UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2017~~2023

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

For the transition period from to

Commission file number: 001-16465

Retractable Technologies, Inc.

(Exact name of registrant as specified in its charter)


Texas		75-2599762
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

511 Lobo Lane
Little Elm, Texas		75068-5295
(Address of principal executive offices)		(Zip Code)

~~(972)~~ (972) 294-1010

(Registrant’s telephone number, including area code)

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	RVP	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☑ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x☑ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated filer”~~" "accelerated filer," "smaller reporting company" and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~ o		~~Accelerated filer~~ o
Large accelerated filer	☐	Accelerated filer	☐
~~Non-accelerated filer~~ o		~~Smaller reporting company~~ x
~~(Do not check if a smaller reporting company)~~Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.◻

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o◻ No o◻

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~32,666,454~~29,937,159 shares of Common Stock ~~no par value,~~ outstanding, excluding 4,087,145 treasury shares, on November 1, ~~2017.~~2023.

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, ~~2017~~2023

TABLE OF CONTENTS


	PART I—I – FINANCIAL INFORMATION

Item 1.	Financial Statements		1

CONDENSED BALANCE SHEETS			1
	CONDENSED STATEMENTS OF OPERATIONS		2
	CONDENSED STATEMENTS OF CASH FLOWS		3
	~~NOTES TO~~ CONDENSED ~~FINANCIAL~~ STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY		4
	NOTES TO CONDENSED FINANCIAL STATEMENTS		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16	20

Item 4.	Controls and Procedures	16	20

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	17	21

Item 1A.	Risk Factors	17	21
Item 5.	Other Information		21
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	17

~~Item 3.~~	~~Defaults Upon Senior Securities~~	17

Item 6.	Exhibits	18	21
SIGNATURES
~~SIGNATURES~~		1922

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements.

~~Item 1.~~~~Financial Statements.~~

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED BALANCE SHEETS

(unaudited)

September 30, 2017

December 31, 2016

ASSETS

Current assets:

Cash and cash equivalents
$
15,866,458
$
16,199,043

Accounts receivable, net

5,246,322

3,267,838

Inventories, net

7,353,247

7,017,224

Other current assets

505,656

192,548

Total current assets

28,971,683

26,676,653

Property, plant, and equipment, net

11,663,988

12,092,037

Other assets

7,063

10,289

Total assets
$
40,642,734
$
38,778,979

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable
$
5,046,014
$
4,471,756

Current portion of long-term debt

430,089

430,393

Accrued compensation

924,879

536,456

Dividends payable

55,113

55,113

Accrued royalties to shareholder

847,301

659,443

Insurance proceeds

876,250

—

Other accrued liabilities

950,770

1,019,283

Total current liabilities

9,130,416

7,172,444

Long-term debt, net of current maturities

3,172,321

3,498,244

Total liabilities

12,302,737

10,670,688

Commitments and contingencies — see Note 6

Stockholders’ equity:

Preferred stock, $1 par value:

Series I, Class B

98,500

98,500

Series II, Class B

171,200

171,200

Series III, Class B

129,245

129,245

Series IV, Class B

342,500

342,500

Series V, Class B

40,000

40,000

Common stock, no par value

—

—

Additional paid-in capital

62,127,956

59,290,333

Accumulated deficit

(34,569,404
)
(31,963,487
)
Total stockholders’ equity

28,339,997

28,108,291

Total liabilities and stockholders’ equity
$
40,642,734
$
38,778,979


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	11,257,822	$	19,721,345
Accounts receivable, net		8,180,244		4,835,119
Receivable from Technology Investment Agreement (TIA)		—		2,025,413
Investments in debt and equity securities, at fair value		33,649,141		29,657,314
Inventories		22,466,954		20,684,168
Income taxes receivable		1,143,930		10,619,835
Prepaid estimated taxes		4,295		4,295
Other current assets		1,095,053		1,262,221
Total current assets		77,797,439		88,809,710

Property, plant, and equipment, net		95,025,849		100,152,768
Deferred tax asset		8,533,602		6,518,663
Other assets		159,515		184,524
Total assets	$	181,516,405	$	195,665,665

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,393,351	$	6,404,925
Current portion of long-term debt		297,257		285,954
Accrued compensation		728,889		997,530
Dividends payable		1,417,937		1,417,937
Accrued royalties to shareholder		794,388		973,701
Other accrued liabilities		2,589,845		1,992,144
Income taxes payable		40,368		63,631
Total current liabilities		9,262,035		12,135,822

Other long-term liabilities		71,517,656		75,459,612
Long-term debt, net of current maturities		1,312,330		1,533,422
Total liabilities		82,092,021		89,128,856

Commitments and contingencies – see Note 8

Stockholders’ equity:
Preferred stock, $1 par value:
Class B; authorized: 5,000,000 shares
Series II, Class B		156,200		156,200
Series III, Class B		76,245		76,245
Common Stock, no par value		—		—
Additional paid-in capital		73,164,501		73,164,501
Retained earnings		38,916,116		46,028,541
Common stock in treasury – at cost		(12,888,678)		(12,888,678)
Total stockholders’ equity		99,424,384		106,536,809
Total liabilities and stockholders’ equity	$	181,516,405	$	195,665,665

See accompanying notes to condensed unaudited financial statements

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

Three Months
Ended
September 30, 2017

Three Months
Ended
September 30, 2016

Nine Months
Ended
September 30, 2017

Nine Months
Ended
September 30, 2016

Sales, net
$
10,412,036

$
8,840,134

$
24,981,833

$
22,337,169

Cost of sales

Cost of manufactured product

6,304,397

4,900,072

15,116,805

12,400,679

Royalty expense to shareholder

847,301

680,287

2,070,699

1,868,064

Total cost of sales

7,151,698

5,580,359

17,187,504

14,268,743

Gross profit

3,260,338

3,259,775

7,794,329

8,068,426

Operating expenses:

Sales and marketing

1,220,451

1,058,029

3,472,004

2,953,773

Research and development

159,921

117,939

465,765

389,712

General and administrative

1,912,824

2,165,246

6,346,731

6,306,085

Total operating expenses

3,293,196

3,341,214

10,284,500

9,649,570

Loss from operations

(32,858
)

(81,439
)

(2,490,171
)

(1,581,144
)

Interest and other income

19,477

8,609

44,155

19,822

Interest expense, net

(52,962
)

(51,994
)

(159,053
)

(158,327
)
Net loss before income taxes

(66,343
)

(124,824
)

(2,605,069
)

(1,719,649
)
Provision for income taxes

283

480

848

1,440

Net loss

(66,626
)

(125,304
)

(2,605,917
)

(1,721,089
)
Preferred stock dividend requirements

(176,249
)

(176,249
)

(528,747
)

(528,747
)
Loss applicable to common shareholders
$
(242,875
)
$
(301,553
)
$
(3,134,664
)
$
(2,249,836
)

Basic loss per share
$
(0.01
)
$
(0.01
)
$
(0.10
)
$
(0.08
)

Diluted loss per share
$
(0.01
)
$
(0.01
)
$
(0.10
)
$
(0.08
)

Weighted average common shares outstanding:

Basic

32,166,454

29,649,874

31,722,010

29,252,652

Diluted

32,166,454

29,649,874

31,722,010

29,252,652


	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Sales, net	$	10,335,031	$	23,061,285	$	29,307,413	$	82,140,204
Cost of sales:
Cost of manufactured product		5,219,962		16,835,848		19,522,722		53,225,651
Royalty expense to shareholder		794,388		1,488,811		2,217,575		4,963,406
Total cost of sales		6,014,350		18,324,659		21,740,297		58,189,057
Gross profit		4,320,681		4,736,626		7,567,116		23,951,147

Operating expenses:
Sales and marketing		1,368,112		1,174,675		4,263,735		3,258,435
Research and development		150,957		105,749		419,475		407,675
General and administrative		3,737,479		4,146,821		11,592,965		13,311,488
Total operating expenses		5,256,548		5,427,245		16,276,175		16,977,598
Income (loss) from operations		(935,867)		(690,619)		(8,709,059)		6,973,549

Other income - TIA		1,447,975		861,850		4,479,773		1,954,404
Unrealized loss on debt and equity securities		(6,538,568)		(615,215)		(11,298,207)		(1,187,629)
Gain on sale of equity securities		—		—		5,574,791		—
Interest and other income		768,863		105,661		1,197,329		201,152
Interest expense		(36,087)		(40,273)		(117,110)		(125,746)
Income (loss) before income taxes		(5,293,684)		(378,596)		(8,872,483)		7,815,730
Benefit for income taxes		(1,233,188)		(5,763,850)		(1,934,393)		(1,544,383)
Net income (loss)		(4,060,496)		5,385,254		(6,938,090)		9,360,113
Preferred Stock dividend requirements		(58,111)		(58,111)		(174,335)		(174,333)
Net income (loss) applicable to common shareholders	$	(4,118,607)	$	5,327,143	$	(7,112,425)	$	9,185,780

