UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2025

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

For the transition period from ________________________ to ______________________

Commission file number 000-51372

Omega Flex, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania

23-1948942

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

451 Creamery Way, Exton, PA		19341
(Address of principal executive offices)		(Zip Code)

(610) 524-7272

Registrant’s telephone number, including area code

Not Applicable

(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(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		OFLX		NASDAQ Global 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 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). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” 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 ☐

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

The number of shares of the registrant’s common stock outstanding as of November 1, 2025 was 10,094,322.

OMEGA FLEX, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025

INDEX

	Page No.
PART I - FINANCIAL INFORMATION

Item 1 – Financial Statements	4

Condensed Consolidated Balance Sheets at September 30, 2025 (unaudited) and December 31, 2024	4

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2025 and 2024 (unaudited)	5

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2025 and 2024 (unaudited)	6

Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2025 and 2024 (unaudited)	7

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 (unaudited)	9

Notes to the Condensed Consolidated Financial Statements (unaudited)	10

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	34

Item 4 – Controls and Procedures	34

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings	35

Item 1A – Risk Factors	35

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3 – Defaults Upon Senior Securities	35

Item 4 – Mine Safety Disclosures	35

Item 5 – Other Information	35

Item 6 - Exhibits	35

SIGNATURES	36

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) of Omega Flex, Inc. that are not historical facts — but rather reflect our current expectations concerning future results and events — constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believes,” “expects,” “intends,” “plans,” “anticipates,” “intent,” “estimates,” “potential,” “continues,” “hopes,” “likely,” “will,” and similar expressions, or the negative of these terms, identify such forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Important factors that could cause the actual results, performance or achievements of Omega Flex, Inc., or industry results, to differ materially from future results, performance or achievements expressed or implied by such forward-looking statements are set forth in Part I, Item 1A. Risk Factors, and other parts of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s view only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions, or circumstances, except as required by law. In addition, certain sections of this Form 10-Q contain information obtained from independent industry sources and other sources that we have not independently verified.

Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to the terms “Omega Flex,” the “Company,” “us,” “we”, and “our” refer to Omega Flex, Inc. and its subsidiaries.

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PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

OMEGA FLEX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in Thousands, except Common Stock par value)

	September 30, 2025			December 31, 2024
	(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	49,368		$	51,699
Accounts Receivable - less allowances of $800 and $866, respectively		14,417			14,381
Inventories - Net		14,310			14,559
Other Current Assets		3,526			2,983
Total Current Assets		81,621			83,622

Right-Of-Use Assets - Operating		4,613			4,944
Property and Equipment - Net		10,316			9,700
Goodwill - Net		3,526			3,526
Deferred Taxes		391			365
Other Long Term Assets		3,379			3,734
Total Assets	$	103,846		$	105,891

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	2,078		$	2,661
Accrued Compensation		1,259			1,989
Accrued Commissions and Sales Incentives		3,372			3,873
Dividends Payable		3,433			3,432
Taxes Payable		-			710
Lease Liability - Operating		763			712
Other Liabilities		3,654			4,061
Total Current Liabilities		14,559			17,438

Lease Liability - Operating, net of current portion		4,175			4,566
Deferred Taxes		471			181
Other Long Term Liabilities		535			525
Total Liabilities		19,740			22,710

Commitments and Contingencies (Note 6)		-			-

Shareholders’ Equity:
Omega Flex, Inc. Shareholders’ Equity:
Common Stock – par value $0.01 share: authorized 20,000,000 shares: 10,153,633 shares issued and 10,094,322 shares outstanding as of September 30, 2025 and December 31, 2024		102			102
Treasury Stock		(1	)		(1	)
Paid-in Capital		11,035			11,025
Retained Earnings		73,995			72,880
Accumulated Other Comprehensive Loss		(931	)		(892	)
Total Omega Flex, Inc. Shareholders’ Equity		84,200			83,114
Noncontrolling Interest		(94	)		67
Total Shareholders’ Equity		84,106			83,181
Total Liabilities and Shareholders’ Equity	$	103,846		$	105,891

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in Thousands, except per Common Share data)

	2025			2024		2025		2024
	For the three months ended					For the nine months ended
	September 30,					September 30,
	2025			2024		2025		2024
	(unaudited)

Net Sales	$	24,234		$	24,880	$	73,089	$	74,716

Cost of Goods Sold		9,653			9,530		29,014		29,045

Gross Profit		14,581			15,350		44,075		45,671

Selling Expense		4,993			4,976		15,211		15,202
General and Administrative Expense		4,082			3,848		12,106		11,687
Engineering Expense		1,321			1,058		3,801		2,973

