Omega Flex, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Form 10-Q. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under 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, 2025. See “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q.

Previous wording

The Company’s cash balance of $49,368,000 on September 30, 2025 decreased $2,331,000 (4.5%) from a $51,699,000 balance at December 31, 2024. Consistent with prior years, the Company paid a significant amount of cash during the first quarter for obligations that were accrued as of the end of the preceding year such as incentive related compensation. The Company also paid dividends during 2025 totaling $10,296,000, as detailed in Note 9, Shareholders’ Equity, to the Condensed Consolidated Financial Statements included in this report, and capital expenditures of $1,613,000 mostly offset by cash provided by operating activities of $9,668,000. See the Company’s Condensed Consolidated Cash Flow Statements for further details regarding the change in cash.

Current wording

The Company’s cash and cash equivalents balance of $49,757,000 on March 31, 2026 decreased $3,469,000 (6.5%) from a $53,226,000 balance at December 31, 2025. Consistent with prior years, the Company paid a significant amount of cash during the first quarter for obligations that were accrued as of the end of the preceding year such as incentive related compensation. The Company also paid a dividend during 2026 totaling $3,431,000, as detailed in Note 9, Shareholders’ Equity, to the Condensed Consolidated Financial Statements included in this report, and capital expenditures of $709,000 partially offset by cash provided by operating activities of $608,000. See the Company’s Condensed Consolidated Statements of Cash Flow for further details regarding the change in cash.

Previous wording

Retained earnings were $73,995,000 and $72,880,000 as of September 30, 2025 and December 31, 2024, respectively, increasing $1,115,000 or 1.5%. The increase was primarily due to net income during the year, as provided on the Company’s Condensed Consolidated Statements of Income, partially offset by dividends declared during 2025, as discussed in detail in Note 9, Shareholders’ Equity, to the Condensed Consolidated Financial Statements included in this report.

Current wording

Retained earnings were $72,623,000 and $73,979,000 as of March 31, 2026 and December 31, 2025, respectively, decreasing $1,356,000 or 1.8%. The decrease was primarily due to a dividend declared during 2026, as discussed in detail in Note 9, Shareholders’ Equity, to the Condensed Consolidated Financial Statements included in this report, partially offset by net income during the year, as provided on the Company’s Condensed Consolidated Statements of Income.

Previous wording

Net Sales. The Company’s 2025 third quarter sales of $24,234,000 decreased $646,000 or 2.6% compared to the third quarter of 2024, which generated sales of $24,880,000.

Current wording

Net Sales. The Company’s 2026 first quarter sales of $23,093,000 decreased $237,000 or 1.0% compared to the first quarter of 2025, which generated sales of $23,330,000.

Previous wording

Gross Profit. The Company’s gross profit margins were 60.2% and 61.7% for the quarters ended September 30, 2025 and 2024, respectively. The decrease in gross profit is mostly attributable to an increase in staffing related costs, mainly employee benefits, and tariffs.

Current wording

Gross Profit. The Company’s gross profit margins were 56.7% and 60.3% for the quarters ended March 31, 2026 and 2025, respectively. The decrease in gross profit is mostly attributable to an increase in raw material costs, which includes tariffs.

Previous wording

Selling Expenses. Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing programs such as advertising, trade shows and related communication costs, and freight. Selling expenses were $4,993,000 and $4,976,000 for the quarters ended September 30, 2025 and 2024, respectively, representing an increase of $17,000 or 0.3%. The increase is mostly related to higher staffing related costs, mainly employee benefits, mostly offset by lower recruiting fees. Selling expenses increased as a percentage of net sales compared to last year, being 20.6% for the quarter ended September 30, 2025, and 20.0% for the quarter ended September 30, 2024.