Basic earnings (loss) per share	$	(0.14)	$	0.16	$	(0.24)	$	0.28

Diluted earnings (loss) per share	$	(0.14)	$	0.16	$	(0.24)	$	0.28

Weighted average common shares outstanding:
Basic		29,937,159		32,936,959		29,937,159		33,049,411
Diluted		29,937,159		33,229,866		29,937,159		33,358,225

See accompanying notes to condensed unaudited financial statements

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

Nine Months
Ended
September 30, 2017

Nine Months
Ended
September 30, 2016

Cash flows from operating activities

Net loss
$
(2,605,917
)
$
(1,721,089
)
Adjustments to reconcile net loss to net cash used by operating activities:

Provision for doubtful accounts

(81,152
)

92,000

Share-based compensation

652,860

84,651

Depreciation and amortization

603,582

672,000

(Increase) decrease in assets:

Accounts receivable

(1,897,332
)

(352,444
)
Inventories

(336,023
)

(908,099
)
Other current assets

(313,108
)

1,338,622

Other assets

—

(750
)
Increase (decrease) in liabilities:

Accounts payable

574,258

(988,248
)
Other accrued liabilities

507,768

139,817

Income taxes payable

—

2,717

Insurance proceeds

876,250

—

Net cash used by operating activities

(2,018,814
)

(1,640,823
)

Cash flows from investing activities

Purchase of property, plant, and equipment

(172,305
)

(1,671,649
)
Net cash used by investing activities

(172,305
)

(1,671,649
)

Cash flows from financing activities

Repayments of long-term debt and notes payable

(326,227
)

(187,418
)
Proceeds from the sale of common stock

2,350,100

—

Proceeds from the exercise of stock options

—

839,200

Payment of Preferred Stock dividends

(165,339
)

(165,640
)
Net cash provided by financing activities

1,858,534

486,142

Net decrease in cash and cash equivalents

(332,585
)

(2,826,330
)

Cash and cash equivalents at:

Beginning of period

16,199,043

18,045,044

End of period
$
15,866,458

$
15,218,714

Supplemental schedule of cash flow information:

Interest paid
$
159,053

$
158,325

Income taxes paid
$
—

$
2,025

Supplemental schedule of noncash investing and financing activities:

Preferred dividends declared, not paid
$
55,113

$
55,113


	Nine Months		Nine Months
	Ended		Ended
	September 30, 2023		September 30, 2022
Cash flows from operating activities
Net income (loss)	$	(6,938,090)	$	9,360,113
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation and amortization		5,826,203		2,984,785
Net unrealized loss on investments		11,298,207		1,187,629
Realized (gain) loss on investments		(5,574,791)		38,378
Accreted interest		9,157		46,957
Deferred taxes		(2,014,939)		3,893,874
Provision for doubtful accounts		452,547		—
Share-based compensation		—		3,433,972
Inventory Reduction		172,203		—
Other income - TIA		(4,479,773)		(1,954,404)
(Increase) decrease in operating assets:
Accounts receivable		(3,797,674)		16,957,532
Inventories		(1,954,988)		2,070,742
Other current assets		167,166		(65,312)
Income taxes receivable		9,475,906		—
Prepaid estimated taxes		—		(13,027,101)
Other assets		25,008		—
Increase (decrease) in operating liabilities:
Accounts payable		(3,011,574)		(12,271,594)
Accrued liabilities		1,241,700		(3,067,833)
Income taxes payable		(23,263)		(4,959,878)
Net cash from operating activities		873,005		4,627,860

Cash flows from investing activities
Purchase of property, plant, and equipment		(699,283)		(13,880,546)
Purchase of debt and equity securities		(68,287,428)		(16,196,164)
Proceeds from the sales of debt and equity securities		58,572,186		1,924,769
Net cash from investing activities		(10,414,525)		(28,151,941)

Cash flows from financing activities
Repayments of long-term debt		(209,789)		(213,661)
Proceeds from Technology Investment Agreement (TIA)		2,563,229		12,092,638
Proceeds from the exercise of stock options		—		13,800
Payment of preferred stock repurchase payable		(1,101,110)		(1,101,110)
Payment of preferred stock dividends		(174,333)		(194,768)
Repurchase of common stock		—		(2,818,177)
Net cash from financing activities		1,077,997		7,778,722

Net decrease in cash and cash equivalents		(8,463,523)		(15,745,359)
Cash and cash equivalents at:
Beginning of period		19,721,345		29,162,913
End of period	$	11,257,822	$	13,417,554

Supplemental schedule of cash flow information:
Interest paid	$	71,867	$	78,789
Income taxes paid	$	—	$	12,323,857

Supplemental schedule of noncash investing and financing activities:
Preferred dividends declared, not paid	$	—	$	1,417,937
Amounts receivable under Technology Investment Agreement (TIA)	$	—	$	1,836,826
Preferred stock repurchase payable	$	—	$	1,084,795

See accompanying notes to condensed unaudited financial statements

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

The following shows the changes in stockholders’ equity for the three-month period ended September 30, 2023:


			Series II		Series III
			Class B		Class B		Additional				Treasury
	Common		Preferred		Preferred		Paid-In		Retained		Stock –
	Stock		Stock		Stock		Capital		Earnings		at cost		Total
Balance at June 30, 2023	$	—	$	156,200	$	76,245	$	73,164,501	$	43,034,723	$	(12,888,678)	$	103,542,991
Dividends		—		—		—		—		(58,111)		—		(58,111)
Net Loss		—		—		—		—		(4,060,496)		—		(4,060,496)
Balance at September 30, 2023	$	—	$	156,200	$	76,245	$	73,164,501	$	38,916,116	$	(12,888,678)	$	99,424,384

The following shows the changes in stockholders’ equity for the three-month period ended September 30, 2022:


			Series II		Series III
			Class B		Class B		Additional				Treasury
	Common		Preferred		Preferred		Paid-In		Retained		Stock –
	Stock		Stock		Stock		Capital		Earnings		at cost		Total
Balance at June 30, 2022	$	—	$	156,200	$	76,245	$	65,312,124	$	45,041,065	$	(8,088,678)	$	102,496,956
Stock Option Exercises		—		—		—		3,300		—		—		3,300
Dividends		—		—		—		—		(58,111)		—		(58,111)
Stock Option Compensation		—		—		—		1,157,236		—		—		1,157,236
Net Income		—		—		—		—		5,385,254		—		5,385,254
Balance at September 30, 2022	$	—	$	156,200	$	76,245	$	66,472,660	$	50,368,208	$	(8,088,678)	$	108,984,635

The following shows the changes in stockholders’ equity for the nine-month period ended September 30, 2023:


			Series II		Series III
			Class B		Class B		Additional				Treasury
	Common		Preferred		Preferred		Paid-In		Retained		Stock –
	Stock		Stock		Stock		Capital		Earnings		at cost		Total
Balance at December 31, 2022	$	—	$	156,200	$	76,245	$	73,164,501	$	46,028,541	$	(12,888,678)	$	106,536,809
Dividends		—		—		—		—		(174,335)		—		(174,335)
Net Loss		—		—		—		—		(6,938,090)		—		(6,938,090)
Balance at September 30, 2023	$	—	$	156,200	$	76,245	$	73,164,501	$	38,916,116	$	(12,888,678)	$	99,424,384

The following shows the changes in stockholders’ equity for the nine-month period ended September 30, 2022:


			Series II		Series III
			Class B		Class B		Additional				Treasury
	Common		Preferred		Preferred		Paid-In		Retained		Stock –
	Stock		Stock		Stock		Capital		Earnings		at cost		Total
Balance at December 31, 2021	$	—	$	156,200	$	76,245	$	63,024,888	$	41,182,429	$	(5,270,501)	$	99,169,261
Stock Option Exercises		—		—		—		13,800		—		—		13,800
Dividends		—		—		—		—		(174,334)		—		(174,334)
Stock Option Compensation		—		—		—		3,433,972		—		—		3,433,972
Repurchase of Common Stock - at cost		—		—		—		—		—		(2,818,177)		(2,818,177)
Net Income		—		—		—		—		9,360,113		—		9,360,113
Balance at September 30, 2022	$	—	$	156,200	$	76,245	$	66,472,660	$	50,368,208	$	(8,088,678)	$	108,984,635

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION

Business of the Company

Retractable Technologies, Inc. (the “Company”) was incorporated in Texas on May 9, 1994, and designs, develops, manufactures, and markets safety syringes and other safety medical products for the healthcare profession. The Company began to develop its manufacturing operations in 1995. The Company’s manufacturing and administrative facilities are located in Little Elm, Texas. The Company’s products are the VanishPoint^® 0.5mL insulin syringe; 1mL tuberculin, insulin, and allergy antigen syringes; 0.5mL, 1mL, 2mL, 3mL, 5mL, and 10mL syringes; the blood collection tube holder; the EasyPoint^® blood collection tube holder with needle; the small diameter tube adapter; the allergy tray; the IV safety catheter; the Patient Safe^® syringes; the Patient Safe^® Luer Cap; the VanishPoint^®Blood Collection Set; and the EasyPoint^® needle as well as a standard 3mL syringe packaged with an EasyPoint^® needle. The Company also sells VanishPoint^®autodisable syringes in the international market in addition to the Company’s other products.