Operating Profit		4,185			5,468		12,957		15,809

Interest Income		509			586		1,513		1,741
Other (Expense) Income		(1	)		21		311		(39	)

Income Before Income Taxes		4,693			6,075		14,781		17,511

Income Tax Expense		1,062			1,479		3,527		4,241

Net Income		3,631			4,596		11,254		13,270
Net Loss - Noncontrolling Interest		57			21		158		62

Net Income attributable to Omega Flex, Inc.	$	3,688		$	4,617	$	11,412	$	13,332

Basic and Diluted Earnings per Common Share	$	0.37		$	0.46	$	1.13	$	1.32

Cash Dividends Declared per Common Share	$	0.34		$	0.34	$	1.02	$	1.01

Basic and Diluted Weighted Average Shares Outstanding		10,094			10,094		10,094		10,094

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in Thousands)

	2025			2024		2025			2024
	For the three months ended					For the nine months ended
	September 30,					September 30,
	2025			2024		2025			2024
	(unaudited)

Net Income	$	3,631		$	4,596	$	11,254		$	13,270

Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment		(59	)		158		(42	)		158
Other Comprehensive Income (Loss)		(59	)		158		(42	)		158

Comprehensive Income		3,572			4,754		11,212			13,428

Comprehensive Loss Attributable to the Noncontrolling Interest		60			13		161			54

Comprehensive Income Attributable to Omega Flex, Inc.	$	3,632		$	4,767	$	11,373		$	13,482

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in Thousands, Except Share Amounts)

(unaudited)

For the three months ended September 30, 2025

	Common Stock Outstanding		Common Stock		Treasury Stock			Paid In Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Noncontrolling Interest			Shareholders’ Equity
	(unaudited)
July 1, 2025		10,094,322	$	102	$	(1	)	$	11,032	$	73,740		$	(875	)	$	(34	)	$	83,964

Net Income											3,688						(57	)		3,631
Cumulative Translation Adjustment		-		-		-								(56	)		(3	)		(59	)
Equity Based Compensation									3											3
Dividends Declared											(3,433	)								(3,433	)

September 30, 2025		10,094,322	$	102	$	(1	)	$	11,035	$	73,995		$	(931	)	$	(94	)	$	84,106

For the three months ended September 30, 2024

	Common Stock Outstanding		Common Stock		Treasury Stock			Paid In Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Noncontrolling Interest			Shareholders’ Equity
	(unaudited)
July 1, 2024		10,094,322	$	102	$	(1	)	$	11,025	$	70,445		$	(930	)	$	122		$	80,763

Net Income											4,617						(21	)		4,596
Cumulative Translation Adjustment		-		-		-			-					150			8			158
Dividends Declared											(3,432	)								(3,432	)

September 30, 2024		10,094,322	$	102	$	(1	)	$	11,025	$	71,630		$	(780	)	$	109		$	82,085

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in Thousands, Except Share Amounts)

(unaudited)

For the nine months ended September 30, 2025

	Common Stock Outstanding		Common Stock		Treasury Stock			Paid In Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Noncontrolling Interest			Shareholders’ Equity
	(unaudited)
January 1, 2025		10,094,322	$	102	$	(1	)	$	11,025	$	72,880		$	(892	)	$	67		$	83,181

Net Income											11,412						(158	)		11,254
Cumulative Translation Adjustment		-		-		-								(39	)		(3	)		(42	)
Equity Based Compensation									10											10
Dividends Declared											(10,297	)								(10,297	)

September 30, 2025		10,094,322	$	102	$	(1	)	$	11,035	$	73,995		$	(931	)	$	(94	)	$	84,106

For the nine months ended September 30, 2024

	Common Stock Outstanding		Common Stock		Treasury Stock			Paid In Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)			Noncontrolling Interest			Shareholders’ Equity
	(unaudited)
January 1, 2024		10,094,322	$	102	$	(1	)	$	11,025	$	68,493		$	(930	)	$	163		$	78,852
Balance		10,094,322	$	102	$	(1	)	$	11,025	$	68,493		$	(930	)	$	163		$	78,852

Net Income											13,332						(62	)		13,270
Cumulative Translation Adjustment		-		-		-			-					150			8			158
Dividends Declared											(10,195	)								(10,195	)

