | |||||
Prepaid income taxes | | ( | |||||
Net cash provided by operating activities |
| |
| | |||
Investing activities: | |||||||
Proceeds from maturities of investments | | | |||||
Purchases of property and equipment |
| ( |
| ( | |||
Capitalized intangible assets |
| ( |
| ( | |||
Net cash (used in) provided by investing activities |
| ( |
| | |||
Financing activities: | |||||||
Dividends paid | ( | — | |||||
Proceeds from exercises of stock options | | | |||||
Taxes paid related to the net share settlement of equity awards | ( | ( | |||||
Net cash used in financing activities |
| ( |
| ( | |||
Net (decrease) increase in cash and cash equivalents |
| ( |
| | |||
Cash and cash equivalents, beginning of period |
| |
| | |||
Cash and cash equivalents, end of period | $ | | $ | | |||
Supplemental disclosure of cash flow information: |
| ||||||
Cash paid for income taxes | $ | | $ | | |||
ROU asset recognized in exchange for new lease obligation | | | |||||
Operating and short-term lease payments recorded within cash flow provided by operating activities | $ | | $ | | |||
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 Securities and Exchange Commission (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 June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, and other interim perdiods, or future year or period.
The accompanying interim condensed financial statements should be read in conjunction 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
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 regularly 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 worldwide 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.
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
10
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.
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 | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
(unaudited) | (unaudited) | ||||||||||||
United States |
| $ | |
| $ | |
| $ | |
| $ | |
|
International |
| |
| |
| |
| | |||||
Total revenue |
| $ | |
| $ | |
| $ | |
| $ | |
|
Revenue information by type is as follows:
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
(unaudited) | (unaudited) | |||||||||||
Devices: | ||||||||||||
MRI Compatible IV Infusion Pump Systems |
| $ | |
| $ | |
| $ | |
| $ | |
MRI Compatible Patient Vital Signs Monitoring Systems |
| |
| |
| |
| | ||||
Total Devices revenue |
| |
| |
| |
| | ||||
Disposables, services and other |
| |
| |
| |
| | ||||
Amortization of extended warranty agreements |
| |
| |
| |
| | ||||
Total revenue |
| $ | |
| $ | |
| $ | |
| $ | |
Contract Liabilities
Our contract liabilities consist of:
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
(unaudited) | |||||||
Advance payments from customers |
| $ | |
| $ | |
|
Shipments in-transit |
| |
| | |||
Extended warranty agreements |
| |
| | |||
Total |
| $ | |
| $ | |
|
11
Changes in the contract liabilities during the periods presented are as follows:
| Deferred | ||
Revenue | |||
Contract liabilities, December 31, 2021 |
| $ | |
Increases due to cash received from customers |
| | |
Decreases due to recognition of revenue |
| ( | |
Contract liabilities, June 30, 2022 |
| $ | |
| Deferred | ||
| Revenue | ||
Contract liabilities, December 31, 2020 | $ | | |
Increases due to cash received from customers |
| | |
Decreases due to recognition of revenue |
| ( | |
Contract liabilities, June 30, 2021 | $ | | |
Capitalized Contract Costs
Our capitalized contract costs totaled $
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 June 30, | Six Months Ended June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
(unaudited) | (unaudited) | |||||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Weighted-average shares outstanding — Basic |
| |
| |
| |
| | ||||
Effect of dilutive securities: | ||||||||||||
Stock options | | | | | ||||||||
Restricted stock units | | | | | ||||||||
Weighted-average shares outstanding — Diluted |
| |
| |
| |
| | ||||
Basic net income per share | $ | | $ | | $ | | $ | | ||||
