10-Q 2015-06-30 false Omega Flex, Inc. 0001317945 oflx --12-31 10091822 Smaller Reporting Company Yes No No 2015 Q2 20430000 22585000 13751000 13723000 708000 625000 1058000 1468000 44183000 45765000 4667000 4483000 3526000 3526000 1253000 1364000 53629000 55138000 1294000 2352000 2234000 4184000 2507000 2749000 4945000 935000 1216000 3746000 3572000 10716000 19018000 933000 926000 1062000 1225000 12711000 21169000 102000 102000 1000 1000 10808000 10808000 30258000 23446000 -449000 -497000 40718000 33858000 200000 111000 53629000 55138000 21636000 19872000 42609000 36461000 8298000 8418000 16881000 15728000 13338000 11454000 25728000 20733000 3815000 3428000 7590000 6551000 3419000 3073000 6696000 5260000 720000 658000 1351000 1362000 5384000 4295000 10091000 7560000 15000 6000 31000 12000 48000 15000 1000 7000 5447000 4316000 10123000 7579000 1733000 1387000 3224000 2428000 44000 33000 60000 3670000 2896000 6812000 5091000 0.36 0.29 0.68 0.50 10092 10092 10092 10092 3714000 2929000 6899000 5151000 149000 77000 50000 93000 149000 77000 50000 93000 3863000 3006000 6949000 5244000 54000 37000 89000 65000 3809000 2969000 6860000 5179000 6899000 5151000 112000 125000 201000 287000 -50000 -107000 44000 1435000 -871000 -527000 439000 540000 -1059000 -381000 -1961000 -1458000 -244000 -1851000 -389000 -394000 3121000 2820000 384000 69000 -384000 -69000 4945000 -4945000 -2208000 2751000 53000 54000 22585000 8257000 20430000 11062000 3590000 2247000 <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'><b>1.&#160; BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Basis of Presentation</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify;text-autospace:ideograph-numeric ideograph-other'>The accompanying unaudited condensed consolidated financial statements include the accounts of Omega Flex, Inc. (Omega) and its subsidiaries (collectively the &#147;Company&#148;).&#160; The Company&#146;s unaudited&#160; condensed consolidated financial statements for the quarter ended June 30, 2015 have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and with the instructions of Form 10-Q and Article 10 of Regulation S-X.&#160; 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.&#160; 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&#146;s latest shareholders&#146; annual report (Form 10-K).&#160; All material inter-company accounts and transactions have been eliminated in consolidation.&#160; It is Management&#146;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.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'><b><u>Description of Business</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company is a leading manufacturer of flexible metal hose, and is currently engaged in a number of different markets, including construction, manufacturing, petrochemical transfer, pharmaceutical and other industries.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company&#146;s business is managed as a single operating segment that consists of the manufacture and sale of flexible metal hose and accessories.&#160; The Company&#146;s products are concentrated in residential and commercial construction, and general industrial markets, with a comprehensive portfolio of intellectual property and patents issued in various countries around the world. The Company&#146;s primary product, flexible gas piping, is used for gas piping within residential and commercial buildings.&#160; Through its flexibility and ease of use, the Company&#146;s TracPipe<sup>&#174;</sup> and TracPipe<sup>&#174; </sup>CounterStrike<sup>&#174;</sup> flexible gas piping, along with its fittings distributed under the trademarks AutoSnap<sup>&#174;</sup> and AutoFlare<sup>&#174;</sup>, allows users to substantially cut the time required to install gas piping, as compared to traditional methods.&#160; The Company&#146;s products are manufactured at its Exton, Pennsylvania facilities in the United States, and in Banbury, Oxfordshire in the United Kingdom.&#160; A majority of the Company&#146;s sales across all industries are generated through independent outside sales organizations such as sales representatives, wholesalers and distributors, or a combination of both.&#160; The Company has a broad distribution network in North America and to a lesser extent in other global markets.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'><b>2. SIGNIFICANT ACCOUNTING POLICIES</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Use of Estimates</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The preparation of financial statements in conformity with generally accepted accounting principles (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 at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates and assumptions relate to revenue recognition and related sales incentives, accounts receivable allowances, inventory valuations, goodwill valuation, product liability reserve, stock-based compensation valuations and accounting for income taxes.&#160; Actual amounts could differ significantly from these estimates.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Revenue Recognition</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company&#146;s revenue recognition activities relate almost entirely to the manufacture and sale of flexible metal hose and pipe.&#160; Under GAAP, revenues are considered to have been earned when the Company has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.&#160; The following criteria represent preconditions to the recognition of revenue:</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>Persuasive evidence of an arrangement for the sale of product or services must exist.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-align:justify;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>Delivery has occurred or services rendered.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-align:justify;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>The sales price to the customer is fixed or determinable.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-align:justify;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>Collection is reasonably assured.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company recognizes revenue upon shipment in accordance with the above principles.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Gross sales are reduced for all consideration paid to customers for which no identifiable benefit is received by the Company.&#160; This includes promotional incentives, which includes various programs including year-end rebates and discounts.&#160; The amounts of certain incentives are known with reasonable certainty at the time of sale, while others are projected based upon the most reliable information available at the reporting date.&#160; Commissions are accounted for as a sales expense.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Cash Equivalents</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>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.&#160; Carrying value approximates fair value.&#160; Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits.&#160; The Company monitors the viability of the banking institutions carrying its assets on a regular basis, and has the ability to transfer cash to various institutions during times of risk.&#160; The Company has not experienced any losses related to these cash balances, and believes its credit risk to be minimal.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Accounts Receivable and Provision for Doubtful Accounts</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. The estimated allowance for uncollectible amounts is based primarily on specific analysis of accounts in the receivable portfolio and historical write-off experience. While management believes the allowance to be adequate, if the financial condition of the Company&#146;s customers were to deteriorate, resulting in their inability to make payments, additional allowances may be required.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance.&#160; The Company determines the allowance based on any known collection issues, historical experience, and other currently available evidence.