Current wording

Selling Expenses. Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing programs such as advertising, trade shows and related communication costs, and freight. Selling expenses were $5,494,000 and $5,001,000 for the quarters ended March 31, 2026 and 2025, respectively, representing an increase of $493,000 or 9.9%. The increase is mostly related to higher trade show and advertising, salary related, annual sales meeting, and outbound freight related expenses, partly offset by lower travel and commissions. Selling expenses increased as a percentage of net sales compared to last year, being 23.8% for the quarter ended March 31, 2026, and 21.4% for the quarter ended March 31, 2025.

Previous wording

General and Administrative Expenses. General and administrative expenses consist primarily of employee salaries, benefits for administrative, executive and finance personnel, legal and accounting, and corporate general and administrative services. General and administrative expenses were $4,082,000 and $3,848,000 for the quarters ended September 30, 2025 and 2024, respectively, increasing by $234,000 or 6.1%. The increase is due to higher staffing related costs, mainly employee benefits, partly offset by lower incentive compensation expenses which are aligned with profitability. As a percentage of sales, general and administrative expenses increased to 16.8% for the quarter ended September 30, 2025 from 15.5% for the quarter ended September 30, 2024.

Current wording

General and Administrative Expenses. General and administrative expenses consist primarily of employee salaries, benefits for administrative, executive and finance personnel, legal and accounting, and corporate general and administrative services. General and administrative expenses were $3,768,000 and $3,891,000 for the quarters ended March 31, 2026 and 2025, respectively, decreasing by $123,000 or 3.2%. The decrease is due to lower legal and product liability and incentive compensation expenses, which are aligned with profitability, partly offset by higher stock based compensation, which moves in relation to the Company’s stock price, as detailed in Note 7, Stock Based Compensation Plans. As a percentage of sales, general and administrative expenses decreased to 16.3% for the quarter ended March 31, 2026 from 16.7% for the quarter ended March 31, 2025.

Previous wording

Engineering Expense. Engineering expenses consist of development expenses associated with the development of new products and enhancements to existing products, and manufacturing engineering costs. Engineering expenses were $1,321,000 and $1,058,000 for the quarters ended September 30, 2025 and 2024, respectively, increasing by $263,000 or 24.9%. The increase is mostly due to product development and certification related expenses and staffing related costs. Engineering expenses increased as a percentage of sales, being 5.5% for the quarter ended September 30, 2025, and 4.3% for the same quarter in 2024.

Current wording

Engineering Expense. Engineering expenses consist of development expenses associated with the development of new products and enhancements to existing products, and manufacturing engineering costs. Engineering expenses were $1,512,000 and $1,130,000 for the quarters ended March 31, 2026 and 2025, respectively, increasing by $382,000 or 33.8%. The increase is mostly due to product development and certification related expenses. Engineering expenses increased as a percentage of sales, being 6.5% for the quarter ended March 31, 2026, and 4.8% for the same quarter in 2025.

Previous wording

Operating Profits. Reflecting all of the factors mentioned above, operating profits were $4,185,000 and $5,468,000 for the quarters ended September 30, 2025 and 2024, respectively, decreasing by $1,283,000 or 23.5%.

Current wording

Operating Profits. Reflecting all of the factors mentioned above, operating profits were $2,311,000 and $4,050,000 for the quarters ended March 31, 2026 and 2025, respectively, decreasing by $1,739,000 or 42.9%.

Previous wording

Interest Income. Interest income is recorded on cash investments, and interest expense is recorded at times when the Company has debt amounts outstanding on its line of credit. The Company recorded $509,000 of interest income for the third quarter of 2025 and $586,000 for the third quarter of 2024. The decrease is mainly due to lower interest rates.

Current wording

Interest Income. Interest income is recorded on cash investments, and interest expense is recorded at times when the Company has debt amounts outstanding on its line of credit. The Company recorded $456,000 of interest income for the first quarter of 2026 and $511,000 for the first quarter of 2025. The decrease is mainly due to lower interest rates.

Previous wording

Other Income (Expense). Other income (expense) primarily consists of foreign currency exchange gains (losses) on transactions settled in currencies other than the Company’s local currency, typically related to the Company’s foreign U.K. and France subsidiaries. There was a loss of $1,000 during the third quarter of 2025 compared to a gain of $21,000 during the third quarter of 2024 mainly due to the strengthening/weakening of the U.S. dollar compared to the British Pound and Euro.