Diluted net income per share | $ | | $ | | $ | | $ | | ||||
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 | Six Months Ended | ||||||||
June 30, | June 30, | ||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||
(unaudited) | (unaudited) | ||||||||
Anti-dilutive stock options and restricted stock units |
| | |
| | |
| ||
12
4 — Inventory, net
Inventory consists of:
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
(unaudited) | |||||||
Raw materials | $ | | $ | | |||
Work in process |
| |
| | |||
Finished goods |
| |
| | |||
Inventory before allowance for excess and obsolete | | | |||||
Allowance for excess and obsolete | ( | ( | |||||
Total | $ | | $ | | |||
5 — Property and Equipment, net
Property and equipment consist of:
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
(unaudited) | |||||||
Computer software and hardware | $ | | $ | | |||
Furniture and fixtures |
| |
| | |||
Leasehold improvements |
| |
| | |||
Machinery and equipment |
| |
| | |||
Tooling in-process |
| |
| | |||
| |
| | ||||
Accumulated depreciation |
| ( |
| ( | |||
Total | $ | | $ | | |||
Depreciation expense of property and equipment was $
Property and equipment, net, information by geographic region is as follows:
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
(unaudited) | |||||||
United States |
| $ | |
| $ | |
|
International |
| |
| | |||
Total property and equipment, net |
| $ | |
| $ | |
|
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:
June 30, | December 31, | ||||||
| 2022 |
| 2021 | ||||
(unaudited) | |||||||
Patents — in use | $ | | $ | | |||
Patents — in process |
| |
| | |||
Internally developed software — in use |
| |
| | |||
Internally developed software — in process | | | |||||
Trademarks | | | |||||
| |
| | ||||
Accumulated amortization |
| ( |
| ( | |||
Total | $ | | $ | | |||
Amortization expense of intangible assets was $
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):
Six months ending December 31, 2022 |
| $ | |
2023 |
| $ | |
2024 | $ | | |
2025 | $ | | |
2026 | $ | | |
2027 | $ | |
7 — Investments
Our investments consist of bonds that we have classified as available-for-sale and are summarized in the following tables:
June 30, 2022 | ||||||||||||
|
| Gross |
| Gross |
|
| ||||||
Unrealized | Unrealized | Fair | ||||||||||
| Cost |
| Gains |
| Losses |
| Value | |||||
U.S. corporate bonds |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
December 31, 2021 | ||||||||||||
|
| Gross |
| Gross |
| |||||||
Unrealized | Unrealized | Fair | ||||||||||
| Cost |
| Gains |
| Losses |
| Value | |||||
U.S. corporate bonds | $ | |
| $ | |
| $ | — |
| $ | | |
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.
14
The fair value of our assets and liabilities subject to recurring fair value measurements are as follows:
Fair Value at June 30, 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 | $ | — | $ | — | $ | — | $ | — | ||||
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 | $ | | $ | — | $ | | $ | — | ||||
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 June 30, 2022 and 2021 are as follows:
Unrealized (Losses) | |||
Gains on | |||
Available-For-Sale | |||
| Securities | ||
Balance at March 31, 2022 |
| $ | |
Loss on available-for-sale securities, net |
| ( | |
Reclassification realized in net earnings | ( | ||
Balance at June 30, 2022 |
| $ | — |
Balance at March 31, 2021 | $ | | |
Gains on available-for-sale securities, net |
| | |
Reclassification realized in net earnings | ( | ||
Balance at June 30, 2021 | $ | | |
The components of accumulated other comprehensive income, net of tax, for the six months ended June 30, 2022 and 2021 are as follows:
Unrealized (Losses) | |||
Gains on | |||
Available-For-Sale | |||
| Securities | ||
Balance at December 31, 2021 |
| $ | |
Loss on available-for-sale securities, net |
| ( | |
Reclassification realized in net earnings | ( | ||
Balance at June 30, 2022 |
| $ | — |
Balance at December 31, 2020 | $ | | |
Loss on available-for-sale securities, net |
| ( | |