&#160; The reserve for future credits, discounts, and doubtful accounts was $661,000 and $710,000 as of June 30, 2015 and December 31, 2014, respectively.&#160; In regards to identifying uncollectible accounts, the Company reviews an aging report on a consistent basis to determine past due accounts, and utilizes a well established credit rating agency.&#160; The Company charges off those accounts that are deemed uncollectible once all collection efforts have been exhausted.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Inventories</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Inventories are valued at the lower of cost or market.&#160; The cost of inventories is determined by the first-in, first-out (FIFO) method.&#160; The Company generally considers inventory quantities beyond two-years usage, measured on a historical usage basis, to be excess inventory and reduces the carrying value of inventory accordingly.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Property and Equipment</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Property and equipment are carried 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.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Goodwill</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;punctuation-wrap:simple;text-autospace:none'>In accordance with Financial Accounting Standards Board (FASB) ASC Topic 350, Intangibles &#150; Goodwill and Other, the Company performed an annual impairment test in accordance with this guidance as of December 31, 2014.&#160; This analysis did not indicate any impairment of goodwill.&#160; There were no circumstances that indicate that Goodwill might be impaired at June 30, 2015.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Stock-Based Compensation Plans</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In 2006, the Company adopted a Phantom Stock Plan (the &#147;Plan&#148;), which allows the Company to grant phantom stock units (Units) to certain key employees, officers or directors.&#160; The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company&#146;s common stock.&#160; The Units follow a vesting schedule of three years from the grant date, and are then paid upon maturity.&#160; In accordance with FASB ASC Topic 718, Stock Compensation, the Company uses the Black-Scholes option pricing model as its method for determining the fair value of the Units.&#160; Further details of the Plan are provided in Note 6.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Product Liability Reserves</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Product liability reserves represent the estimated unpaid amounts under the Company&#146;s insurance policies with respect to existing claims.&#160; The Company uses the most current available data to estimate claims.&#160; As explained more fully under Note 5, Commitments and Contingencies, for various product liability claims covered under the Company&#146;s general liability insurance policies, the Company must pay certain defense costs within its deductible or self-insured retention limits, ranging primarily from $25,000 to $250,000 per claim, depending on the terms of the policy in the applicable policy year, up to an aggregate amount.&#160; The Company is vigorously defending against all known claims.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Fair Value of Financial and Nonfinancial Instruments</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company measures financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures.&#160; The accounting standard defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements.&nbsp;&nbsp;Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.&nbsp;&nbsp;Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.&#160; The standard creates a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that reflect the Company&#146;s own assumptions about the assumptions market participants would use in pricing the asset or liability. The Company relies on its actively traded share value &#150; a level 1 input &#150; in determining the fair value of the reporting unit in its annual impairment test as described in the FASB ASC Topic 350, Intangibles - Goodwill and Other.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Earnings per Common Share</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Basic earnings per share have been computed using the weighted-average number of common shares outstanding.&#160; For the periods presented, there are no dilutive securities.&#160; Consequently, basic and dilutive earnings per share are the same.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Currency Translation</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Assets and liabilities denominated in foreign currencies, most of which relate to our United Kingdom subsidiary whose functional currency is British pound sterling, are translated into U.S. dollars at exchange rates prevailing on the balance sheet dates.&#160; The statements of income are translated into U.S. dollars at average exchange rates for the period.&#160; Adjustments resulting from the translation of financial statements are excluded from the determination of income and are accumulated in a separate component of shareholders&#146; equity.&#160; Exchange gains and losses resulting from foreign currency transactions are included in the statements of income (other expense) in the period in which they occur.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Income Taxes</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes.&#160; Under this method the Company recorded tax expense, related deferred taxes and tax benefits, and uncertainties in tax positions.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.&#160; Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.&#160; The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date.&#160; A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The FASB ASC Topic 740, Income Taxes clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company&#146;s financial statements.&#160; This guidance prescribes a recognition threshold of more-likely than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-autospace:none;margin-left:0in;text-align:justify'>The Company follows the provisions of ASC 740-10 relative to accounting for uncertainties in tax positions. These provisions provide guidance on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions. The Company elected to recognize interest and penalties related to income tax matters as a component of the income tax provision in the consolidated statements of income. For additional information regarding ASC 740-10, see Note 8 of the Company&#146;s December 31, 2014 Form 10-K.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-autospace:none;margin-left:0in'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Other Comprehensive Income</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>For the three and six months ended June 30, 2015 and 2014, respectively, the components of other comprehensive income consisted solely of foreign currency translation adjustments.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Significant Concentration</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company has one significant customer who represents more than 10% of the Company&#146;s Net Sales for the three and six months ended June 30, 2015 and 2014, and more than 10% of the Company&#146;s Accounts Receivable balance at June 30, 2015 and December 31, 2014.&#160; Geographically, the Company has a significant amount of sales in the United States versus internationally. These concentrations are discussed in detail in the Company&#146;s December 31, 2014 Form 10-K, and there has been no significant change as of this quarterly report.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Subsequent Events</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company evaluates all events or transactions through the date of the related filing that may have a material impact on its condensed consolidated financial statements.&#160; Refer to Note 9 of the condensed consolidated financial statements.