September 30, 2024		10,094,322	$	102	$	(1	)	$	11,025	$	71,630		$	(780	)	$	109		$	82,085
Balance		10,094,322	$	102	$	(1	)	$	11,025	$	71,630		$	(780	)	$	109		$	82,085

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

	2025			2024
	For the nine months ended
	September 30,
	2025			2024
	(unaudited)
Cash Flows from Operating Activities:
Net Income	$	11,254		$	13,270
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Non-Cash Compensation		122			60
Non-Cash Lease Expense		476			565
Depreciation and Amortization		1,001			886
Provision for Losses on Accounts Receivable, net of write-offs and recoveries		(67	)		(331	)
Deferred Taxes		264			525
Provision for Inventory Reserves		(271	)		20
Changes in Assets and Liabilities:
Accounts Receivable		71			1,584
Inventories		664			(347	)
Other Assets		(182	)		(1,130	)
Accounts Payable		(596	)		490
Accrued Compensation		(732	)		(1,723	)
Accrued Commissions and Sales Incentives		(508	)		(1,126	)
Lease Liability - Operating		(484	)		(235	)
Other Liabilities		(1,344	)		(1,411	)
Net Cash Provided by Operating Activities		9,668			11,097

Cash Flows from Investing Activities:
Capital Expenditures		(1,613	)		(1,443	)
Net Cash Used in Investing Activities		(1,613	)		(1,443	)

Cash Flows from Financing Activities:
Dividends Paid		(10,296	)		(10,095	)
Net Cash Used in Financing Activities		(10,296	)		(10,095	)

Net Decrease in Cash and Cash Equivalents		(2,241	)		(441	)
Translation effect on cash		(90	)		(42	)
Cash and Cash Equivalents – Beginning of Period		51,699			46,356
Cash and Cash Equivalents – End of Period	$	49,368		$	45,873

Supplemental Disclosure of Cash Flow Information:
Cash paid for Income Taxes	$	4,965		$	4,562
Declared Dividends	$	10,297		$	10,195
Additions to Right-Of-Use Assets obtained from new operating Lease Liabilities	$	31		$	2,813

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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OMEGA FLEX, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Omega Flex, Inc., and its subsidiaries (collectively the “Company”). The Company’s Condensed Consolidated Financial Statements for the quarter ended September 30, 2025 have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and with the instructions of Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (“Form 10-K”). All material intercompany accounts and transactions have been eliminated in consolidation. It is management’s opinion that all adjustments necessary for a fair statement of the results for the interim periods have been made, and that all adjustments are of a normal recurring nature, or a description is provided for any adjustments that are not of a normal recurring nature.

Description of Business

The Company is a leading manufacturer of flexible metal hose, which is used in a variety of applications to carry gases and liquids within their particular applications. The Company’s business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose and accessories. These applications include carrying fuel gases within residential and commercial buildings; gasoline and diesel gasoline products (both above and below the ground) in a double containment piping to contain any possible leaks, which is used in automotive and marina refueling, and fueling for back-up generation; and medical gases in health care facilities. The Company’s flexible metal piping is also used to carry other types of gases and fluids in a number of industrial applications where the customer requires the piping to have both a degree of flexibility and/or an ability to carry corrosive compounds or mixtures, or to carry at both very high and very low (cryogenic) temperatures.

The Company manufactures flexible metal hose at its facilities in Exton, Pennsylvania and Houston, Texas, in the United States (U.S.), and in Banbury, Oxfordshire in the United Kingdom (U.K.), and sells its products through distributors, wholesalers and to original equipment manufacturers (OEMs) throughout North America, and in certain European markets.

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2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual amounts could differ significantly from these estimates.

Revenue Recognition

The Company applies the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). The standard requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services.

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

	●	Identification of the contract, or contracts, with a customer — a contract with a customer exists when the Company enters into an enforceable contract with a customer, typically a purchase order initiated by the customer, that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods.

	●	Identification of the performance obligations in the contract — performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are distinct, whereby the customer can benefit from the goods on their own or together with other resources that are readily available from third parties or from us. Persuasive evidence of an arrangement for the sale of product must exist. The Company ships products in accordance with the purchase order and standard terms as reflected within the Company’s order acknowledgments and sales invoices.

	●	Determination of the transaction price —the transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods to the customer. This would be the agreed upon quantity and price per product type in accordance with the customer purchase order, which is aligned with the Company’s internally approved pricing guidelines.

	●	Allocation of the transaction price to the performance obligations in the contract — if the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. This applies to the Company as there is only one performance obligation to ship the goods.

