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 September 30, 2020

◻

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 12,269,524 shares of common stock, par value $0.0001 per share, outstanding as of November 1, 2020.

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IRADIMED CORPORATION

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			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 September 30, 2020 (Unaudited) and December 31, 2019	5

		(b) Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	6

		(c) Condensed Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	7

		(d) Condensed Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	8

		(e) Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)	10

		(f) Notes to Unaudited Condensed Financial Statements	11

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	27

	Item 4	Controls and Procedures	27

Part II	Other Information		28

	Item 1	Legal Proceedings	28

	Item 1A	Risk Factors	28

	Item 2	Unregistered Sale of Equity Securities and Use of Proceeds	29

	Item 3	Default Upon Senior Securities	29

	Item 4	Mine Safety Disclosures	29

	Item 5	Other Information	29

	Item 6	Exhibits	30

Signatures			31

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled “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 respond and adapt to unexpected hospital, legal and regulatory changes resulting from the ongoing COVID-19 pandemic, such as changes in hospital treatment and financial practices, shelter-in-place orders, travel, social distancing and quarantine policies, curtailment of trade, and other business restrictions affecting our ability to assemble and sell our products;

●

our ability to receive 510(k) clearance for our products and product candidates, complete inspections conducted by the FDA or other regulatory bodies resulting in favorable outcomes, additional actions by or requests from the U.S. Food & Drug Administration (“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;

●

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, 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;

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●

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;

●

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. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (“SEC”). In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. You should read this Quarterly Report on Form 10-Q and the documents we file with the SEC with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

IRADIMED CORPORATION

CONDENSED BALANCE SHEETS


	September 30,		December 31,
	2020		2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	47,549,619	$	43,481,781
Accounts receivable, net of allowance for doubtful accounts of $43,286 as of September 30, 2020 and $69,093 as of December 31, 2019		4,252,329		7,293,303
Investments		2,320,407		2,768,287
Inventory, net		4,589,741		3,641,561
Prepaid expenses and other current assets		475,039		407,802
Prepaid income taxes		3,716,442		1,370,947
Total current assets		62,903,577		58,963,681
Property and equipment, net		2,164,391		2,053,806
Intangible assets, net		975,879		860,087
Operating lease right-of-use asset		2,776,599		2,955,873
Deferred income taxes, net		1,346,214		1,663,415
Other assets		258,457		232,002
Total assets	$	70,425,117	$	66,728,864
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	580,309	$	993,742
Accrued payroll and benefits		1,642,772		2,166,209
Other accrued taxes		123,196		596,576
Warranty reserve		87,059		81,761
Deferred revenue		1,956,180		1,671,420
Current portion of operating lease liability		251,901		240,843
Other current liability		108,421		108,421
Accrued income taxes		10,390		—
Total current liabilities		4,760,228		5,858,972
Deferred revenue		2,423,733		2,630,467
Operating lease liability, less current portion		2,524,698		2,715,030
Total liabilities		9,708,659		11,204,469
Stockholders’ equity:
Common stock; $0.0001 par value; 31,500,000 shares authorized; 12,269,123 shares issued and outstanding as of September 30, 2020 and 11,765,875 shares issued and outstanding as of December 31, 2019		1,227		1,177
Additional paid-in capital		23,636,433		19,192,394
Retained earnings		37,032,037		36,300,450
Accumulated other comprehensive income		46,761		30,374
Total stockholders’ equity		60,716,458		55,524,395
Total liabilities and stockholders’ equity	$	70,425,117	$	66,728,864

See accompanying notes to unaudited condensed financial statements.