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Recent Accounting Pronouncements</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In May 2014, the FASB issued ASU 2014-09, <i>Revenue from Contracts with Customers (Topic 606)</i>, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The updated standard becomes effective for the Company in the first quarter of fiscal year 2018. Early adoption is permitted beginning in the first quarter of the Company&#146;s 2017 fiscal year.&#160; The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the condensed consolidated financial statements.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In July 2015, the FASB issued ASU 2015-11, <i>Simplifying the Measurement of Inventory (Topic 330)</i>.&#160; Under this ASU, inventory will be measured at the &#147;lower of cost and net realizable value&#148; and options that currently exist for &#147;market value&#148; will be eliminated. The ASU defines net realizable value as the &#147;estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.&#148; No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively.&#160; The Company is evaluating the provisions of this statement, including which period to adopt, and has not determined what impact the adoption of ASU 2015-11 will have on the Company's financial position or results of operations.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b>3. INVENTORIES</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Inventories - Net of reserves consisted of the following:</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="586" style='width:439.25pt;border-collapse:collapse'> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="120" valign="bottom" style='width:1.25in;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>June 30,</b></p> </td> <td width="110" valign="bottom" style='width:82.85pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>December 31,</b></p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="120" valign="bottom" style='width:1.25in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>2015</b></p> </td> <td width="110" valign="bottom" style='width:82.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>2014</b></p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="230" colspan="2" valign="bottom" style='width:172.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>(dollars in thousands)</b></p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Finished Goods</p> </td> <td width="120" valign="bottom" style='width:1.25in;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$5,719</p> </td> <td width="110" valign="bottom" style='width:82.85pt;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$5,122</p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Raw Materials</p> </td> <td width="120" valign="bottom" style='width:1.25in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>2,517</p> </td> <td width="110" valign="bottom" style='width:82.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>2,242</p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Inventories - Net</p> </td> <td width="120" valign="bottom" style='width:1.25in;border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$8,236</p> </td> <td width="110" valign="bottom" style='width:82.85pt;border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$7,364</p> </td> </tr> </table> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b>4. LINE OF CREDIT</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>On December 29, 2014, the Company entered into to an Amended and Restated Committed Revolving Line of Credit Note (&#147;the Line&#148;) and a Second Amendment to the Loan Agreement with Santander Bank, N.A. (&#147;Santander&#148;). The Company renewed and increased the Line facility in the maximum amount of $15,000,000, for a five year term maturing on December 31, 2019, with funds available for working capital purposes and to fund dividends. This Line facility supersedes the $10,000,000 line of credit the Company previously had in place with Santander since 2010, which was to expire at the end of 2014. The Line is unsecured. The Line provides for the payment of any borrowings at an interest rate of either LIBOR plus 1.00% to plus 1.35% (for borrowings with a fixed term of 30, 60, or 90 days), or Prime from 0.00% to plus 0.10%, depending upon the Company&#146;s then existing financial ratios.&#160; At June 30, 2015, the Company&#146;s financial ratios would allow for the most favorable rate under the agreement&#146;s range, which would be a rate of 1.63%.&#160; Under the terms of the agreement, the Company is required to pay on a quarterly basis an unused facility fee equal to 10 basis points of the average unused balance of the total Line commitment.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>As of June 30, 2015 and December 31, 2014, the Company had no outstanding borrowings on its line of credit, and was in compliance with all debt covenants.</p> <!--egx--><p><font style='text-decoration:none;text-underline:none'>5. COMMITMENTS AND CONTINGENCIES</font></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b>Commitments:</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Under a number of indemnity agreements between the Company and each of its officers and directors, the Company has agreed to indemnify each of its officers and directors against any liability asserted against them in their capacity as an officer or director, or both.&#160; The Company&#146;s indemnity obligations under the indemnity agreements are subject to certain conditions and limitations set forth in each of the agreements.&#160; Under the terms of the Agreement, the Company is contingently liable for costs which may be incurred by the officers and directors in connection with claims arising by reason of these individuals&#146; roles as officers and directors.&#160; The Company has obtained directors&#146; and officers&#146; insurance policies to fund certain obligations under the indemnity agreements.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company has salary continuation agreements with one current employee, and one former employee who retired at the end of 2010.&#160; These agreements provide for monthly payments to each of the employees or their designated beneficiary upon the employee&#146;s retirement or death.&#160; The payment benefits range from $1,000 per month to $3,000 per month with the term of such payments limited to 15 years after the employee&#146;s retirement at age 65.&#160; The agreements also provide for survivorship benefits if the employee dies before attaining age 65; and severance payments if the employee is terminated without cause; the amount of which is dependent on the length of company service at the date of termination.&#160; The net present value of the retirement payments associated with these agreements is $500,000 at June 30, 2015, of which $488,000 is included in Other Long Term Liabilities, and the remaining current portion of $12,000 is included in Other Liabilities, associated with the retired employee previously noted who is now receiving benefit payments.&#160; The December 31, 2014 liability of $501,000 had $489,000 reported in Other Long Term Liabilities and a current portion of $12,000 in Other Liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company has obtained and is the beneficiary of three whole life insurance policies with respect to the two employees discussed above, and one other employee policy.&#160; The cash surrender value of such policies (included in Other Long Term Assets) amounts to $1,073,000 at June 30, 2015 and $1,033,000 at December 31, 2014.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>As disclosed in detail in Note 9 of the Company&#146;s December 31, 2014 Form 10-K, under the caption &#147;Leases&#148;, the Company has several lease obligations in place that will be paid out over time.&#160; Most notably, the Company leases facilities in Banbury, England, and Exton, Pennsylvania in the United States that both serve the manufacturing, warehousing and distribution functions.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b>Contingencies:</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In the ordinary and normal conduct of the Company&#146;s business, it is subject to periodic lawsuits, investigations and claims (collectively, the &#147;Claims&#148;).