Basis of presentation

The accompanying condensed financial statements are unaudited and, in the opinion of Management, reflect all adjustments that are necessary for a fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The unaudited condensed financial statements should be read in conjunction with the financial statement disclosures contained in the Company’s audited financial statements incorporated into its Form 10-K filed on March ~~31, 2017~~30, 2023 for the year ended December 31, ~~2016.~~2022.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. The amount reported as a contractual allowance for rebates involves examination of past historical trends related to sales to customers and the related credits issued once contractual obligations of the customers have been met. The establishment of a liability for future claims of rebates against sales in the current period requires that the Company has an understanding of the relevant sales with respect to product categories, sales distribution channels, and the likelihood of contractual obligations being satisfied.

Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash, money market accounts, and investments with original maturities of three months or less.

Accounts receivable

The Company records trade receivables when revenue is recognized. No product has been consigned to customers. The Company’s allowance for doubtful accounts is primarily determined by review of specific trade receivables. Those accounts that are doubtful of collection are included in the allowance. This provision is reviewed to determine

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the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms.

The allowance for doubtful accounts was $716,148 and $675,208 as of September 30, 2023 and December 31, 2022, respectively.

The Company requires certain customers to make a prepayment prior to beginning production or shipment of their order. Customers may apply such prepayments to their outstanding invoices or pay the invoice and continue to carry forward the deposit for future orders. Such amounts are included in Other accrued liabilities on the Condensed Balance Sheets and are shown in Note 5,6, Other Accrued Liabilities.

The Company records an allowance for estimated returns as a reduction to Accounts receivable and Gross sales. Historically, returns have been ~~immaterial.~~

~~Inventories~~insignificant.

Inventories

Inventories are valued at the lower of cost or net realizable value, with cost being determined using actual average cost. The Company compares the average cost to the net realizable value and records the lower value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. As of September 30, 2023, the company recorded a $31 thousand lower of cost or net realizable value inventory adjustment associated with the VanishPoint^® 3mL product segment. There was no lower of cost or net realizable value inventory adjustment as of December 31, 2022.

Management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time to sell such inventory, the shelf life of inventory, and current market conditions when determining excess or obsolete inventories. ~~A reserve is established for any~~Once inventory items are deemed to be either excess or obsolete, ~~inventories~~they are written down to their net realizable value. As of September 30, 2023 and December 31, 2022, our inventory reserve was $438 thousand and $297 thousand, respectively.

Investments in debt and equity securities

The Company holds mutual funds, debt and equity securities as investments. These assets are readily marketable and are carried at fair value as of the date of the Condensed Balance Sheets. Net unrealized and realized gains or ~~they may be written off.~~losses on these investments are reflected separately on the Condensed Statements of Operations. Realized gains or losses on investments are recognized using the specific identification method.

Property, plant, and equipment

Property, plant, and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Cost includes major expenditures for improvements and replacements which extend useful lives or increase capacity and interest ~~cost~~costs associated with significant capital additions. Gains or losses from ~~property~~ disposals are included in Interest and other income.

The ~~Company’s~~Company's property, plant, and equipment primarily consist of buildings, ~~and improvements,~~ land, assembly equipment, molding machines, molds, office equipment, furniture, and fixtures. Depreciation and amortization are calculated using the straight-line method over the following useful lives:


Production equipment		3 to 13 years
Office furniture and equipment		3 to 10 years
Buildings		39 years
Building improvements		15 years

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Long-lived assets

The Company assesses the recoverability of long-lived assets using an assessment of the estimated undiscounted future cash flows related to such assets. In the event that assets are found to be carried at amounts which are in excess of estimated gross future cash flows, the assets will be adjusted for impairment to a level commensurate with fair value determined using a discounted cash flow analysis or appraised values of the underlying assets.

Fair value measurements

For assets and liabilities that are measured using quoted prices in active markets, total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, adjusted for contract restrictions and other terms specific to that asset or liability. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using a fair value model, such as a discounted cash flow model or Black-Scholes model.

Financial instruments

The Company estimates the fair value of financial instruments through the use of public market prices, quotes from financial institutions, and other available information. Judgment is required in interpreting data to develop estimates of fair value and, accordingly, amounts are not necessarily indicative of the amounts that could be realized in a current market exchange. Short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on ~~Management’s~~Management's estimates, equals their recorded values. Investments in debt and equity securities consist primarily of individual equity securities and mutual funds and are reported at their fair value based upon quoted prices in active markets. The fair value of long-term liabilities, based on Management’s estimates, approximates their reported values.

Concentration risks

The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash, cash equivalents, certificates of deposit, exchange-traded and closed-end funds, mutual funds, equity securities, and accounts receivable. Cash balances, some of which exceed federally insured limits, are maintained in financial institutions; however, Management believes the institutions are of high credit quality. The Company assesses market risk in equity securities through consultation with its outside investment advisors. Management is responsible for directing investment activity based on current economic conditions. The majority of accounts receivable are due from companies which are well-established entities. ~~As a consequence,~~ Management considers any exposure from concentrations of credit risks to be limited.

The following table reflects our significant customers for the ~~three~~three-month and ~~nine months~~nine-month periods ended September 30, ~~2017~~2023 and ~~2016:~~

Three Months ended
September 30, 2017

Three Months ended
September 30, 2016

Nine Months ended
September 30, 2017

Nine Months ended
September 30, 2016

Number of significant customers

3

2

2

1

Aggregate dollar amount of net sales to significant customers

$5.1 million

$3.5 million

$9.4 million

$7.1 million

Percentage of net sales to significant customers

49.1%

39.3%

37.5%

31.6%

2022:


	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2023			September 30, 2022			September 30, 2023			September 30, 2022
Number of significant customers		3			2			3			4
Aggregate dollar amount of net sales to significant customers	$	5.7	million	$	15.5	million	$	14.3	million	$	60.0	million
Percentage of net sales to significant customers		55.0%			67.4%			49.0%			73.0%

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The Company manufactures some of its products in Little Elm, Texas as well as utilizing manufacturers in China. The Company ~~purchases most~~obtained roughly 90% and 92% of its product components from single suppliers, including needle adhesives and packaging materials. There are multiple sources of these materials. The Company obtained roughly 90.4% and 85.1% of its VanishPoint® ~~syringes~~products in the first nine months of ~~2017~~2023 and ~~2016,~~2022, respectively, from its ~~primary~~ Chinese ~~manufacturer.~~manufacturers. Purchases from ~~this~~ Chinese ~~manufacturer~~manufacturers aggregated ~~93.0%~~91% and ~~92.7%~~94% of ~~VanishPoint~~® ~~syringes~~products in the ~~three month periods ended September 30, 2017~~third quarter of 2023 and ~~2016,~~2022, respectively. In the event that the Company becomes unable to purchase products from its Chinese manufacturers, the Company ~~would~~may need to find an alternate manufacturer for its blood collection set, EasyPoint^® blood collection tube holder with needle, IV catheter, Patient Safe^® syringe, 0.5mL insulin syringe, 0.5mL autodisable syringe, and 2mL, 5mL, and 10mL syringes, and would increase domestic production for the 1mL and 3mL ~~syringes.~~

~~Revenue recognition~~

syringes and EasyPoint^® needles.

Revenue ~~is recognized for sales~~recognition

The Company recognizes revenue when ~~title and risk~~control of ~~ownership~~performance obligations passes to the customer, generally ~~upon shipment.~~when the product ships. Payments from customers with approved credit terms are typically due 30 days from the invoice date. Under certain contracts, revenue is recorded on the basis of sales price to distributors, less contractual pricing allowances. Contractual pricing allowances consist of: (i) rebates granted to distributors who provide tracking reports which show, among other things, the facility that purchased the products, and (ii) a provision for estimated contractual pricing allowances for products for which the Company has not received tracking reports. ~~Rebates~~When rebates are ~~recorded when~~ issued, ~~and~~they are applied against the customer’s receivable balance. Distributors receive a rebate for the difference between the Wholesale Acquisition Cost and the appropriate contract price as reflected on a tracking report provided by the distributor to the Company. If product is sold by a distributor to an entity that has no contract, there is a standard rebate (lower than a contracted rebate) given to the distributor. One of the purposes of the rebate is to encourage distributors to submit tracking reports to the Company. The provision for contractual pricing allowances is recognized in the period the related sales are recognized and is reviewed at the end of each quarter and adjusted for changes in levels of products for which there is no tracking report. Additionally, if it becomes clear that tracking reports will not be provided by individual distributors, the provision is further adjusted. The estimated contractual allowance is included in Accounts payable in the Condensed Balance Sheets and deducted from ~~revenues~~Revenues in the Condensed Statements of Operations. Accounts payable included estimated contractual allowances for ~~$3,714,733~~$2.7 million and ~~$3,591,534~~$3.0 million as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, respectively. The terms and conditions of contractual pricing allowances are governed by contracts between the Company and its distributors. Revenue for shipments directly to end-users is recognized when title and risk of ownership pass from the Company. End-users do not receive any contractual allowances on their purchases. Any product shipped or distributed for evaluation purposes is expensed.