Reclassification realized in net earnings | ( | ||
Balance at June 30, 2021 | $ | | |
15
10 — Stock-Based Compensation
Stock-based compensation was recognized as follows in the Condensed Statements of Operations:
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2022 |
| 2021 |
| 2022 |
| 2021 | |||||||
(unaudited) | (unaudited) | ||||||||||||
Cost of revenue | $ | | $ | | $ | | $ | | |||||
General and administrative |
| |
| |
| |
| | |||||
Sales and marketing |
| |
| |
| |
| | |||||
Research and development |
| |
| |
| |
| | |||||
Total | $ | | $ | | $ | | $ | | |||||
As of June 30, 2022, we had $
On May 26, 2022, the Company announced the appointment of John Glenn as Chief Financial Officer and entered into an employment agreement on May 21, 2022. Pursuant to his employment agreement, Mr. Glenn was awarded a grant of restricted stock units totaling $
The following table presents a summary of our stock-based compensation activity for the six months ended June 30, 2022 (shares):
Performance | ||||||
Based | ||||||
Stock | Restricted | Restricted | ||||
| Options |
| Stock Units |
| Stock Units | |
Outstanding beginning of period | | | | |||
Awards granted | — | | — | |||
Awards exercised/vested | ( | ( | — | |||
Awards canceled/ forfeited | — | ( | ( | |||
Outstanding end of period | | | |
11 — Income Taxes
For the three and six months ended June 30, 2022, we recorded a provision for income tax expense of $
For the three and six months ended June 30, 2021, we recorded a provision for income tax expense of $
As of June 30, 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
16
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
Operating lease cost recognized in the Condensed Statements of Operations is as follows:
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
(unaudited) | (unaudited) | ||||||||||||
Cost of revenue | $ | | $ | | $ | |
| $ | | ||||
General and administrative | |
| | | | ||||||||
Sales and marketing | |
| | | | ||||||||
Research and development | |
| | | | ||||||||
Total | $ | | $ | | $ | | $ | | |||||
Lease costs for short-term leases were immaterial for the three and six months ended June 30, 2022 and 2021.
Maturity of our operating lease liability as of June 30, 2022 is as follows:
Six months ending December 31, 2022 |
| $ | |
2023 |
| | |
2024 |
| | |
2025 |
| | |
2026 |
| | |
Thereafter |
| | |
Total lease payments |
| | |
Imputed interest |
| ( | |
Present value of lease liability | $ | |
13 — Commitments and Contingencies
Purchase commitments. We had various purchase orders for goods or services totaling $
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 June 30, 2022 and December 31, 2021, we accrued approximately $
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 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. As of June 30, 2022 our direct U.S. sales force consisted of 22 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. 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.
Financial Highlights
For the second quarter ended June 30, 2022, our revenue increased $2.9 million, or 29.7 percent, to $12.7 million, compared to $9.8 million for the second quarter last year. Income before the provision for income taxes was $4.2 million for the second quarter
18
2022, compared to $1.9 million for the second quarter last year. Net income was $3.2 million, or $0.26 per diluted share in the second quarter ended June 30, 2022, compared to $1.5 million, or $0.12 per share in the second 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 generally accepted accounting principles (“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 revenue recognition, accounts receivable, allowance for doubtful accounts, inventory valuation, product warranties, stock compensation, and income taxes are critical accounting policies requiring the use of significant estimates, assumptions, and judgments.
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 and six months ended June 30, 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.