&nbsp; Following the Company&#146;s first product liability related trial in Pennsylvania during 2010, there was an initial spike in Claims.&nbsp; During the last couple of years, the pace of new Claims has however softened, as the Company has successfully defended itself in all court proceedings, including the Pennsylvania case, as described below.&nbsp; The Company does not believe that the Claims have legal merit, and is therefore vigorously defending against those Claims.&nbsp; In 2013, the Company won two of the Claims at two separate trials, both of which were held in U.S. District Court; one in St. Louis, Missouri and the other in Bridgeport, Connecticut.&#160; In both cases, the jury unanimously found that the Company was not negligent in designing its TracPipe<sup>&#174;</sup> product, and that the TracPipe<sup>&#174;</sup> product was not defective or unreasonably dangerous.&#160; In 2010, the Company took its first Claim to trial in Pennsylvania, and the jury returned a verdict that the Company was not negligent in designing and selling the TracPipe product, but also returned a verdict for plaintiff on strict liability.&#160; The Company has appealed that portion of the verdict, and in December 2014, the Supreme Court of Pennsylvania ruled in favor of the Company, and returned the case to the trial court for further hearings.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company has in place commercial general liability insurance policies that cover the Claims, which are subject to deductibles or retentions, ranging primarily from $25,000 to $250,000 per claim, (depending on the terms of the policy and the applicable policy year) up to an aggregate amount. Litigation is subject to many uncertainties and management is unable to predict the outcome of the pending suits and claims. The potential liability for a given claim could range from zero to a maximum of $250,000, depending upon the circumstances, and insurance deductible or retention in place for the respective claim year.&#160; The aggregate maximum exposure for all current open Claims is estimated to not exceed approximately $4,700,000, which represents the potential costs that may be incurred over time for the Claims within the applicable insurance policy deductibles or retentions.&#160; It is possible that the results of operations or liquidity of the Company, as well as the Company&#146;s ability to procure reasonably priced insurance, could be adversely affected by the pending litigation, potentially materially. The Company is currently unable to estimate the ultimate liability, if any, that may result from the pending litigation, or potential litigation from future claims or claims that have not yet come to our attention, and accordingly, the liability in the consolidated financial statements primarily represents an accrual for legal costs for services previously rendered and outstanding settlements for existing claims. The liabilities recorded on the Company&#146;s books at June 30, 2015 and December 31, 2014 were $412,000 and $582,000, respectively, and are included in Other Liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Additionally, two putative class action cases have been filed against the Company; one in U.S. District Court for the Middle District of Florida titled <u>Hall v. Omega Flex, Inc</u>. and one in U.S. District Court for the Southern District of Ohio titled <u>Schoelwer v. Omega Flex, Inc</u>.&#160; In both cases, the lead plaintiffs claimed that they are exposed to an increased likelihood of harm if one of the plaintiffs&#146; houses that contain TracPipe CSST is struck by lightning, that could damage the CSST causing a release of fuel gas in the house and causing a fire.&#160; In 2014, the judges in both cases granted the Company&#146;s motion to dismiss all of the plaintiff&#146;s claims due primarily to a lack of jurisdiction because there is no actual case or controversy posed by these claims.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Finally, in February of 2012, the Company was made aware of a fraud perpetrated by an outside party involving insurance related premiums that the Company had prepaid for umbrella coverage. The assets are currently secured by a governmental agency which investigated the case, and held in a custodial account.&#160; As of May of 2014, utilizing the secured funds, the court has ordered restitution to all victims including the Company.&#160; It is not clear however at this point what amount will eventually be received by the Company.&#160; The value of the assets on the books amount to $213,000 at June 30, 2015 and December 31, 2014, and are included in Other Long Term Assets.&#160; It is possible that not all of those funds will be returned to the Company, or the Company may need to incur additional costs to procure collection.&#160; The Company is currently pursuing all avenues in an effort to bring closure to the event, and reclaim the assets, and has since replaced the aforementioned insurance coverage.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b>6. STOCK BASED PLANS</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b>Phantom Stock Plan</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><i>Plan Description.&#160; </i></b>On April 1, 2006, the Company adopted the Omega Flex, Inc. 2006 Phantom Stock Plan (the &#147;Plan&#148;).&#160; The Plan authorizes the grant of up to 1 million units of phantom stock to employees, officers or directors of the Company and of any of its subsidiaries.&#160; The phantom stock units (&quot;Units&quot;) each represent a contractual right to payment of compensation in the future based on the market value of the Company&#146;s common stock.&#160; The Units are not shares of the Company&#146;s common stock, and a recipient of the Units <u>does not</u> receive any of the following:</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>ownership interest in the Company</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>shareholder voting rights</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>other incidents of ownership to the Company&#146;s common stock</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Units are granted to participants upon the recommendation of the Company&#146;s CEO, and the approval of the Compensation Committee.&#160; Each of the Units that are granted to a participant will be initially valued by the Compensation Committee, at an amount equal to the closing price of the Company&#146;s common stock on the grant date, but are recorded at fair value using the Black-Sholes method as described below.&#160; The Units follow a vesting schedule, with a maximum vesting of 3 years after the grant date.&#160; Upon vesting, the Units represent a contractual right of payment for the value of the Unit.&#160; The Units will be paid on their maturity date, one year after all of the Units granted in a particular award have fully vested, unless an acceptable event occurs under the terms of the Plan prior to one year, which would allow for earlier payment.&#160; The amount to be paid to the participant on the maturity date is dependent on the type of Unit granted to the participant.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Units may be <i>Full Value,</i> in which the value of each Unit at the maturity date, will equal the closing price of the Company&#146;s common stock as of the maturity date; or <i>Appreciation Only</i>, in which the value of each Unit at the maturity date will be equal to the closing price of the Company&#146;s common stock at the maturity date <i>minus</i> the closing price of the Company&#146;s common stock at the grant date.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>On December 9, 2009, the Board of Directors authorized an amendment to the Plan to pay an amount equal to the value of any cash or stock dividend declared by the Company on its common stock to be accrued to the phantom stock units outstanding as of the record date of the common stock dividend.&#160; The dividend equivalent will be paid at the same time the underlying phantom stock units are paid to the participant.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In certain circumstances, the Units may be immediately vested upon the participant&#146;s death or disability.