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●

Recognition of revenue when, or as, the Company satisfies a performance obligation — the Company satisfies performance obligations at a point in time when control of the goods transfers to the customer. Determining the point in time when control transfers requires judgment. Indicators considered in determining whether the customer has obtained control of a good include:

	■	The Company has a present right to payment
	■	The customer has legal title to the goods
	■	The Company has transferred physical possession of the goods
	■	The customer has the significant risks and rewards of ownership of the goods
	■	The customer has accepted the goods

It is important to note that the indicators are not a set of conditions that must be met before the Company can conclude that control of the goods has transferred to the customer. The indicators are a list of factors that are often present if a customer has control of the goods.

The Company has typical, unmodified FOB shipping point terms. As the seller, the Company can determine that the shipped goods meet the agreed-upon specifications in the contract or customer purchase order (e.g., items, quantities, and prices) with the buyer, so customer acceptance would be deemed a formality, as noted in ASC 606-10-55-86. As a result, the Company has a legal right to payment upon shipment of the goods.

Based upon the above, the Company has concluded that control substantively transfers to the customer upon shipment.

Other considerations of Topic 606 include the following:

	●	Contract Costs - costs to obtain a contract (e.g. customer purchase order) include sales commissions. Under Topic 606, these costs may be expensed as incurred for contracts with a duration of one year or less. The majority of the Company’s customer purchase orders are fulfilled (e.g. goods are shipped) within two days of receipt.

	●	Warranties - the Company does not offer a warranty as a separate component for customers to purchase. A warranty is generally included with each purchase, providing assurance that the goods comply with agreed-upon specifications, and the cost is therefore accrued accordingly, but contracts do not include any requirement for additional distinct services. Therefore, there is not a separate performance obligation, and there is no impact of warranties under Topic 606 upon the financial reporting of the Company.

	●	Returned Goods - from time to time, the Company provides authorization to customers to return goods. If deemed to be material, the Company would record a “right of return” asset for the cost of the returned goods which would reduce cost of sales.

	●	Volume Rebates (Promotional Incentives) - volume rebates are variable (dependent upon the volume of goods purchased by our eligible customers) and, under Topic 606, must be estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g. upon shipment of goods). Also under Topic 606, to ensure that the related revenue recognized would not be probable of a significant reversal, the four following factors are considered:

■

The amount of consideration is highly susceptible to factors outside the Company’s influence.

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	■	The uncertainty about the amount of consideration is not expected to be resolved for a long period of time.
	■	The Company’s experience with similar types of contracts is limited.
	■	The contract has a large number and broad range of possible consideration amounts.

If it was concluded that the above factors were in place for the Company, it would support the probability of a significant reversal of revenue. However, as none of the four factors apply to the Company, promotional incentives are recorded as a reduction of revenue based upon estimates of the eligible products expected to be sold.

Accounts receivable, net of allowances, was $15,361,000 as of January 1, 2024.

Regarding disaggregated revenue disclosures, as previously noted, the Company’s business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose. Most of the Company’s transactions are very similar in nature, contract, terms, timing, and transfer of control of goods. As indicated in this Note 2, Significant Accounting Policies, under the caption “Significant Concentrations”, the majority of the Company’s sales were geographically contained within North America, with the remainder scattered internationally. All performance assessments and resource allocations are generally based upon the review of the results of the Company as a whole.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes, and bonds, and/or repurchase agreements, backed by such obligations, and in U.S. Treasury bills and certificates of deposit. Carrying value approximates fair value except for U.S. Treasury bills and certificates of deposit where amortized cost approximates fair value. Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits. The Company monitors the viability of the banking institutions carrying their assets on a regular basis and has the ability to transfer cash to various institutions during times of risk. The Company has not experienced any losses related to these cash balances and believes its credit risk to be minimal.

Accounts Receivable and Provision for Credit Losses

All accounts receivable is stated at amortized cost, net of allowances for credit losses, and adjusted for any write-offs. The Company maintains allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its receivable portfolio. For accounts receivable, the Company uses historical loss experience rates and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, operating profit. The allowances consider numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics.

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The reserve for credit losses, which include future credits, discounts, and doubtful accounts, was $800,000 and $866,000 as of September 30, 2025 and December 31, 2024, respectively.

Inventories

Inventories are valued at the lower of cost or net realizable value. The cost of inventories is determined by the first-in, first-out (FIFO) method. The Company generally considers inventory quantities beyond two years of usage, measured on a historical usage basis, to be excess inventory and reduces the carrying value of inventory accordingly.