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 | Percent of Revenue | |||||||||
| Three Months | Six Months | ||||||||
Ended June 30, | Ended June 30, | |||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||
Revenue |
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
|
Cost of revenue |
| 20.3 |
| 25.3 |
| 22.0 |
| 24.4 |
|
|
Gross profit |
| 79.7 |
| 74.7 |
| 78.0 |
| 75.6 |
|
|
Operating expenses: |
|
|
|
|
|
| ||||
General and administrative |
| 18.9 |
| 26.1 |
| 20.4 |
| 26.2 |
|
|
Sales and marketing |
| 22.9 |
| 25.2 |
| 23.9 |
| 25.5 |
|
|
Research and development |
| 5.2 |
| 4.6 |
| 4.7 |
| 4.9 |
|
|
Total operating expenses |
| 47.0 |
| 55.9 |
| 49.0 |
| 56.6 |
|
|
Income from operations |
| 32.8 |
| 18.8 |
| 28.9 |
| 19.0 |
|
|
Other income, net |
| 0.1 |
| 0.1 |
| 0.0 |
| 0.0 |
|
|
Income before provision for income taxes |
| 32.9 |
| 18.9 |
| 28.9 |
| 19.1 |
|
|
Provision for income tax expense |
| 7.4 |
| 4.0 |
| 6.0 |
| 4.1 |
|
|
Net income |
| 25.5 | % | 15.0 | % | 22.9 | % | 15.0 | % |
|
19
Three and Six Months Ended June 30, 2022 and 2021
Revenue by Geographic Region
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
United States | $ | 10,816,691 | $ | 8,043,156 | $ | 20,796,032 | $ | 15,315,986 | ||||
International |
| 1,904,878 |
| 1,767,267 |
| 4,236,248 |
| 3,718,433 | ||||
Total revenue | $ | 12,721,569 | $ | 9,810,423 | $ | 25,032,279 | $ | 19,034,419 | ||||
Revenue by Type
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | |||||
Devices: | ||||||||||||
MRI Compatible IV Infusion Pump Systems | $ | 3,853,016 | $ | 2,456,767 | $ | 7,134,955 | $ | 5,960,114 | ||||
MRI Compatible Patient Vital Signs Monitoring Systems |
| 4,921,619 |
| 3,377,719 |
| 10,116,370 |
| 5,981,549 | ||||
Total Devices revenue |
| 8,774,635 |
| 5,834,486 |
| 17,251,325 |
| 11,941,663 | ||||
Disposables, services and other |
| 3,430,005 |
| 3,490,969 |
| 6,748,907 |
| 6,126,435 | ||||
Amortization of extended warranty agreements |
| 516,929 |
| 484,968 |
| 1,032,047 |
| 966,321 | ||||
Total revenue | $ | 12,721,569 | $ | 9,810,423 | $ | 25,032,279 | $ | 19,034,419 | ||||
For the three months ended June 30, 2022, revenue increased $2.9 million, or 29.7 percent, to $12.7 million from $9.8 million for the same period in 2021.
Revenue from sales in the U.S. increased $2.8 million, or 34.5 percent, to $10.8 million for the second quarter 2022, from $8.0 million for the second quarter 2021. Revenue from sales internationally increased $0.1 million, or 7.8 percent, to $1.9 million for the second quarter 2022, from $1.8 million for the second quarter 2021. Domestic sales accounted for 85.0 percent of revenue for the second quarter 2022, compared to 82.0 percent for the second quarter 2021.
Revenue from sales of devices increased $3.0 million, or 50.4 percent, to $8.8 million for the three months ended June 30, 2022, from $5.8 million for the same period in 2021.
The average selling price (ASP) of our MRI compatible IV infusion pump system during the three months ended June 30, 2022 was approximately $37,400, compared to approximately $41,600 for the same period in 2021. The decrease in ASP is the result of higher international unit sales and an unfavorable product sales mix when compared to the same period in 2021.
The average selling price of our MRI compatible patient vital signs monitoring system during the three months ended June 30, 2022 was approximately $48,700, compared to approximately $39,700 for the same period in 2021. The increase in ASP relates to higher domestic unit sales when compared to the same period in 2021, and price increases we began implementing during the second half of 2021.
Revenue from sales of our disposables, service and other decreased $(0.1) million, or 1.7 percent, to $3.4 million for the three months ended June 30, 2022, from $3.5 million for the same period in 2021. Revenue from the amortization of extended warranty agreements was consistent at $0.5 million for the three months ended June 30, 2022 and 2021.
For the six months ended June 30, 2022, revenue increased $6.0 million, or 31.5 percent, to $25.0 million from $19.0 million for the same period in 2021.
Revenue from sales in the U.S. increased $6 million, or 35.8 percent, to $21 million for the six months ended June 30, 2022, from $15.0 million for the same period 2021. Revenue from sales internationally increased $0.5 million, or 13.9 percent, to $4.2 million for the second quarter 2022, from $3.7 million for the second quarter 2021. Domestic sales accounted for 83.1 percent of revenue for the second quarter 2022, compared to 80.5 percent for the second quarter 2021.