&#160; All Units granted to a participant are forfeited if the participant is terminated from his relationship with the Company or its subsidiary for &#147;cause,&#148; which is defined under the Plan.&#160; If a participant&#146;s employment or relationship with the Company is terminated for reasons other than for &#147;cause,&#148; then any vested Units will be paid to the participant upon termination.&#160; However, Units granted to certain &#147;specified employees&#148; as defined in Section 409A of the Internal Revenue Code will be paid approximately 181 days after termination.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><i>Grants of Phantom Stock Units.&#160; </i></b>As of December 31, 2014, the Company had 19,156 unvested units outstanding, all of which were granted at <i>Full Value</i>.&#160; On February 16, 2015, the Company granted an additional 10,460 <i>Full Value </i>Units with a fair value of $28.90 per unit on grant date, using historical volatility. In March 2015, the Company paid $257,000 for the 8,100 fully vested and matured units that were granted on March 3, 2011, including their respective earned dividend values.&#160; As of June 30, 2015, the Company had 20,335 unvested units outstanding.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&#160;The Company uses the Black-Scholes option pricing model as its method for determining fair value of the Units.&#160; The Company uses the straight-line method of attributing the value of the stock-based compensation expense relating to the Units.&#160; The compensation expense (including adjustment of the liability to its fair value) from the Units is recognized over the vesting period of each grant or award.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The FASB ASC Topic 718, Stock Compensation, requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates in order to derive the Company&#146;s best estimate of awards ultimately to vest.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Forfeitures represent only the unvested portion of a surrendered Unit and are typically estimated based on historical experience.&#160; Based on an analysis of the Company&#146;s historical data, which has limited experience related to any stock-based plan forfeitures, the Company applied a 0% forfeiture rate to Plan Units outstanding in determining its Plan Unit compensation expense as of June 30, 2015.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The total Phantom Stock related liability as of June 30, 2015 was $807,000 of which $341,000 is included in Other Liabilities, as it is expected to be paid in February 2016, and the balance of $466,000 is included in Other Long Term Liabilities.&#160; At December 31, 2014, the total Phantom Stock liability was $952,000, with $321,000 in Other Liabilities, and $631,000 included in Other Long Term Liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In accordance with FASB<b> </b>ASC Topic 718, Stock Compensation, the Company recorded compensation expense of approximately $112,000 and $97,000 related to the Phantom Stock Plan for the six months ended June 30, 2015 and 2014, respectively.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The following table summarizes information about the Company&#146;s nonvested phantom stock Units at June 30, 2015:</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>Units</b></p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>Weighted Average Grant Date Fair Value</b></p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Number of Phantom Stock Unit Awards:</p> </td> <td valign="bottom" style='border:none;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>&nbsp;</p> </td> <td valign="bottom" style='border:none;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> </tr> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;Nonvested at December 31, 2014</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>19,156</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$15.67</p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>10,460</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$28.90</p> </td> </tr> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vested</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>(9,281)</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$15.09</p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> </tr> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canceled</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Nonvested at June 30, 2015</p> </td> <td valign="bottom" style='border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>20,335</p> </td> <td valign="bottom" style='border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$22.74</p> </td> </tr> <tr style='height:12.6pt'> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Phantom Stock Unit Awards Expected to Vest</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:12.6pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>20,335</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:12.6pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$22.74</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The total unrecognized compensation costs calculated at June 30, 2015 are $613,000 which will be recognized through March of 2018.&#160; The Company will recognize the related expense over the weighted average period of 1.7 years.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b>7.&#160; NONCONTROLLING INTERESTS</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company owns 100% of all subsidiaries, except for a small portion of one, which is owned by a Noncontrolling Interest.&#160; At December 31, 2014, total Shareholders&#146; Equity was $33,969,000, and the Noncontrolling Interest was $111,000.&#160; For the six month period ended June 30, 2015, the Noncontrolling Interest&#146;s portion of Net Income was approximately $87,000, and their portion of Other Comprehensive Income was income of $2,000.&#160; At June 30, 2015, total Shareholders&#146; Equity was $40,918,000, of which the Noncontrolling Interest held a value of $200,000.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b>8. SHAREHOLDERS&#146; EQUITY</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>As of June 30, 2015 and December 31, 2014, the Company had authorized 20,000,000 common stock shares with par value of $0.01 per share.&#160; At both dates, the number of shares issued was 10,153,633, and the total number of outstanding shares was 10,091,822, with the 61,811 variance representing shares held in Treasury.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>On December 10, 2014, the Board declared a special dividend of $0.49 per share to all Shareholders of record as of December 22, 2014, which was paid on January 5, 2015, in the amount of $4,945,000. Additionally, there was a dividend that was paid during 2014 by the Company&#146;s UK subsidiary, which amounted to an outlay of cash of $145,000 to the subsidiary&#146;s noncontrolling interest.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>On December 9, 2013, the Board declared a special dividend of $0.425 per share to all Shareholders of record as of December 19, 2013, and payable on or before January 2, 2014. The Company paid its transfer agent $4,289,000 on December 31, 2013, and the transfer agent paid the shareholders on January 2, 2014.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>On April 11, 2015, the Company&#146;s Board of Directors authorized an extension, for another 24 months, of the stock purchase program previously announced on September 12, 2007 and extended on September 15, 2009, April 5, 2011, April 4, 2012 and April 1, 2014.&#160; The original program permitted a purchase of up to $5,000,000 of the Company&#146;s common stock depending on market and business conditions.&#160; Since the program began, the Company has purchased 61,811 shares of its common stock for an aggregate purchase price of approximately $923,000, leaving a balance of approximately $4,077,000 available to purchase additional shares of its common stock within the next 24 months. Stock purchases may be made using various types of transactions, including open-market purchases or transactions off the market, and may be made under Rule 10b5-1 trading programs. The timing of stock purchases, type of transaction and number of shares purchased will depend on a number of factors, including market conditions, the price of the Company&#146;s common stock, and the Company&#146;s capital position, its financial performance and investment opportunities.