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IRADIMED CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue	$	7,699,096	$	9,963,299	$	23,171,329	$	27,626,488
Cost of revenue		1,958,036		2,168,208		6,036,353		6,074,323
Gross profit		5,741,060		7,795,091		17,134,976		21,552,165
Operating expenses:
General and administrative		2,196,935		2,609,722		10,062,089		7,482,790
Sales and marketing		2,282,491		2,297,002		7,090,192		6,607,477
Research and development		476,876		369,526		1,389,812		1,053,409
Total operating expenses		4,956,302		5,276,250		18,542,093		15,143,676
Income (loss) from operations		784,758		2,518,841		(1,407,117)		6,408,489
Other income, net		9,352		110,064		125,706		280,663
Income (loss) before provision for income taxes		794,110		2,628,905		(1,281,411)		6,689,152
Provision for income tax (benefit) expense		(280,536)		174,035		(2,012,998)		299,876
Net income	$	1,074,646	$	2,454,870	$	731,587	$	6,389,276
Net income per share:
Basic	$	0.09	$	0.22	$	0.06	$	0.57
Diluted	$	0.09	$	0.20	$	0.06	$	0.52
Weighted average shares outstanding:
Basic		12,243,362		11,369,404		12,071,027		11,188,761
Diluted		12,493,309		12,309,948		12,414,932		12,248,102

See accompanying notes to unaudited condensed financial statements.

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IRADIMED CORPORATION

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income	$	1,074,646	$	2,454,870	$	731,587	$	6,389,276
Other comprehensive (loss) income:
Change in fair value of available-for-sale securities, net of tax (benefit) expense of $(1,402) and $4,429 for the three months ended September 30, 2020 and 2019, respectively, and $9,071 and $24,756 for the nine months ended September 30, 2020 and 2019, respectively		(7,181)		11,615		23,049		74,233
Realized gain on available-for-sale securities reclassified to net income, net of tax expense of $0 and $1,895 for the three months ended September 30, 2020 and 2019, respectively, and $2,199 and $958 for the nine months ended September 30, 2020 and 2019, respectively		—		(5,742)		(6,662)		(2,901)
Other comprehensive (loss) income		(7,181)		5,873		16,387		71,332
Comprehensive income	$	1,067,465	$	2,460,743	$	747,974	$	6,460,608

See accompanying notes to unaudited condensed financial statements.

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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, 2019	11,765,875	$	1,177	$	19,192,394	$	36,300,450	$	30,374	$	55,524,395
Net income	—		—		—		1,769,211		—		1,769,211
Other comprehensive income	—		—		—		—		10,433		10,433
Stock-based compensation expense	—		—		568,958		—		—		568,958
Net share settlement of restricted stock units	14,521		1		(133,873)		—		—		(133,872)
Exercise of stock options	190,541		19		322,160		—		—		322,179
Balances, March 31, 2020	11,970,937	$	1,197	$	19,949,639	$	38,069,661	$	40,807	$	58,061,304
Net loss	—		—		—		(2,112,270)		—		(2,112,270)
Other comprehensive income	—		—		—		—		13,135		13,135
Stock-based compensation expense	—		—		2,658,632		—		—		2,658,632
Net share settlement of restricted stock units	76,381		8		(725,393)		—		—		(725,385)
Exercise of stock options	150,519		15		468,795		—		—		468,810
Balances, June 30, 2020	12,197,837	$	1,220	$	22,351,673	$	35,957,391	$	53,942	$	58,364,226
Net income	—		—		—		1,074,646		—		1,074,646
Other comprehensive income	—		—		—		—		(7,181)		(7,181)
Stock-based compensation expense	—		—		416,525		—		—		416,525
Net share settlement of restricted stock units	8,245		1		(63,491)		—		—		(63,490)
Exercise of stock options	63,041		6		931,726		—		—		931,732
Balances, September 30, 2020	12,269,123	$	1,227	$	23,636,433	$	37,032,037	$	46,761	$	60,716,458

See accompanying notes to unaudited condensed financial statements.