20
Revenue from sales of devices increased $5.3 million, or 44.5 percent, to $17.2 million for the six months ended June 30, 2022, from $11.9 million for the same period in 2021.
The average selling price of our MRI compatible IV infusion pump system during the six months ended June 30, 2022 was approximately $35,700 compared to approximately $35,900 for the same period in 2021. The decrease in ASP is the result of higher international unit sales, partially offset by a favorable product sales mix when compared to the same period in 2021.
The average selling price of our MRI compatible patient vital signs monitoring system during the six months ended June 30, 2022 was approximately $41,700, compared to approximately $39,100 for the same period in 2021. The increase in ASP relates to higher domestic unit sales when compared to the same period in 2021, and price increases we began implementing during the second half of 2021.
Revenue from sales of our disposables, service and other increased $0.6 million, or 10.2 percent, to $6.7 million for the six months ended June 30, 2022, from $6.1 million for the same period in 2021. Revenue from the amortization of extended warranty agreements remained consistent at $1.0 million for the six months ended June 30, 2022 and 2021.
Cost of Revenue and Gross Profit
Three Months Ended |
| Six Months Ended |
| ||||||||||
June 30, | June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
Revenue | $ | 12,721,569 | $ | 9,810,423 | $ | 25,032,279 | $ | 19,034,419 | |||||
Cost of revenue |
| 2,581,806 |
| 2,478,122 |
| 5,512,992 |
| 4,639,802 | |||||
Gross profit | $ | 10,139,763 | $ | 7,332,301 | $ | 19,519,287 | $ | 14,394,617 | |||||
Gross profit percentage |
| 79.7 | % |
| 74.7 | % |
| 78.0 | % |
| 75.6 | % | |
For the three months ended June 30, 2022 and 2021, cost of revenue increased $0.1 million, or 4.2 percent to $2.6 million from $2.5 million for the same period 2021. Gross profit increased $2.8 million, or 38.3 percent, to $10.1 million for the second quarter 2022 from $7.3 million for the same period in 2021. Gross profit margin was 79.7 percent for second quarter 2022, compared to 74.7 percent for the second quarter 2021. The increase in gross profit margin is primarily due to favorable geographic sales mix, price increases we began implementing during the second half of 2021, and inventory standards cost update offsetting cost of revenue.
For the six months ended June 30, 2022, cost of revenue increased $0.9 million, or 18.8 percent, to $5.5 million from $4.6 million for the same period last year. Gross profit increased $5.1 million, or 35.6 percent, to $19.5 million for the six months ended June 30, 2022 from $14.4 million for the same period in 2021. Gross profit margin was 78.0 percent for six months ended June 30, 2022, compared to 75.6 percent for the same period in 2021. The increase in gross profit and gross profit margin is primarily due to a favorable geographic sales mix, price increases we began implementing during the second half of 2021, inventory standards cost update offsetting cost of revenue, partially offset by unfavorable inventory reserve adjustments and overhead variances.
Operating Expenses
Three Months Ended |
| Six Months Ended |
| ||||||||||
June 30, | June 30, | ||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| |||||
General and administrative | $ | 2,402,795 | $ | 2,564,619 | $ | 5,118,746 | $ | 4,994,988 | |||||
Percentage of revenue |
| 18.9 | % |
| 26.1 | % |
| 20.4 | % |
| 26.2 | % | |
Sales and marketing | $ | 2,907,788 | $ | 2,469,777 | $ | 5,977,344 | $ | 4,848,901 | |||||
Percentage of revenue |
| 22.9 | % |
| 25.2 | % |
| 23.9 | % |
| 25.5 | % | |
Research and development | $ | 662,599 | $ | 453,679 | $ | 1,181,694 | $ | 929,496 | |||||
Percentage of revenue |
| 5.2 | % |
| 4.6 | % |
| 4.7 | % |
| 4.9 | % | |
21
General and Administrative
For the three months ended June 30, 2022, general and administrative expense decreased $(0.2) million, or 6.3 percent, to $2.4 million from $2.6 million for the same period last year. This decrease is primarily due to reduced legal and professional expenses.