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b>9.SUBSEQUENT EVENTS</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company evaluated all events or transactions that occurred through the date of this filing.&#160; During this period, the Company did not have any material subsequent events that impacted its condensed consolidated financial statements.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Basis of Presentation</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify;text-autospace:ideograph-numeric ideograph-other'>The accompanying unaudited condensed consolidated financial statements include the accounts of Omega Flex, Inc. (Omega) and its subsidiaries (collectively the &#147;Company&#148;).&#160; The Company&#146;s unaudited&#160; condensed consolidated financial statements for the quarter ended June 30, 2015 have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and with the instructions of Form 10-Q and Article 10 of Regulation S-X.&#160; 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.&#160; 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&#146;s latest shareholders&#146; annual report (Form 10-K).&#160; All material inter-company accounts and transactions have been eliminated in consolidation.&#160; It is Management&#146;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.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'><b><u>Description of Business</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-autospace:ideograph-numeric ideograph-other'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company is a leading manufacturer of flexible metal hose, and is currently engaged in a number of different markets, including construction, manufacturing, petrochemical transfer, pharmaceutical and other industries.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company&#146;s business is managed as a single operating segment that consists of the manufacture and sale of flexible metal hose and accessories.&#160; The Company&#146;s products are concentrated in residential and commercial construction, and general industrial markets, with a comprehensive portfolio of intellectual property and patents issued in various countries around the world. The Company&#146;s primary product, flexible gas piping, is used for gas piping within residential and commercial buildings.&#160; Through its flexibility and ease of use, the Company&#146;s TracPipe<sup>&#174;</sup> and TracPipe<sup>&#174; </sup>CounterStrike<sup>&#174;</sup> flexible gas piping, along with its fittings distributed under the trademarks AutoSnap<sup>&#174;</sup> and AutoFlare<sup>&#174;</sup>, allows users to substantially cut the time required to install gas piping, as compared to traditional methods.&#160; The Company&#146;s products are manufactured at its Exton, Pennsylvania facilities in the United States, and in Banbury, Oxfordshire in the United Kingdom.&#160; A majority of the Company&#146;s sales across all industries are generated through independent outside sales organizations such as sales representatives, wholesalers and distributors, or a combination of both.&#160; The Company has a broad distribution network in North America and to a lesser extent in other global markets.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Use of Estimates</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The preparation of financial statements in conformity with generally accepted accounting principles (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 at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates and assumptions relate to revenue recognition and related sales incentives, accounts receivable allowances, inventory valuations, goodwill valuation, product liability reserve, stock-based compensation valuations and accounting for income taxes.&#160; Actual amounts could differ significantly from these estimates.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Revenue Recognition</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company&#146;s revenue recognition activities relate almost entirely to the manufacture and sale of flexible metal hose and pipe.&#160; Under GAAP, revenues are considered to have been earned when the Company has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.&#160; The following criteria represent preconditions to the recognition of revenue:</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>Persuasive evidence of an arrangement for the sale of product or services must exist.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-align:justify;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>Delivery has occurred or services rendered.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-align:justify;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>The sales price to the customer is fixed or determinable.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;margin-left:.5in;text-align:justify;text-indent:-.25in'><font style='font-family:Symbol'>&#183;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font>Collection is reasonably assured.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company recognizes revenue upon shipment in accordance with the above principles.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Gross sales are reduced for all consideration paid to customers for which no identifiable benefit is received by the Company.&#160; This includes promotional incentives, which includes various programs including year-end rebates and discounts.&#160; The amounts of certain incentives are known with reasonable certainty at the time of sale, while others are projected based upon the most reliable information available at the reporting date.&#160; Commissions are accounted for as a sales expense.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Cash Equivalents</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>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.&#160; Carrying value approximates fair value.&#160; Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits.&#160; The Company monitors the viability of the banking institutions carrying its assets on a regular basis, and has the ability to transfer cash to various institutions during times of risk.&#160; The Company has not experienced any losses related to these cash balances, and believes its credit risk to be minimal.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Accounts Receivable and Provision for Doubtful Accounts</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Accounts receivable are reduced by an allowance for amounts that may become uncollectible in the future. The estimated allowance for uncollectible amounts is based primarily on specific analysis of accounts in the receivable portfolio and historical write-off experience. While management believes the allowance to be adequate, if the financial condition of the Company&#146;s customers were to deteriorate, resulting in their inability to make payments, additional allowances may be required.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance.&#160; The Company determines the allowance based on any known collection issues, historical experience, and other currently available evidence.&#160; The reserve for future credits, discounts, and doubtful accounts was $661,000 and $710,000 as of June 30, 2015 and December 31, 2014, respectively.&#160; In regards to identifying uncollectible accounts, the Company reviews an aging report on a consistent basis to determine past due accounts, and utilizes a well established credit rating agency.&#160; The Company charges off those accounts that are deemed uncollectible once all collection efforts have been exhausted.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Inventories</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Inventories are valued at the lower of cost or market.&#160; The cost of inventories is determined by the first-in, first-out (FIFO) method.