The Company provides product warranties that: i) the products are fit for medical use as generally defined within the boundaries of United States FDA approval; ii) the products are not defective; and iii) the products will conform to the descriptions set forth in their respective labeling, provided that they are used in accordance with such labeling and the Company’s written directions for use. The Company has historically not incurred significant warranty claims.

The Company’s domestic return ~~policy is set forth in its standard Distribution Agreement. This~~ policy provides that a customer may return incorrect shipments within 10 days following arrival at the distributor’s facility. In all such cases, the distributor must obtain an authorization code from the Company and affix the code to the returned product. ~~The Company will not accept returned goods without a returned goods authorization number. The Company may refund the customer’s money or replace the product.~~

The Company’s domestic return policy also generally provides that a customer may return product that is overstocked. Overstocking returns are limited to two times in each 12-month period up to 1% of distributor’s total purchase of products for the prior 12-month period. All product overstocks and returns are subject to inspection and acceptance by the Company. The Company has not historically incurred significant returns.

The Company’s international distribution agreements generally do not provide for any returns.

The Company requires certain customers to pay in advance of product shipment. Such prepayments from customers are recorded in Other accrued liabilities and are generally recognized as revenue upon shipment of the product.

The Company periodically recognizes revenue from licensing agreements. If the Company licenses its products for sale and the customers of the sublicensee are not known to the Company, the Company is obligated to pay Thomas J.

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Shaw, the owner of certain patented technology, fifty percent (50%) of such revenue pursuant to the terms of the Technology License Agreement between the Company and Mr. Shaw.
Disaggregated information of revenue recognized from contracts with customers and licensing fees recognized are as follows:

For the three months ended September 30, 2023:




Blood





Total

Collection

EasyPoint^®

Other

Product
Geographic Segment

Syringes

Products

Needles

Products

Sales
U.S. sales

$
6,439,220

$
379,135

$
2,566,161

$
8,221

$
9,392,737
Sales to U.S. government

—

—

—

—

—
North and South America sales (excluding U.S.)

825,480

—

—

14,250

839,730
Other international sales

87,694

10,920

3,800

150

102,564
Total

$
7,352,394

$
390,055

$
2,569,961

$
22,621

$
10,335,031

For the three months ended September 30, 2022:




Blood





Total

Collection

EasyPoint^®

Other

Product
Geographic Segment

Syringes

Products

Needles

Products

Sales
U.S. sales (excluding U.S. government)

$
6,947,856

$
815,964

$
1,426,060

$
7,253

$
9,197,133
Sales to U.S. government

—

—

—

—

—
North and South America sales (excluding U.S.)

9,825,120

—

—

16,416

9,841,536
Other international sales

3,915,102

8,590

97,724

1,200

4,022,616
Total

$
20,688,078

$
824,554

$
1,523,784

$
24,869

$
23,061,285

For the nine months ended September 30, 2023:




Blood





Total

Collection

EasyPoint^®

Other

Product
Geographic Segment

Syringes

Products

Needles

Products

Sales
U.S. sales (excluding U.S. government)

$
17,022,384

$
1,123,808

$
3,944,284

$
26,385

$
22,116,861
Sales to U.S. government

—

—

—

—

—
North and South America sales (excluding U.S.)

5,596,992

—

—

226,290

5,823,282
Other international sales

959,548

224,868

178,004

4,850

1,367,270
Total

$
23,578,924

$
1,348,676

$
4,122,288

$
257,525

$
29,307,413

For the nine months ended September 30, 2022:




Blood





Total

Collection

EasyPoint^®

Other

Product
Geographic Segment

Syringes

Products

Needles

Products

Sales
U.S. sales (excluding U.S. government)

$
22,220,324

2,419,915

4,294,603

36,941

$
28,971,783
Sales to U.S. government

15,731,136

—

—

—

15,731,136
North and South America sales (excluding U.S.)

24,421,790

—

2,608

232,834

24,657,232
Other international sales

12,418,679

255,204

103,420

2,750

12,780,053
Total

$
74,791,929

$
2,675,119

$
4,400,631

$
272,525

$
82,140,204

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Income taxes

The Company evaluates tax positions taken or expected to be taken in a tax return for recognition in the financial statements based on whether it is “more-likely-than-not” that a tax position will be sustained based upon the technical merits of the position. Measurement of the tax position is based upon the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The Company provides for deferred income taxes through utilizing an asset and liability approach for financial accounting and reporting based on the tax effects of differences between the financial statement and tax bases of assets and liabilities, based on enacted rates expected to be in effect when such differences reverse in future periods. Deferred tax assets are periodically reviewed for realizability. ~~The Company~~Management has ~~established~~concluded that a $283 thousand valuation allowance is needed for ~~its~~state net ~~deferred tax asset~~operating losses as ~~future taxable income cannot be reasonably assured. Penalties~~of September 30, 2023 and ~~interest related to income tax are classified as General and administrative expense and Interest expense, respectively, in the Condensed Statements of Operations. Such expenses are not material.~~December 31, 2022.

Earnings per share

The Company computes basic earnings per share (“EPS”) by dividing net earnings for the period (adjusted for any cumulative dividends for the period) by the weighted average number of common shares outstanding during the period. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the dilutive effect, if any, of the common stock deliverable pursuant to stock options and/or common stock issuable upon the conversion of convertible preferred stock.

The calculation of diluted EPS ~~excluded 93,125~~under the treasury stock method included the following shares in the three-month and ~~670,338 shares of Common Stock underlying issued and outstanding stock options for the three months ended~~nine-month periods ending September 30, ~~2017~~2023 and September 30, 2016, respectively, as their effect was antidilutive. The calculation of diluted EPS excluded 128,540 and 674,042 shares of Common Stock underlying issued and outstanding stock options for the nine months ended September 30, 2017 and September 30, 2016, respectively, as their effect was antidilutive. 2022:


	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
	September 30, 2023	September 30, 2022	September 30, 2023	September 30, 2022
Common Stock underlying issued and outstanding stock options	6,408	60,462	17,904	76,370
Common stock issuable upon the conversion of convertible preferred shares	232,445	232,445	232,445	232,445
	238,853	292,907	250,349	308,815

The potential dilution, if any, is shown on the following schedule:

Three Months Ended
September 30, 2017

Three Months Ended
September 30, 2016

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2016

Net loss
$
(66,626
)
$
(125,304
)
$
(2,605,917
)
$
(1,721,089
)
Preferred dividend requirements

(176,249
)

(176,249
)

(528,747
)

(528,747
)
Loss applicable to common shareholders after assumed conversions
$
(242,875
)
$
(301,553
)
$
(3,134,664
)
$
(2,249,836
)
Average common shares outstanding

32,166,454

29,649,874

31,722,010

29,252,652

Average common and common equivalent shares outstanding – assuming dilution

32,166,454

29,649,874

31,722,010

29,252,652

Basic loss per share
$
(0.01
)
$
(0.01
)
$
(0.10
)
$
(0.08
)
Diluted loss per share
$
(0.01
)
$
(0.01
)
$
(0.10
)
$
(0.08
)


	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net income (loss)	$	(4,060,496)	$	5,385,254	$	(6,938,090)	$	9,360,113
Preferred stock dividend requirements		(58,111)		(58,111)		(174,335)		(174,333)
Income (loss) applicable to common shareholders	$	(4,118,607)	$	5,327,143	$	(7,112,425)	$	9,185,780
Average common shares outstanding		29,937,159		32,936,959		29,937,159		33,049,411
Average common and common equivalent shares outstanding — assuming dilution		29,937,159		33,229,866		29,937,159		33,358,225
Basic earnings (loss) per share	$	(0.14)	$	0.16	$	(0.24)	$	0.28
Diluted earnings (loss) per share	$	(0.14)	$	0.16	$	(0.24)	$	0.28

Shipping and handling costs

The Company classifies shipping and handling costs as part of Cost of sales in the Condensed Statements of Operations.

~~Research and development costs~~Table of Contents

~~Research and development costs are expensed as incurred.~~

Share-based ~~compensation~~

Compensation

The Company’s share-based payments are accounted for using the Black-Scholes fair value method. The Company generally records share-based compensation expense on a straight-line basis over the requisite service period. The Company ~~incurred~~records forfeitures as they occur.

Self-insured employee benefit costs

The Company self-insures certain health insurance benefits for its employees under certain policy limits. The Company has additional coverage provided by an insurance company for any individual with claims in excess of $100,000 and/or total plan claims in excess of $1.7 million for the ~~following share-based compensation costs:~~plan year.

Three Months
Ended
September 30, 2017

Three Months
Ended
September 30, 2016

Nine Months
Ended
September 30, 2017

Nine Months
Ended
September 30, 2016

Cost of sales
$
74,683

$
37,995

$
270,800

$
37,995

Sales and marketing

38,578

20,723

143,255

20,723

Research and development

12,458

6,310

45,174

6,310

General and administrative

56,832

19,623

193,631

19,623

$
182,551

$
84,651

$
652,860

$
84,651

Research and development costs

~~Insurance Proceeds~~Research and development costs are expensed as incurred.