For the six months ended June 30, 2022, general and administrative expense increased $0.1 million, or 2.5 percent, to $5.1 million from $5.0 million for the same period last year. This increase is primarily due to higher payroll and benefits expenses offset by reduced legal and professional expenses.
Sales and Marketing
For the three months ended June 30, 2022, sales and marketing expense increased $0.4 million, 17.7 percent, to $2.9 million from $2.5 million for the same period last year. This increase is primarily due to higher sales commissions, sales activities expenses, and payroll and benefits expenses.
For the six months ended June 30, 2022, sales and marketing expense increased $1.1 million, 23.3 percent, to $5.9 million from $4.8 million for the same period last year. This increase is primarily due to higher sales commissions, sales activities expenses, and payroll and benefits expenses.
Research and Development
For the three months ended June 30, 2022, research and development expense increased $0.2 million, 46.1 percent, to $0.7 million from $0.5 million for the same period last year. This is primarily due to higher payroll and benefits expenses as well as prototype and consulting expenses related to next generation pump.
For the six months ended June 30, 2022, research and development expense increased $0.3 million, 27.1 percent, to $1.2 million from $0.9 million for the same period last year. This is primarily due to higher payroll and benefits expenses as well as prototype and consulting expenses related to next generation pump.
Other Income / Expense, Net
Other expense, net consists of interest income, foreign currency gains and losses, and other miscellaneous income. For the three months ended June 30, 2022 and 2021, we reported other expense of approximately $13,000. There were no significant changes in these accounts during the three months ended June 30, 2022, compared to the same quarter last year.
For the six months ended June 30, 2022 and 2021, we reported expense of (1,812) and income of 7,532 respectively. The change is primarily due to interest income received in 2021 related to investments.
Income Taxes
For the three and six months ended June 30, 2022, we recorded a provision for income tax expense of $938,631 and $1,511,926 respectively. Our effective tax rate was 22.5 percent and 20.9 percent respectively and differed from the U.S. Federal statutory rate primarily due to U.S. Federal income tax expense, partially offset by benefits from foreign derived intangible income and research and development tax credits.
For the three and six months ended June 30, 2021, we recorded a provision for income tax expense of $387,727 and $772,221, respectively. Our effective tax rate was 20.9 percent and 21.3 percent respectively, 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 June 30, 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.
22
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.
Liquidity and Capital Resources
Our principal sources of liquidity have historically been our cash and cash equivalents balances, our investments, cash flow from operations and access to the financial markets. Our principal uses of cash are operating expenses, working capital requirements and capital expenditures.
As of June 30, 2022, we had cash and investments of $52.2 million, stockholders’ equity of $65.9 million, and working capital of $62.4 million. During the first six months ended June 30, 2022, we paid a special dividend of $12.6 million to our shareholders. As of December 31, 2021, we had cash and investments of $62.5 million, stockholders’ equity of $72.2 million, and working capital of $69.4 million.
We believe that our current cash, and any cash generated from operations will be sufficient to meet our ongoing operating requirements for at least the next 12 months. We do not anticipate requiring additional capital; however, if required or desirable, we may seek to obtain a credit facility, raise debt or issue additional equity in private or public markets.
| Six Months Ended | |||||
June 30, | ||||||
| 2022 |
| 2021 | |||
Net cash provided by operating activities | $ | 3,065,405 | $ | 4,513,772 | ||
Net cash (used in)/ provided by investing activities | (347,133) | 609,047 | ||||
Net cash used in financing activities | (12,560,284) | (31,886) | ||||
Cash provided by operating activities decreased $(1.4) million, to $3.1 million for the six months ended June 30, 2022, compared to $4.5 million for the same period in 2021. During the six months ended June 30, 2022, cash provided by operations was positively impacted by cash inflows from prepaid income taxes, and negatively impacted by cash outflows from prepaid expenses and inventory purchases.