&#160; The Company generally considers inventory quantities beyond two-years usage, measured on a historical usage basis, to be excess inventory and reduces the carrying value of inventory accordingly.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Property and Equipment</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Property and equipment are carried 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.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Goodwill</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;punctuation-wrap:simple;text-autospace:none'>In accordance with Financial Accounting Standards Board (FASB) ASC Topic 350, Intangibles &#150; Goodwill and Other, the Company performed an annual impairment test in accordance with this guidance as of December 31, 2014.&#160; This analysis did not indicate any impairment of goodwill.&#160; There were no circumstances that indicate that Goodwill might be impaired at June 30, 2015.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'><b><u>Stock-Based Compensation Plans</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In 2006, the Company adopted a Phantom Stock Plan (the &#147;Plan&#148;), which allows the Company to grant phantom stock units (Units) to certain key employees, officers or directors.&#160; The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company&#146;s common stock.&#160; The Units follow a vesting schedule of three years from the grant date, and are then paid upon maturity.&#160; In accordance with FASB ASC Topic 718, Stock Compensation, the Company uses the Black-Scholes option pricing model as its method for determining the fair value of the Units.&#160; Further details of the Plan are provided in Note 6.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Product Liability Reserves</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Product liability reserves represent the estimated unpaid amounts under the Company&#146;s insurance policies with respect to existing claims.&#160; The Company uses the most current available data to estimate claims.&#160; As explained more fully under Note 5, Commitments and Contingencies, for various product liability claims covered under the Company&#146;s general liability insurance policies, the Company must pay certain defense costs within its deductible or self-insured retention limits, ranging primarily from $25,000 to $250,000 per claim, depending on the terms of the policy in the applicable policy year, up to an aggregate amount.&#160; The Company is vigorously defending against all known claims.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Fair Value of Financial and Nonfinancial Instruments</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company measures financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures.&#160; The accounting standard defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements.&nbsp;&nbsp;Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.&nbsp;&nbsp;Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.&#160; The standard creates a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that reflect the Company&#146;s own assumptions about the assumptions market participants would use in pricing the asset or liability. The Company relies on its actively traded share value &#150; a level 1 input &#150; in determining the fair value of the reporting unit in its annual impairment test as described in the FASB ASC Topic 350, Intangibles - Goodwill and Other.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Earnings per Common Share</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Basic earnings per share have been computed using the weighted-average number of common shares outstanding.&#160; For the periods presented, there are no dilutive securities.&#160; Consequently, basic and dilutive earnings per share are the same.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Currency Translation</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Assets and liabilities denominated in foreign currencies, most of which relate to our United Kingdom subsidiary whose functional currency is British pound sterling, are translated into U.S. dollars at exchange rates prevailing on the balance sheet dates.&#160; The statements of income are translated into U.S. dollars at average exchange rates for the period.&#160; Adjustments resulting from the translation of financial statements are excluded from the determination of income and are accumulated in a separate component of shareholders&#146; equity.&#160; Exchange gains and losses resulting from foreign currency transactions are included in the statements of income (other expense) in the period in which they occur.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Income Taxes</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes.&#160; Under this method the Company recorded tax expense, related deferred taxes and tax benefits, and uncertainties in tax positions.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.&#160; Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.&#160; The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date.&#160; A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The FASB ASC Topic 740, Income Taxes clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company&#146;s financial statements.&#160; This guidance prescribes a recognition threshold of more-likely than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-autospace:none;margin-left:0in;text-align:justify'>The Company follows the provisions of ASC 740-10 relative to accounting for uncertainties in tax positions. These provisions provide guidance on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions. The Company elected to recognize interest and penalties related to income tax matters as a component of the income tax provision in the consolidated statements of income. For additional information regarding ASC 740-10, see Note 8 of the Company&#146;s December 31, 2014 Form 10-K.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Other Comprehensive Income</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>For the three and six months ended June 30, 2015 and 2014, respectively, the components of other comprehensive income consisted solely of foreign currency translation adjustments.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Significant Concentration</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company has one significant customer who represents more than 10% of the Company&#146;s Net Sales for the three and six months ended June 30, 2015 and 2014, and more than 10% of the Company&#146;s Accounts Receivable balance at June 30, 2015 and December 31, 2014.&#160; Geographically, the Company has a significant amount of sales in the United States versus internationally. These concentrations are discussed in detail in the Company&#146;s December 31, 2014 Form 10-K, and there has been no significant change as of this quarterly report.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Subsequent Events</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>The Company evaluates all events or transactions through the date of the related filing that may have a material impact on its condensed consolidated financial statements.&#160; Refer to Note 9 of the condensed consolidated financial statements.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'><b><u>Recent Accounting Pronouncements</u></b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In May 2014, the FASB issued ASU 2014-09, <i>Revenue from Contracts with Customers (Topic 606)</i>, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The updated standard becomes effective for the Company in the first quarter of fiscal year 2018. Early adoption is permitted beginning in the first quarter of the Company&#146;s 2017 fiscal year.&#160; The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on the condensed consolidated financial statements.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>In July 2015, the FASB issued ASU 2015-11, <i>Simplifying the Measurement of Inventory (Topic 330)</i>.