Technology Investment Agreement (TIA)

~~Receipts from insurance up~~Effective July 1, 2020, the Company entered into a Technology Investment Agreement (“TIA”) with the United States Government Department of Defense, U.S. Army Contracting Command-Aberdeen Proving Ground, Natick Contracting Division & Edgewood Contracting Division (ACC-APG, NCD & ECD) on behalf of the Biomedical Advanced Research and Development Authority (BARDA), as amended, for $81,029,518 in government funding for expanding the Company’s domestic production of needles and syringes. Pursuant to the ~~amount~~terms of ~~any loss recognized by~~the TIA, the Company ~~are considered recoveries. Any~~has made significant additions to its facilities which allows the Company to increase domestic production capacity.

The amounts set forth as Receivable from Technology Investment Agreement (TIA) in the Condensed Balance Sheets represent amounts receivable under the TIA. The amounts represented advance requests or reimbursement requests for expenditures. As reimbursements were received from the U.S. government for such ~~recoveries are~~expenditures, the Company recorded ~~when they are received. Insurance recoveries are not recognized~~a deferred liability. In 2021, the deferred liability began to be systematically amortized as a ~~component~~gain over the life of ~~earnings (loss) from operations until all repairs are made.~~the related property, plant, and equipment and is presented as Other income – TIA on the Condensed Statements of Operations. For any reimbursements received for expenditures not capitalized as property, plant, and equipment, Other income – TIA was recognized in the same period as the expense.

~~Recent pronouncements~~

Recently Issued Pronouncements

In ~~July 2015,~~June 2022, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”) No. 2015-11, “Inventory~~ASU 2022-03, “Fair Value Measurement (Topic ~~330) Simplifying the~~820): Fair Value Measurement of ~~Inventory,” which~~Equity Securities Subject to Contractual Sale Restrictions”, intended to clarify that a contractual restriction on the sale of an equity security is not considered part of the ~~FASB’s Simplification Initiative. Inventory, including inventory measured at average cost, would be valued at~~unit of account of the ~~lower~~equity security and, therefore, is not considered in measuring fair value. The amendment also clarifies that an entity cannot, as a separate unit of ~~cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal,~~account, recognize and ~~transportation.~~measure a contractual sale restriction. ASU ~~2015-11~~No. 2022-03 is effective for ~~the Company’s annual periods and~~public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted. For all other entities, it is effective for fiscal years, including interim periods within those fiscal years beginning after December 15, 2024. Early adoption is permitted for both interim and annual ~~periods beginning January 1, 2017. Amendments in this ASU should be applied prospectively with earlier application permitted at the beginning of an interim~~financial statements that have not yet been issued or ~~annual reporting period.~~made available for issuance. The adoption of ~~this pronouncement had no impact on~~ the ~~Company’s Balance Sheet, Results of Operations, or Cash Flows in the period of adoption.~~

~~In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. These~~ amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The updated guidance is ~~effective for the Company’s quarter ending March 31, 2018, with early adoption permitted. The Company does not expect ASU 2016-18~~unlikely to have a material effect on ~~its~~the Company’s financial statements ~~as the Company currently holds no restricted cash~~ or ~~restricted cash equivalents.~~disclosures.

~~In June 2016, the FASB issued Accounting Standards Update 2016-13, “Financial Instruments —Credit Losses (Topic 326): Measurement~~

Table of Credit Losses on Financial Instruments”. Among other things, these amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. This ASU is effective for the Company’s quarter ending March 31, 2020 with early application permitted for the Company’s quarter ending March 31, 2019. The Company is currently assessing the impact that adoption of this guidance will have on its financial statements and related disclosures.Contents

In February 2016, the FASB issued ASU No. 2016-02, Leases (topic 842). Under the new ASU, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance lessor accounting is largely unchanged. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified

retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. This ASU is effective for the Company’s quarter ending March 31, 2019, with early adoption permitted. The Company is currently evaluating the impact of this standard.

In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, which provides guidance for revenue recognition. This ASU’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects consideration to which the company expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption. In July 2015, the FASB voted to delay the effective date of this ASU by one year. The ASU will now be effective commencing with the Company’s quarter ending March 31, 2018. Early adoption of this ASU is allowed no sooner than the original effective date. Management’s preliminary assessment is that the implementation of the amended guidance will not have a material impact on the Company’s balance sheet, statements of operations, changes in stockholders’ equity and cash flows. The Company’s revenue is generated from sales of finished goods (disposable medical devices). Revenue from these sales will continue to be recognized when title of the products is passed to the customer. Management expects materially similar results under the amended guidance as compared to the Company’s current policies and procedures regarding revenue recognition. This preliminary assessment may change prior to adoption. Additionally, Management anticipates adopting this amended guidance on a Modified Retrospective basis in the first quarter of 2018.

3.INVENTORIES

Inventories consist of the following:

		September 30, 2017			December 31, 2016

							September 30, 2023		December 31, 2022
Raw materials	$	1,543,972		$	1,303,278		$	4,534,246	$	4,896,904
Finished goods		6,404,798			6,309,469			17,932,708		15,787,264
		7,948,770			7,612,747
Inventory reserve		(595,523	)		(595,523	)
	$	7,353,247		$	7,017,224
							$	22,466,954	$	20,684,168

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820, “Fair Value Measurements”, defines fair value, establishes a framework for measuring fair value and requires additional disclosures regarding certain fair value measurements. ASC 820 establishes a three-tier hierarchy for measuring fair value, as follows:

●

Level 1 – quoted market prices in active markets for identical assets and liabilities

●

Level 2 – inputs other than quoted prices that are directly or indirectly observable

●

Level 3 – unobservable inputs where there is little or no market activity

The following tables summarize the values of assets designated as Investments in debt and equity securities:

September 30, 2023


Level 1

Level 2

Level 3

Total
Equity securities

$
17,635,793

—

—

$
17,635,793
Mutual funds

15,389,017

—

—

15,389,017
Municipal bonds

624,331

—

—

624,331

$
33,649,141

$
—

$
—

$
33,649,141

December 31, 2022


Level 1

Level 2

Level 3

Total
Equity securities

$
27,692,459

$
—

$
—

$
27,692,459
Mutual funds

1,302,973

—

—

1,302,973
Municipal bonds

661,882

—

—

661,882

$
29,657,314

$
—

$
—

$
29,657,314

The investment assets are readily marketable and are carried at fair value as of the date of the Condensed Balance Sheets. The Company intends to hold these assets for possible future operating requirements. The following table summarizes gross unrealized gains and losses from Investments in debt and equity securities:

September 30, 2023

Cumulative Unrealized

Aggregate


Cost

Gains

Losses

Fair Value
Equity securities

24,074,113

—

(6,438,320)

17,635,793
Mutual funds

15,381,743

7,274

—

15,389,017
Municipal bonds

635,177

—

(10,846)

624,331

$
40,091,033

$
7,274

$
(6,449,166)

$
33,649,141

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December 31, 2022

Cumulative Unrealized

Aggregate


Cost

Gains

Losses

Fair Value
Equity securities

$
22,913,739

$
4,778,720

$
—

$
27,692,459
Mutual funds

1,252,804

50,169

—

1,302,973
Municipal bonds

634,455

27,427

—

661,882

$
24,800,998

$
4,856,316

$
—

$
29,657,314

Unrealized losses on investments in debt and equity securities were $(11.3) million and $(1.2) million for the nine months ended September 30, 2023 and 2022, respectively.

5. INCOME TAXES

The Company’s effective tax rate on the net ~~earnings~~loss before income taxes was 23.3% and 1,522% for the three months ended September 30, 2023 and 2022, respectively. The Company’s effective tax rate on the net income (loss) before income taxes was ~~0.0%~~22.4% and ~~(0.1)~~(19.8)% for the nine months ended September 30, ~~2017~~2023 and ~~September 30, 2016,~~2022, respectively. ~~For~~

A reconciliation of the ~~three months ended September 30, 2017 and September 30, 2016,~~federal statutory corporate tax rate to the Company’s effective tax rate onis as follows:


	Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022
U.S. statutory federal tax rate	21.00	%	21.0	%
State tax, net of federal tax	0.13	%	0.6	%
Stock options	0.15	%	8.9	%
State tax nexus study	—	%	(89.5)	%
Rate Change	—	%	34.3	%
Return-to-provision and other	1.14	%	4.9	%
Effective tax rate	22.42	%	(19.8)	%

The Company uses the recognition and measurement provisions of the FASB ASC Topic 740, Income Taxes (“Topic 740”), to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing net ~~earnings (loss) before~~deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should be commensurate with the extent to which it can be objectively verified. The Company reviewed the operating results, as well as all of the positive and negative evidence related to realization of such deferred tax assets, to evaluate the need for a valuation allowance at September 30, 2023 and 2022. As a result of this review, the Company concluded that a $283 thousand valuation allowance is needed for state net operating losses as of September 30, 2023.