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IRADIMED CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(Unaudited)


								Accumulated
				Additional				Other
	Common Stock			Paid-in		Retained		Comprehensive		Stockholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balances, December 31, 2018	10,989,111	$	1,099	$	15,317,335	$	26,669,491	$	(42,192)	$	41,945,733
Net income	—		—		—		1,845,565		—		1,845,565
Other comprehensive income	—		—		—		—		38,194		38,194
Stock-based compensation expense	—		—		382,353		—		—		382,353
Net share settlement of restricted stock units	4,322		—		(22,507)		—		—		(22,507)
Exercise of stock options	150,763		15		456,724		—		—		456,739
Balances, March 31, 2019	11,144,196	$	1,114	$	16,133,905	$	28,515,056	$	(3,998)	$	44,646,077
Net income	—		—		—		2,088,841		—		2,088,841
Other comprehensive income	—		—		—		—		27,265		27,265
Stock-based compensation expense	—		—		468,436		—		—		468,436
Net share settlement of restricted stock units	23,331		3		(125,708)		—		—		(125,705)
Exercise of stock options	28,875		3		43,505		—		—		43,508
Balances, June 30, 2019	11,196,402	$	1,120	$	16,520,138	$	30,603,897	$	23,267	$	47,148,422
Net income	—		—		—		2,454,870		—		2,454,870
Other comprehensive income	—		—		—		—		5,873		5,873
Stock-based compensation expense	—		—		455,641		—		—		455,641
Net share settlement of restricted stock units	121		—		(1,186)		—		—		(1,186)
Exercise of stock options	234,944		23		1,709,255		—		—		1,709,278
Balances, September 30, 2019	11,431,467	$	1,143	$	18,683,848	$	33,058,767	$	29,140	$	51,772,898

See accompanying notes to unaudited condensed financial statements.

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IRADIMED CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended
	September 30,
	2020		2019
Operating activities:
Net income	$	731,587	$	6,389,276
Adjustments to reconcile net income to net cash provided by operating activities:
Change in allowance for doubtful accounts		41,786		27,532
Change in provision for excess and obsolete inventory		29,209		104,407
Depreciation and amortization		999,812		961,597
Stock-based compensation		3,644,115		1,306,430
Deferred income taxes, net		310,329		26,071
Gain on maturities of investments		(8,861)		(3,859)
Changes in operating assets and liabilities:
Accounts receivable		2,999,188		(2,742,517)
Inventory		(1,062,455)		(570,242)
Prepaid expenses and other current assets		(642,982)		(547,694)
Other assets		(40,899)		(150,386)
Accounts payable		(468,615)		293,810
Accrued payroll and benefits		(523,437)		434,328
Other accrued taxes		(473,380)		(48,216)
Warranty reserve		5,298		2,973
Deferred revenue		119,658		537,700
(Prepaid) accrued income taxes		(2,335,105)		261,805
Other		(3,820)		859
Net cash provided by operating activities		3,321,428		6,283,874
Investing activities:
Proceeds from maturity of investments		480,000		2,522,000
Purchases of property and equipment		(349,283)		(196,369)
Capitalized intangible assets		(184,281)		(59,912)
Net cash (used in) provided by investing activities		(53,564)		2,265,719
Financing activities:
Proceeds from exercises of stock options		1,722,721		2,209,525
Taxes paid related to the net share settlement of equity awards		(922,747)		(149,398)
Net cash provided by financing activities		799,974		2,060,127
Net increase in cash and cash equivalents		4,067,838		10,609,720
Cash and cash equivalents, beginning of period		43,481,781		28,027,688
Cash and cash equivalents, end of period	$	47,549,619	$	38,637,408
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—	$	12,000
Right-of-use asset recognized in exchange for new lease obligation	$	—	$	3,182,724
Operating and short-term lease payments recorded within cash flow from operating activities	$	321,856	$	320,907

See accompanying notes to unaudited condensed financial statements.

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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 and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

These 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, 2019. 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 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.

COVID-19 Considerations

We are subject to risks and uncertainties as a result of the spread of COVID-19. We have experienced a decline in operating results, which has limited our generation of capital resources. The extent of the impact of COVID-19 on our business is highly uncertain and difficult to predict. Our future results of operations and liquidity could be adversely impacted by, among other things, delays in payments from customers, supply chain disruptions, and uncertain demand. As of the date of the issuance of these financial statements, the extent to which COVID-19 may materially impact our financial condition, liquidity, or results of operations in future periods is uncertain.

Recent Accounting Pronouncements

Recently Issued Accounting Pronouncements to be Implemented

In December 2019, the FASB issued 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 do not expect ASU 2019-12 to have a material impact on financial condition, results of operations or cash flows.