Property and Equipment

Property and equipment are initially recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, the life of the lease, if shorter. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in other income or expense for the period. The cost of maintenance and repairs is expensed as incurred; significant improvements are capitalized.

Goodwill

In accordance with FASB ASC Topic 350, Intangibles – Goodwill and Other, using the simplified method as adopted, the Company performed an annual impairment test as of December 31, 2024. This analysis did not indicate any impairment of goodwill.

Stock Based Compensation Plans

Phantom Stock Plan

In 2006, the Company adopted a Phantom Stock Plan (the “Phantom Plan”), which allows the Company to grant phantom stock units (“Units”) to certain key employees, officers, or directors. The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company’s common stock and are accordingly recorded as liabilities. The Units follow a vesting schedule over three years from the grant date and are then paid upon maturity. In accordance with FASB ASC Topic 718, Compensation - Stock Compensation, the Company uses the Black-Scholes option pricing model as its method for determining the fair value of the Units. The liabilities for the Units are adjusted to market value over time from the grant dates to the related maturity dates. The Company recognizes the reversal of any previously recognized compensation expense on forfeited nonvested Units in the period the Units are forfeited.

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The Phantom Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year cliff vesting following the grant date, with payment upon maturity. Additionally, for grants made starting January 1, 2023, upon retirement at age 67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate on a pro-rata basis, 1/3 per year from the grant date.

Equity Incentive Plan

In 2024, the Flex-Trac, Inc. 2025 Equity Incentive Plan (the “Equity Incentive Plan”) was adopted to provide directors, officers, employees, contractors and consultants of Flex-Trac, Inc. or its affiliates an equity-based incentive to maintain and enhance the performance and profitability of Flex-Trac, Inc. Subject to adjustment as provided in the Equity Incentive Plan, up to 818,458 shares of the common stock, par value $0.01 per share, of Flex-Trac, Inc. (“FTI Common Stock”), or 7.5% of the fully-diluted shares of FTI Common Stock, may be issued pursuant to the Equity Incentive Plan with respect to awards.

On January 2, 2025, 420,000 shares of restricted stock in the aggregate, or 4% of the shares of FTI Common Stock, were granted and issued to certain eligible participants under the Equity Incentive Plan (the “Awards”). The Awards cliff vest after eight years of continuous service or earlier upon the grantee’s death, disability or retirement, or a change of control, as defined and further described in the Equity Incentive Plan.

In accordance with FASB ASC Topic 718, Compensation - Stock Compensation, the Company values the Awards at fair value at grant date and recognizes compensation expense over the vesting period. The Company recognizes the reversal of any previously recognized compensation expense on forfeited nonvested Awards in the period the Awards are forfeited.

Further details of the Phantom Plan and Equity Incentive Plan are provided in Note 7, Stock Based Compensation Plans, to the Condensed Consolidated Financial Statements included in this report.

Product Liability Reserves

Product liability reserves represent the estimated unpaid amounts under the Company’s insurance policy deductibles or self-insured retention limits (or “retentions”), with respect to existing claims. The Company uses the most current available data to estimate claims. As explained more fully under Note 6, Commitments and Contingencies, to the Condensed Consolidated Financial Statements included in this report, for various product liability claims covered under the Company’s general liability insurance policies, the Company must pay certain defense and settlement costs within its retentions, ranging primarily from $250,000 to $3,000,000 per claim, depending on the terms of the policy and the applicable policy year, up to an aggregate amount. The Company is vigorously defending against all known claims.

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Leases

The Company applies the requirements of FASB ASC Topic 842, Leases which defines a lease as any contract that conveys the right to use a specific asset for a period of time in exchange for consideration. Leases are classified as a finance lease, formerly called a capital lease, if any of the following criteria are met:

	1.	The lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
	2.	The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
	3.	The lease term is for the major part of the remaining economic life of the underlying asset.
	4.	The present value of the sum of lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.
	5.	The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term.

For any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases. As of September 30, 2025 and December 31, 2024, each of the Company’s leases is classified as an operating lease.

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

There are some exceptions which the Company has elected in its accounting policies. For leases with terms of twelve months or less, or below the Company’s general capitalization policy threshold, the Company has elected an accounting policy to not recognize lease assets and lease liabilities for all asset classes. The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term.

The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain to be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for separately. In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining if the component should be included in the lease liability. For purposes of calculating the present value of the lease obligations, the Company utilizes the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes its incremental borrowing rate at the time of the lease agreement.

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SEC Form 10-Q filed by Omega Flex Inc.