The effective tax rate for the nine months ended September 30, 2023 was different from the federal statutory rate due primarily to stock-based compensation and compensation limits under IRC Section 162(m). In the third quarter of 2022, the Company, in conjunction with its state and local tax advisors, began a thorough analysis of the income ~~taxes was (0.4)%~~tax imposition and ~~(0.4)%, respectively.~~apportionment statutes, including the application of Public Law 86-272. As a result of this analysis, the Company’s state income tax rate is lower for the nine months ended September 30, 2023 as compared to September 30, 2022.

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6. OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:

September 30, 2017

December 31, 2016

Prepayments from customers
$
376,984

$
692,922

Accrued property taxes

363,075

—

Accrued professional fees

159,526

266,747

Other accrued expenses

51,185

59,614

$
950,770

$
1,019,283


	September 30, 2023		December 31, 2022
Prepayments from customers	$	286,388	$	435,916
Accrued property taxes		1,683,679		—
Accrued professional fees		489,088		254,584
Current portion – preferred stock repurchase		6,000		1,097,954
Other accrued expenses		124,690		203,690
Total	$	2,589,845	$	1,992,144

7. OTHER LONG-TERM LIABILITIES

Other long-term liabilities are comprised of the Technology Investment Agreement (TIA) which was $71,517,656 at September 30, 2023 and $75,459,612 at December 31, 2022. The TIA provides for reimbursement to the Company for the purchase of equipment and supplies related to the expansion of the Company’s domestic production of needles and syringes. Under the TIA, reimbursable amounts are reflected as a liability until the time its deferred income can be systematically amortized over a period matching the useful life of the purchased assets.

8. COMMITMENTS AND CONTINGENCIES

~~In May 2010,~~On November 7, 2019, the Company filed a lawsuit in the 44^th District Court of Dallas County, Texas (No. DC-19-17946) against Locke Lord, LLP and ~~an officer’s suit~~Roy Hardin in connection with their legal representation of the Company in its previous litigation against Becton, Dickinson and Company ~~(“BD”~~("BD"). The Company alleged that the defendants breached their fiduciary duties, committed malpractice, and were negligent in the U.S. District Court for the Eastern District of Texas, Marshall Division alleging violations of antitrust acts, false advertising, product disparagement, tortious interference, and unfair competition was reopened. The trial commenced on September 9, 2013, in the U.S. District Court for the Eastern District of Texas, Tyler Division, and the jury found that BD illegally engaged in anticompetitive conduct with the intent to acquire or maintain monopoly power in the safety syringe market and engaged in false advertising under the Lanham Act. The jury awarded the Company $113,508,014 in damages, which was trebled pursuant to statute. The Court granted injunctive relief to take effect January 15, 2015. In doing so, the Court found that BD’s business practices limited innovation, including false advertisements that suppressed salestheir representation of the ~~VanishPoint~~® ~~syringes.~~Company. The specific injunctive relief includes: (1) enjoining BD’s use of “World’s Sharpest Needle” or any similar assertion of superior sharpness; (2) requiring notification to all customers who purchased BD syringe products from July 2, 2004 to date that BD wrongfully claimed that its syringe needles were sharperCompany seeks actual and ~~that its statement that it had “data on file” was false~~exemplary damages, disgorgement, costs, and ~~misleading; (3) requiring notification to employees, customers, distributors, GPOs, and government agencies that the deadspace of the VanishPoint~~® ~~has been within ISO standards since 2004 and that BD overstated the deadspace of the VanishPoint~~® to represent that it was higher than some of BD’s syringes when it was actually less, and that BD’s statement that it had “data on file” was false and misleading, and, in addition, posting this notice on its website for a period of three years; (4) enjoining BD from advertising that its syringe products save medication as compared to VanishPoint® products for a period of three years; (5) requiring notification to all employees, customers, distributors, GPOs, and government agencies that BD’s website, cost calculator, printed materials, and oral representations alleging BD’s syringes save medication as compared to the VanishPoint® ~~were based on false and inaccurate measurement of the VanishPoint~~®, and, in addition, posting this notice on its website for a period of three years; and (6) requiring the implementation of a comprehensive training program for BD employees and distributors that specifically instructs them not to use old marketing materials and not to make false representations regarding VanishPoint® syringes. Final judgment was entered on January 15, 2015, awarding the Company $340,524,042 in damages and $11,722,823 in attorneys’ fees, as well as granting injunctive relief consistent with the orders as indicated above. The parties stipulated that the amount of litigation costs recoverable by the Company is $295,000. On January 14, 2015, the District Court stayed the portion of the injunctive relief that requires BD to notify end-user customers but also ordered BD to comply with internal correction activities as well as mandatory disclosures as set out above to its employees, customers, distributors and Group Purchasing Organizations. BD filed an appeal of that ruling with the 5th Circuit Court of Appeals and that appeal was denied on February 3, 2015. On February 12, 2015, BD filed a motion to amend the judgment directed most specifically to the issue of award of prejudgment interest. On April 23, 2015, the Court entered an Amended Final Judgment that removed prejudgment interest but kept all other monetary and injunctive relief the same as was granted in the original Final Judgment. BD filed its brief in the appeal on July 20, 2015. Oral argument occurred on Monday, February 29, 2016. On DecemberSeptember 2, 2016, the 5th Circuit Court of Appeals overturned the antitrust damages. The finding of false advertising liability was affirmed and the case was remanded to the Eastern District of Texas for a redetermination as to the amount of damages to which the Company is entitled. The Company’s petition for certiorari to the U.S. Supreme Court was denied on March 20, 2017. The Eastern District of Texas trial date was May 11, 2017. On August 17, 2017, District Court for the Eastern District of Texas issued the Court’s Final Judgment ordering that the Company take nothing in its suit against BD and dismissing the case. On September 13, 2017,2022, the Company filed a ~~Motion to Alter or Amend the Judgment~~Second Amended Petition alleging legal malpractice and ~~on September 14, 2017, the Company filed~~negligence. Following an agreed motion for continuance, a ~~Notice~~jury trial date of ~~Appeal to the United States Court of Appeals~~February 26, 2024 has been set for the Fifth Circuit. On October 27, 2017, the Eastern District denied the Company’s Motion to Alter or Amend the Judgment. As a result of the District Court’s denial of the Motion to Amend, an amended Notice of Appeal was filed with the United States Court of Appeals for the Fifth Circuit on November 3, 2017.this case.

In September 2007, BD and MDC Investment Holdings, Inc. (“MDC”) sued the Company in the United States District Court for the Eastern District of Texas, Texarkana Division, initially alleging that the Company is infringing two U.S. patents of MDC (6,179,812 and 7,090,656) that are licensed to BD. BD and MDC seek injunctive relief and unspecified damages. The Company counterclaimed for declarations of non-infringement, invalidity, and unenforceability of the asserted patents. The plaintiffs subsequently dropped

allegations with regard to patent no. 7,090,656 and the Company subsequently dropped its counterclaims for unenforceability of the asserted patents. On June 30, 2015, the Court ordered that further proceedings in this matter be stayed and that this case remain administratively closed until resolution of all appeals in the case detailed in the preceding paragraph. The case remains stayed as a result of the ongoing proceedings regarding the Lanham Act claims in the separate proceeding described above.

7.9. BUSINESS SEGMENT

The Company does not operate in separate reportable segments. Shipments to international customers generally require a prepayment either by wire transfer or an irrevocable confirmed letter of credit. The Company does extend credit to international customers on some occasions depending upon certain criteria, including, but not limited to, the credit worthiness of the customer, the stability of the country, banking restrictions, and the size of the order. All transactions are in U.S. currency.

Revenues by geography are as follows:

		Three Months Ended September 30, 2017		Three Months Ended September 30, 2016		Nine Months Ended September 30, 2017		Nine Months Ended September 30, 2016
U.S. sales	$	8,358,847	$	7,303,015	$	20,361,847	$	19,750,504

									Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
									September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
U.S. sales (excluding U.S. government)									$	9,392,737	$	9,197,133	$	22,116,861	$	28,971,783
Sales to U.S. government										—		—		—		15,731,136
North and South America sales (excluding U.S.)		1,900,892		1,406,720		3,728,452		2,058,594		839,730		9,841,536		5,823,282		24,657,232
Other international sales		152,297		130,399		891,534		528,071		102,564		4,022,616		1,367,270		12,780,053
Total sales	$	10,412,036	$	8,840,134	$	24,981,833	$	22,337,169	$	10,335,031	$	23,061,285	$	29,307,413	$	82,140,204

~~Long -lived~~14

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Long-lived assets by geography are as follows:

	September 30, 2017		December 31, 2016


					September 30, 2023		December 31, 2022
Long-lived assets
U.S.	$	11,520,337	$	11,930,293	$	90,705,204	$	95,587,561
International	$	143,651	$	161,744		4,320,645		4,565,207
Total					$	95,025,849	$	100,152,768

8.~~DIVIDENDS~~

10. DIVIDENDS

A cash dividend of $39,050 was paid within one month of each quarter’s end in 2022 and in January, April, July, and October of 2023 to Series II preferred shareholders. Series III preferred shareholders were paid a cash dividend of $39,495 in January 2022 and $19,061 within one month of each remaining quarter’s end in 2022 as well as in January, April, July, and October of 2023.