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.

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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				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(unaudited)				(unaudited)
United States	$	6,465,184	$	8,281,854	$	17,430,206	$	22,916,642
International		1,233,912		1,681,445		5,741,123		4,709,846
Total revenue	$	7,699,096	$	9,963,299	$	23,171,329	$	27,626,488

Revenue information by type is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019

	(unaudited)				(unaudited)
Devices:
MRI Compatible IV Infusion Pump Systems	$	2,153,699	$	4,769,252	$	6,693,692	$	13,512,548
MRI Compatible Patient Vital Signs Monitoring Systems		2,282,943		2,557,889		6,829,932		6,215,528
Total Devices revenue		4,436,642		7,327,141		13,523,624		19,728,076
Disposables, service and other		2,802,039		2,162,602		8,269,487		6,513,030
Amortization of extended warranty agreements		460,415		473,556		1,378,218		1,385,382
Total revenue	$	7,699,096	$	9,963,299	$	23,171,329	$	27,626,488

Contract Liabilities

Our contract liabilities consist of:


	September 30,		December 31,
	2020		2019
	(unaudited)
Advance payments from customers	$	103,669	$	12,765
Shipments in-transit		41,632		4,250
Extended warranty agreements		4,234,612		4,284,872
Total	$	4,379,913	$	4,301,887

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


	Deferred
	Revenue
Contract liabilities, December 31, 2019	$	4,301,887
Increases due to cash received from customers		1,655,021
Decreases due to recognition of revenue		(1,576,995)
Contract liabilities, September 30, 2020	$	4,379,913

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	Deferred
	Revenue
Contract liabilities, December 31, 2018	$	3,605,789
Increases due to cash received from customers		2,530,978
Decreases due to recognition of revenue		(2,033,473)
Contract liabilities, September 30, 2019	$	4,103,294

Capitalized Contract Costs

Our capitalized contract costs consist of:

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 and 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 September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(unaudited)				(unaudited)
Net income	$	1,074,646	$	2,454,870	$	731,587	$	6,389,276
Weighted-average shares outstanding — Basic		12,243,362		11,369,404		12,071,027		11,188,761
Effect of dilutive securities:
Underwriters’ warrants		—		41,124		—		69,183
Stock Options		204,108		822,128		294,202		899,311
Restricted Stock Units		45,839		77,292		49,703		90,847
Weighted-average shares outstanding — Diluted		12,493,309		12,309,948		12,414,932		12,248,102
Basic net income per share	$	0.09	$	0.22	$	0.06	$	0.57
Diluted net income per share	$	0.09	$	0.20	$	0.06	$	0.52

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		Nine Months Ended
	September 30,		September 30,
	2020	2019	2020	2019

	(unaudited)		(unaudited)
Anti-dilutive stock options and restricted stock units	10,024	117,584	48,706	14,991

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4 — Inventory

Inventory consists of:


	September 30,		December 31,
	2020		2019
	(unaudited)
Raw materials	$	3,734,471	$	2,939,451
Work in process		246,227		229,479
Finished goods		778,085		697,483
Inventory before allowance for excess and obsolete		4,758,783		3,866,413
Allowance for excess and obsolete		(169,042)		(224,852)
Total	$	4,589,741	$	3,641,561

5 — Property and Equipment

Property and equipment consist of:


	September 30,		December 31,
	2020		2019
	(unaudited)
Computer software and hardware	$	673,576	$	627,624
Furniture and fixtures		1,246,566		1,112,550
Leasehold improvements		225,841		225,841
Machinery and equipment		1,818,023		1,778,524
Tooling in-process		433,168		163,105
		4,397,174		3,907,644
Accumulated depreciation		(2,232,783)		(1,853,838)
Total	$	2,164,391	$	2,053,806

Depreciation expense of property and equipment was $128,513 and $122,834 for the three months ended September 30, 2020 and 2019, respectively, and $382,766 and $373,828 for the nine months ended September 30, 2020 and 2019, respectively.

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

September 30,

December 31,

(unaudited)

Capitalized contract costs