&#160; Under this ASU, inventory will be measured at the &#147;lower of cost and net realizable value&#148; and options that currently exist for &#147;market value&#148; will be eliminated. The ASU defines net realizable value as the &#147;estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.&#148; No other changes were made to the current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively.&#160; The Company is evaluating the provisions of this statement, including which period to adopt, and has not determined what impact the adoption of ASU 2015-11 will have on the Company's financial position or results of operations.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="586" style='width:439.25pt;border-collapse:collapse'> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="120" valign="bottom" style='width:1.25in;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>June 30,</b></p> </td> <td width="110" valign="bottom" style='width:82.85pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>December 31,</b></p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="120" valign="bottom" style='width:1.25in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>2015</b></p> </td> <td width="110" valign="bottom" style='width:82.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>2014</b></p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="230" colspan="2" valign="bottom" style='width:172.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>(dollars in thousands)</b></p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Finished Goods</p> </td> <td width="120" valign="bottom" style='width:1.25in;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$5,719</p> </td> <td width="110" valign="bottom" style='width:82.85pt;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$5,122</p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Raw Materials</p> </td> <td width="120" valign="bottom" style='width:1.25in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>2,517</p> </td> <td width="110" valign="bottom" style='width:82.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>2,242</p> </td> </tr> <tr align="left"> <td width="355" valign="bottom" style='width:3.7in;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Inventories - Net</p> </td> <td width="120" valign="bottom" style='width:1.25in;border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$8,236</p> </td> <td width="110" valign="bottom" style='width:82.85pt;border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 3.0pt 0in 3.0pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$7,364</p> </td> </tr> </table> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:justify'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>Units</b></p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:center'><b>Weighted Average Grant Date Fair Value</b></p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Number of Phantom Stock Unit Awards:</p> </td> <td valign="bottom" style='border:none;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>&nbsp;</p> </td> <td valign="bottom" style='border:none;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> </tr> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;Nonvested at December 31, 2014</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>19,156</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$15.67</p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Granted</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>10,460</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$28.90</p> </td> </tr> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vested</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>(9,281)</p> </td> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$15.09</p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forfeited</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> </tr> <tr align="left"> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canceled</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>---</p> </td> </tr> <tr align="left"> <td valign="bottom" style='background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Nonvested at June 30, 2015</p> </td> <td valign="bottom" style='border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>20,335</p> </td> <td valign="bottom" style='border:none;border-bottom:double windowtext 1.5pt;background:#CCE0FF;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$22.74</p> </td> </tr> <tr style='height:12.6pt'> <td valign="bottom" style='padding:0in 5.4pt 0in 5.4pt;height:12.6pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Phantom Stock Unit Awards Expected to Vest</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:12.6pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>20,335</p> </td> <td valign="bottom" style='border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt;height:12.6pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-autospace:none;text-align:right'>$22.74</p> </td> </tr> </table> 661000 710000 5719000 5122000 2517000 2242000 8236000 7364000 On December 29, 2014, the Company entered into to an Amended and Restated Committed Revolving Line of Credit Note (&#147;the Line&#148;) and a Second Amendment to the Loan Agreement with Santander Bank, N.A. (&#147;Santander&#148;). 15000000 The Line provides for the payment of any borrowings at an interest rate of either LIBOR plus 1.00% to plus 1.35% (for borrowings with a fixed term of 30, 60, or 90 days), or Prime from 0.00% to plus 0.10%, depending upon the Company&#146;s then existing financial ratios. At June 30, 2015, the Company&#146;s financial ratios would allow for the most favorable rate under the agreement&#146;s range, which would be a rate of 1.63%. the Company is required to pay on a quarterly basis an unused facility fee equal to 10 basis points of the average unused balance of the total Line commitment. 0 0 Under a number of indemnity agreements between the Company and each of its officers and directors, the Company has agreed to indemnify each of its officers and directors against any liability asserted against them in their capacity as an officer or director, or both. The Company&#146;s indemnity obligations under the indemnity agreements are subject to certain conditions and limitations set forth in each of the agreements. Under the terms of the Agreement, the Company is contingently liable for costs which may be incurred by the officers and directors in connection with claims arising by reason of these individuals&#146; roles as officers and directors. The Company has obtained directors&#146; and officers&#146; insurance policies to fund certain obligations under the indemnity agreements. The Company has salary continuation agreements with one current employee, and one former employee who retired at the end of 2010. These agreements provide for monthly payments to each of the employees or their designated beneficiary upon the employee&#146;s retirement or death. The payment benefits range from $1,000 per month to $3,000 per month with the term of such payments limited to 15 years after the employee&#146;s retirement at age 65. The agreements also provide for survivorship benefits if the employee dies before attaining age 65; and severance payments if the employee is terminated without cause; the amount of which is dependent on the length of company service at the date of termination. 500000 488000 12000 501000 489000 12000 1073000 1033000 25000 250000 -213000 -213000 Other Long Term Assets P1Y8M12D 33969000 111000 87000 2000 40918000 200000 20000000 20000000 0.01 0.01 10153633 10153633 10091822 10091822 61811 61811 5000000 61811 923000 0001317945 2015-01-01 2015-06-30 0001317945 2015-06-30 0001317945 2014-12-31 0001317945 2015-04-01 2015-06-30 0001317945 2014-04-01 2014-06-30 0001317945 2014-01-01 2014-06-30 0001317945 2013-12-31 0001317945 2014-06-30 0001317945 fil:SantanderBankNAMember 2015-01-01 2015-06-30 0001317945 fil:SantanderBankNAMember 2015-06-30 0001317945 fil:SantanderBankNAMember 2014-12-31 0001317945 us-gaap:InsuranceClaimsMember 2015-06-30 0001317945 us-gaap:PositiveOutcomeOfLitigationMember 2015-06-30 0001317945 us-gaap:PositiveOutcomeOfLitigationMember 2014-12-31 0001317945 us-gaap:PositiveOutcomeOfLitigationMember 2015-01-01 2015-06-30 0001317945 2007-09-12 2015-06-30 iso4217:USD shares iso4217:USD shares Less allowance of $661 Less allowance of $710. See Note 5.