In June 2021, the Board of Directors approved payments to its Series II, Series III, and former Series IV and Series V Class B Preferred Shareholders in the cumulative amount of $5,056,945 representing all current dividends, dividends in arrears, as well as dividends still owed to shareholders who converted their preferred stock in the past. The dividends were paid on July 22, 2021 to all shareholders who had been contacted and confirmed as the rightful owner entitled to payment. The Company has not yet established contact with all former shareholders, most of whom converted their shares prior to 2001. The Company is continuing its efforts to establish contact with approximately 90 former shareholders who are entitled to approximately $1.4 million. This, along with the current declared dividends, are reflected in Dividends payable on the Condensed Balance Sheets.

11. EXCHANGE OF COMMON STOCK FOR PREFERRED STOCK

In 2020, the Company entered into several agreements with shareholders to purchase its outstanding Class B Convertible Preferred Stock. The consideration for these purchases consisted of both cash and Common Stock. In addition, in each such transaction, the preferred shareholder counterparty waived all rights to unpaid dividends in arrears. The aggregate cash consideration equaled $3,786,000, of which $482,670 was paid in 2020. The balance was paid in equal installments of $1,101,110 over a three-year period which began in February 2021 and the last payment was made in February 2023.

12. STOCK OPTION EXPENSE

In March 2021, three officers were granted stock options for the purchase of a total of 1,350,000 shares under the 2021 Stock Option Plan. The options had a ten-year term and were to vest in their entirety three years from the grant date. The fair value of the 2021 grant was $10.21 per share using the Black-Scholes option pricing model with a risk-free rate of 1.20%, an exercise price of $13.00 per share and a volatility factor of 92.66%. The options as of December 2022 were considered deeply out-of-the-money as the exercise price was significantly higher than the then-current average market price. In December 2022, the board of directors canceled these options with no replacement awards or compensation to be provided to the three officers of the Company.

Stock options granted to executives and other employees are expensed for accounting purposes under the Stock Compensation Topic of the FASB Accounting Standards Codification (ASC). ASC 718-20-35-9 provides that a cancellation of an award that is not accompanied by the concurrent grant of (or offer to grant) a replacement award or other valuable consideration shall be accounted for as a repurchase for no consideration. Accordingly, any previously unrecognized compensation cost shall be recognized at the cancellation date. Under this guidance, the Company accelerated the recognition of all future stock option expense related to the option grants cancelled in December 2022. The impact to the financial statements for the year ended December 31, 2022 was the recognition of an additional $5.5 million in stock option expense. Stock option expense was $0 and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively.

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13. TECHNOLOGY INVESTMENT AGREEMENT

Effective July 1, 2020, the Company entered into the TIA with the U.S. government to expand the Company’s manufacturing capacity for hypodermic safety needles in response to the worldwide COVID-19 global pandemic. The award is an expenditure-type TIA, whereby the U.S. government has made payments to the Company for the Company’s expenditures for equipment and supplies related to the expansion. The Company’s contributions under the terms of the TIA include providing facilities, technical expertise, labor and maintenance for the TIA-funded equipment for a ten-year term. In May of 2021, the Company and the U.S. government amended the TIA agreement to include two additional assembly lines and additional controlled environment space.

As of September 30, 2023, the Company has received all equipment, has completed all property construction required by the TIA, and all reimbursement requests have been submitted. No further amounts for expansion under the TIA are expected to be submitted or collected.

14. STOCK REPURCHASES

The Company ~~declared dividends in~~entered into a repurchase plan (the “Plan”) dated June 4, 2021 with an independent broker for the ~~first quarter~~purchase of ~~2016 in~~up to $10 million of the ~~amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively,~~Company’s Common Stock. The Plan was terminated on April ~~21, 2016. The Company declared dividends in~~14, 2022. A total of 1,087,145 shares were purchased under the ~~second quarter~~Plan for a total purchase price of 2016 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on July 28, 2016. The Company declared dividends in the third quarter of 2016 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on October 20, 2016. The Company declared dividends in the first quarter of 2017 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on April 27, 2017. The Company declared dividends in the second quarter of 2017 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on July 20, 2017. The Company declared dividends in the third quarter of 2017 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on October 20, 2017.$8.1 million.

9.~~PRIVATE PURCHASE~~

The Company ~~approved three~~entered into a private stock repurchase agreement effective December 2022 for the purchase of ~~its executive officers to purchase shares directly from the Company. Thomas J. Shaw, CEO, exercised his purchase rights on January 12, 2017, buying two~~3.0 million shares of Common Stock at ~~market price~~$1.60 per share for an aggregate purchase price of ~~$1.78 million,~~$4.8 million.

These treasury share purchases are accounted for under the cost method and ~~he exercised the remainder~~are included as a component of his purchase rights on August 23, 2017 by purchasing one million shares at market price for aggregate consideration of $570,100. Mr. Cowan, CFO, and Ms. Larios, Vice President and General Counsel, are authorized to purchase 500,000 shares each at market price any time prior to September 9, 2018. The approximate dollar value of these potential future purchases cannot be predicted.

~~10.~~~~BONUSES~~

~~In February of 2017, Mr. Cowan and Ms. Larios were each granted cash bonuses of $250,000. Ms. Larios received her bonus~~treasury stock in the ~~first quarter~~Company’s balance sheets.

Of the 100 million authorized shares of ~~2017. Mr. Cowan will receive his bonus later this year.~~Common Stock, 34,024,304 shares were issued and 29,937,159 shares outstanding as of both December 31, 2022 and September 30, 2023.

~~11.~~~~STORM DAMAGE AND INSURANCE PROCEEDS~~

On March 26, 2017, a hail storm passed through Little Elm, TX, resulting in damage to the Company’s two buildings. During April 2017, the Company performed an inspection of its facilities and determined that possible roof damage had been sustained. In late April 2017, the Company’s insurance carrier inspected the two buildings and confirmed that damage occurred from the hail storm. This damage was principally to the roofs of the buildings but also many of the HVAC units and a wall alongside one of the buildings.

The Company’s insurance carrier has assessed damages of $1,009,960 and the Company’s deductible is $5,000. The Company has received these funds from its carrier. At this time, the Company does not expect the cost of repairs to the roofs, the wall, and to the HVAC units to exceed its coverage. Repairs commenced during the third quarter of 2017 and are expected to be completed by the end of the year. The Company does not currently anticipate that these repairs will result any significant disruption to its operations or interruption to its production. The Company expects that all repairs will be covered by the insurance proceeds.

During the third quarter of 2017, the Company incurred and recognized $128,710 in repairs due to the storm damage. There is $876,250 of remaining insurance proceeds. This repair expense was offset by the insurance proceeds, resulting in no impact to the Statement of Operations. These costs and offsets are included in General and administrative expense in the Statement of Operations.

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

FORWARD-LOOKING STATEMENT WARNING

Certain statements included by reference in this filing containing the words “could,” “may,” “believes,” “anticipates,” “intends,” “expects,” and similar such words constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Any forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among ~~others,~~others: material changes in demand; potential tariffs; our ability to maintain ~~liquidity,~~liquidity; our maintenance of patent ~~protection, the impact of current and future Court decisions regarding current litigation,~~protection; our ability to maintain favorable third party manufacturing and supplier arrangements and ~~relationships, our ability to quickly increase capacity in response to an increase in demand,~~relationships; foreign trade risk; our ability to access the ~~market, our ability to maintain or lower~~market; production ~~costs, our ability to continue to finance research and development as well as operations and expansion of production,~~costs; the ~~continuing interest~~impact of larger market players ~~specifically Becton, Dickinson and Company (“BD”),~~ in providing devices to the safety ~~market,~~market; and any other factors referenced in Item 1A. Risk Factors in Part II. Given these uncertainties, undue reliance should not be placed on forward-looking statements.

MATERIAL CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We have been manufacturing and marketing our products since 1997. ~~Safety~~VanishPoint^® syringes comprised ~~90.6%~~80.5% of our sales in the first nine months of ~~2017. We also manufacture and market the~~2023. EasyPoint®~~, the blood collection tube holder, IV safety catheter, and VanishPoint~~^®~~Blood Collection Set. We currently provide other safety medical~~ products ~~in addition to safety products utilizing retractable technology. One such product is the Patient Safe~~® ~~syringe, which is uniquely designed to reduce the risk~~accounted for 14.1% of ~~bloodstream infections associated with catheter hub contamination.~~

~~In the second quarter of 2016, we began selling a new product, the EasyPoint~~® ~~needle.~~ ~~EasyPoint~~® ~~needle~~ sales ~~made up 9.8% of third quarter revenues and 4.9% of revenues for~~in the first nine months of ~~2017. The EasyPoint~~® ~~is a retractable needle that can be used with Luer lock syringes, Luer slip syringes, and prefilled syringes to give injections. The EasyPoint~~® ~~needle can also be used to aspirate fluids and collect blood.~~2023.

~~Historically, unit sales have increased in the latter part~~Table of ~~the year due, in part, to the demand for syringes during the flu season.~~Contents

Our products have been and continue to be distributed nationally and internationally through numerous distributors. Some of our popular syringe products provide low dead-space. Low dead-space syringes reduce residual medication remaining in the syringe after the dose has been administered. In some instances, the low dead-space allows for additional doses of medication to be obtained from the vials.