Cash used in investing activities increased $0.9 million, to $(0.3) million for the six months ended June 30, 2022, compared to $0.6 million for the same period in 2021. During the six months ended June 30, 2022, cash provided by investing activities was positively impacted by cash inflows from maturities of securities, and negatively impacted by capital expenditures and capitalized intangible assets.
Cash used in financing activities was approximately $(12.6) million for the six months ended June 30, 2022, compared to approximately $(32,000) for the same period in 2021. This change is primarily due to a special dividend payment of $12.6 million to our shareholders during the six months ended June 30, 2022.
We market our products to end users in the U.S. and to distributors internationally. Sales to end users in the U.S. are generally made on open credit terms. Management maintains an allowance for potential credit losses.
Our manufacturing and headquarters facility has been leased from Susi, LLC, an entity controlled by our Chairman of the Board and Chief Executive Officer, Roger Susi. Pursuant to the terms of our lease, the monthly base rent is $34,133, adjusted annually for changes in the consumer price index.
Off-Balance Sheet Arrangements
As of June 30, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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Contractual Obligations
There have been no material changes outside the ordinary course of business to our contractual obligations and commercial commitments since December 31, 2021.
Recent Accounting Pronouncements
See Note 1 to the unaudited condensed financial statements contained herein for a full description of recent accounting pronouncements including the respective expected dates of adoption and status of evaluation of expected effects on results of our operations and financial condition.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Exchange Risk
We have foreign currency risks related to our cost of revenue denominated in currencies other than the U.S. Dollar, principally the Japanese yen (“Yen”). The volatility of the Yen depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in our net income as a result of transaction gains and losses related to revaluing Yen denominated accounts payable balances. In the event our Yen denominated accounts payable or expenses increase, our operating results may be affected by fluctuations in the Yen exchange rate. If the U.S. Dollar uniformly increased or decreased in strength by 10 percent relative to the Yen, our net income would have correspondingly increased or decreased by an immaterial amount for the three and six months ended June 30, 2022 and 2021.
Interest Rate Risk
When able, we invest excess cash in bank money-market funds, corporate debt securities or discrete short-term investments. The fair value of our cash equivalents and short-term investments is sensitive to changes in the general level of interest rates in the U.S., and the fair value of these investments will decline if market interest rates increase. As of June 30, 2022, we had no investments as the last of our corporate bonds matured on April 18, 2022. Our excess cash is held in interest bearing accounts.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are designed to ensure that: (1) information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (2) such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of June 30, 2022 were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may from time to time become party to various legal proceedings or claims that arise in the ordinary course of business. Our management reviews these matters if and when they arise, and believes that the resolution of any such matters currently known will not have a material effect on our results of operations or financial position.
Item 1A. Risk Factors
We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The occurrence of any of these risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. In evaluating the Company and its business, you should carefully consider the information included in this Quarterly Report on Form 10-Q and the factors discussed under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as well as in other documents we file with the SEC. Except as described below, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
None.
Item 3. Default Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit |
| Description of Document |
31.1 |
| |
31.2 |
| |
32.1* |
| |
101.INS** |
| XBRL Instance Document |
101.SCH** |
| XBRL Taxonomy Extension Schema Document |
101.CAL** |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF** |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB** |
| XBRL Taxonomy Extension Label Linkbase Document |
101.PRE** |
| XBRL Taxonomy Extension Presentation Linkbase Document |
104** | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included as part of this Exhibit 101 inline XBRL Document set |
* | This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. |
** | In accordance with Rule 402 of Regulation S-T, this interactive data file is deemed not filed or part of this Quarterly Report on Form 10-Q for purposes of Sections 11 or 12 of the Securities Act or Section 18 of the Exchange Act and otherwise is not subject to liability under these sections. |
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IRADIMED CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| IRADIMED CORPORATION | |
|
|
|
Dated: August 5, 2022 | /s/ Roger Susi | |
| By: | Roger Susi |
| Its: | Chief Executive Officer and President |
|
| (Principal Executive Officer and Authorized Officer) |
| /s/ John Glenn | |
| By: | John Glenn |
| Its: | Chief Financial Officer |
(Principal Financial and Accounting Officer) | ||
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