Current wording

Other (Expense) Income. Other (expense) income primarily consists of foreign currency exchange gains (losses) on transactions settled in currencies other than the Company’s local currency, typically related to the Company’s foreign U.K. and France subsidiaries. There was a loss of $93,000 during the first quarter of 2026 compared to a gain of $83,000 during the first quarter of 2025 mainly due to the strengthening of the U.S. dollar in the current quarter compared to the British Pound and Euro and, conversely, the weakening of the U.S dollar in the same quarter of 2025.

Previous wording

Income Tax Expense. Income tax expense was $1,062,000 for the third quarter of 2025, compared to $1,479,000 for the third quarter in 2024, decreasing $417,000 or 28.2%, mostly the result of lower income before income taxes and research and development credits.

Current wording

Income Tax Expense. Income tax expense was $670,000 for the first quarter of 2026, compared to $1,124,000 for the first quarter in 2025, decreasing $454,000 or 40.4%, mostly the result of lower income before income taxes. The effective tax rates were 25.1% and 24.2% for the quarters ending March 31, 2026 and March 31, 2025 respectively.

Previous wording

As of September 30, 2025, the Company had a cash balance of $49,368,000. Additionally, the Company has a $15,000,000 line of credit available, as discussed in detail in Note 5, which had no borrowings outstanding upon it as of September 30, 2025. As of December 31, 2024, the Company had a cash balance of $51,699,000, also with no borrowings against the line of credit.

Current wording

As of March 31, 2026, the Company had a cash balance of $49,757,000. Additionally, the Company has a $15,000,000 line of credit available, as discussed in detail in Note 5, which had no borrowings outstanding upon it as of March 31, 2026. As of December 31, 2025, the Company had a cash balance of $53,226,000, also with no borrowings against the line of credit.

Previous wording

For the nine months ended September 30, 2025, the Company’s operating activities provided cash of $9,668,000, compared to the nine months ended September 30, 2024 which provided cash of $11,097,000, a decrease of $1,429,000. For details of the operating cash flows refer to the Condensed Consolidated Statements of Cash Flows in Part I – Financial Information on page nine.

Current wording

For the three months ended March 31, 2026, the Company’s operating activities provided cash of $608,000, compared to the three months ended March 31, 2025 which provided cash of $1,555,000, a decrease of $947,000. For details of the operating cash flows refer to the Condensed Consolidated Statements of Cash Flows in Part I – Financial Information on page eight.

Previous wording

Cash used in investing activities during the nine months ended September 30, 2025 and 2024 was $1,613,000 and $1,443,000, respectively, as a result of payments for mainly leasehold improvements and manufacturing equipment capital expenditures.

Current wording

Cash used in investing activities during the three months ended March 31, 2026 and 2025 was $709,000 and $552,000, respectively, mainly as a result of payments for manufacturing equipment capital expenditures and leasehold improvements.

Previous wording

All financing activities relate to dividend payments, which are detailed in Note 9, Shareholders’ Equity. Dividend payments through the first nine months of 2025 and 2024 amounted to $10,296,000 and $10,095,000, respectively.

Current wording

All financing activities relate to dividend payments, which are detailed in Note 9, Shareholders’ Equity. Dividend payments through the first three months of 2026 and 2025 amounted to $3,431,000 and $3,432,000, respectively.

Previous wording

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands public entities tax disclosures including improving disclosures surrounding the company’s rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The amendment is effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact of ASU No. 2023-09 on its Condensed Consolidated Financial Statements.

Current wording

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands public entities tax disclosures including improving disclosures surrounding the company’s rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The amendment is effective for annual periods beginning after December 15, 2024. In 2025, the Company adopted ASU No. 2023-09 retrospectively and reflected these improvements in Note 9. Income Taxes of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.