In 2020 and 2021, we were awarded significant orders and contracts by the U.S. government for safety syringes for COVID-19 vaccination efforts. From 2020 through the first quarter of 2022, the U.S. government was a significant customer. We cannot predict whether any future U.S. government orders may occur.

In 2020, we entered into a Technology Investment Agreement (“TIA”) with the U.S. government which provided significant government funding for expanding our domestic production of needles and syringes to meet ongoing and future U.S. COVID-19 medical countermeasures demands. Recent additions of manufacturing equipment and facilities have increased our production capacity and our overhead costs. Additionally, in 2022, we expanded our existing administrative offices at a total cost of $5.8 million. There are currently no plans to further expand our production or administrative facilities, nor do we have material commitments for additional manufacturing equipment purchases.

The U.S. government orders as well as the TIA are material events particular to the COVID-19 pandemic and are not indicative of future operations.

Although we have ~~made limited progress~~recently experienced certain cost increases in ~~some areas, such as~~raw materials, those costs primarily affected our domestic manufacturing because the ~~alternate care market, our volumes are not as high as they should be given the nature and quality~~finished goods we purchased from China (being 90% of our ~~products~~products) are subject to a long-term fixed price contract. Other factors that could affect our unit costs include increases in tariffs, supplier cost increases, and changing production volumes. Increases in costs may not be recoverable through price increases of our products.

In the ~~federal~~first nine months of 2023, 24.5% of our revenues were international sales, predominantly from international sales in the first quarter of the year. The timing and ~~state legislation requiring~~volumes of international sales are more difficult to predict than domestic sales, and international vaccination campaigns tend to lag behind those in the use of safe needle devices. The alternate care market is composed of facilities that provide long-term nursing and out-patient surgery, emergency care, physician services, health clinics, and retail pharmacies.domestic market.

We ~~continue~~believe domestic customers have retained products provided for vaccination purposes in inventory, leading to ~~pursue various strategies~~a decrease in our 2023 domestic sales. Customers have reported that demand was diminished due to their remaining syringe inventory. While it is difficult to estimate how much of the remaining inventory might still remain in the market, domestic unit sales have ~~better access~~increased each quarter of this year subsequent to the ~~hospital market, as well as other markets, including attempting to gain access to the market through our~~surge in government sales ~~efforts, our innovative technology, introduction of new products, and, when necessary, litigation.~~

~~We have reported in the past that our progress~~for COVID-19 vaccinations. This trend is limited principally due to the practices engaged in by BD, the dominant maker and seller of disposable syringes. We initiated a lawsuit in 2007 against BD which was dismissed on August 17, 2017. We have filed for appeal.

~~Our litigation expenses were significantly less in 2017 and we have expanded our~~consistent with historical sales ~~and marketing staff in an effort to gain market share.~~

~~Our remaining stock option expense for grants in 2016 will be expensed in the fourth quarter of 2017.~~

The Consolidated Appropriations Act, 2016 (Pub. L. 114-113), signed into law on December 18, 2015, includes a two year moratorium on the 2.3% medical device excise tax imposed by Internal Revenue Code section 4191. Thus, the medical device excise tax was suspended beginning on January 1, 2016 and ending on December 31, 2017.

We reevaluated several compensation strategies in late 2016 and early 2017. We also approved three of our executive officers to purchase shares directly from the Company. Thomas J. Shaw exercised his purchase rights on January 12, 2017, buying two million shares at market price for an aggregate purchase price of $1.78 million, and he exercised the remainder of his purchase rights on August 23, 2017 by purchasing one million shares at market price for aggregate consideration of $570,100.

patterns, coinciding with flu season sales.

As ~~discussed~~detailed in Note 114 to the financial statements, we ~~received $1,004,960 from~~held $33.7 million in debt and equity securities as of September 30, 2023, which represented 18.5% of our ~~insurance carrier~~total assets. During the first quarter of 2023, we increased our investment in U.S. government-backed mutual funds by approximately $9.0 million and restructured our investments in equity securities by approximately $6.0 million. During the second quarter of ~~2017~~2023, we sold our position in certain equity investments and ~~began repairing~~reinvested the ~~buildings using these~~ funds, investing approximately $27.8 million in U.S. government-backed mutual funds. During the third quarter of ~~2017.~~2023, we sold $24 million in U.S. government-backed mutual funds and reinvested the proceeds in equity securities. The purchases of new investments have materially decreased our cash position since December 2022.

On July 13, 2023, we received a refund of previously paid estimated state tax payments of approximately $8 million. The $8 million was recorded as Income Taxes Receivable on the Condensed Balance Sheets at December 31, 2022 through June 30, 2023.

In June 2022, we reduced our workforce by approximately 16% and we further reduced our workforce by an additional 22% in March 2023. These reductions in force were a result of the substantial completion of our facility expansion and the fulfillment of U.S. government orders to provide products for COVID-19 vaccinations. The result of such cost saving measures represents overall savings in employee related costs of approximately $1.9 million in the first nine months of 2023 versus 2022. The savings are comprised of overall reductions in gross wages, payroll taxes, and insurance as well as other related employee costs.

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Historically, unit sales have increased during the flu season. With the dramatic increase in sales attributable to COVID-19 vaccinations, however, the effect of flu season sales was less impactful in past years. Unit sales in 2023 have increased each quarter domestically for those products associated with administering vaccinations (including the flu shot) which indicates that the seasonal trends are following pre-pandemic patterns.

Product purchases from our Chinese manufacturers have enabled us to increase manufacturing capacity with little capital outlay and have provided a competitive manufacturing cost. In the ~~first nine months~~third quarter of ~~2017,~~2023, our ~~primary~~ Chinese ~~manufacturer~~manufacturers produced approximately ~~90.4%~~91% of our ~~VanishPoint~~® ~~syringes.~~products. In the event that we become unable to purchase products from our Chinese manufacturers, we ~~would~~may need to find an alternate manufacturer for the blood collection set, IV catheter, Patient Safe^® syringe, 0.5mL insulin syringe, 0.5mL autodisable syringe, and 2mL, 5mL, and 10mL syringes, and we would increase domestic production for the 1mL and 3mL ~~syringes.~~

syringes and EasyPoint^®needles.

In 1995, we entered into a license agreement with Thomas J. Shaw for the exclusive right to manufacture, market, and distribute products utilizing his patented automated retraction technology and other patented technology. This technology is the subject of various patents and patent applications owned by Mr. Shaw. The license agreement generally provides for quarterly payments of a 5% royalty fee on gross ~~sales.~~sales of products subject to the license and he receives fifty percent (50%) of the royalties paid to us by certain sublicensees of the technology subject to the license.

RESULTS OF OPERATIONS

With increased volumes, our manufacturing unit costs have generally tended to decline. Factors that could affect our unit costs include increases in costs by third party manufacturers, changing production volumes, product

~~mix, costs of petroleum products, and transportation costs. Increases in such costs may not be recoverable through price increases of our products.~~

The following discussion may contain trend information and other forward-looking statements that involve a number of risks and uncertainties. Our actual future results could differ materially from our historical results of operations and those discussed in any forward-looking statements. All period references are to periods ended September 30, 2023 or 2022, as applicable. Dollar amounts have been rounded for ease of reading. ~~All period references are to the periods ended September 30, 2017 or 2016.~~

~~RESULTS OF OPERATIONS~~

Comparison of Three Months Ended September 30, ~~2017~~2023 and September 30, ~~2016~~2022

Domestic sales accounted for ~~80.3%~~90.9% and ~~82.6%~~39.9% of the revenues for the three months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively. Domestic revenues increased ~~14.5% principally due to higher volumes mitigated by lower average prices.~~2.1%. Domestic unit sales increased ~~23.9%~~1.8%. Domestic unit sales were ~~71.8%~~87% of total unit sales for the three months ended September 30, ~~2017.~~2023. International ~~revenue and~~revenues decreased approximately 93.2% predominately due to fewer international vaccination-related sales. Overall unit sales ~~increased 33.6% and 29.8%, respectively, due~~decreased 66.1%. There is uncertainty as to the timing of ~~significant~~future international ~~sales. Our international orders may be subject to significant fluctuation over time. Overall unit sales increased 25.5%.~~orders.

~~The~~ Cost of manufactured product ~~increased by 28.7%~~decreased 69.0% principally due to higher volumes and higher manufacturing costs. Profit margins can fluctuate depending upon, among other things, the cost of manufactured product and the capitalized cost of product recorded in inventory, as well as product mix. lower unit sales.Royalty expense ~~increased 24.6%~~decreased 46.6% due to ~~higher~~the associated decrease in gross sales.

~~Gross profit was flat primarily due to higher manufacturing costs.~~

Operating expenses decreased ~~1.4% or $48.0 thousand. The decrease was principally~~3.1% from the prior year. This is substantially due to ~~lower legal cost,~~decreases in stock option expenses and ~~reduced bad debt expense~~headcount as well as employee-related expenses as a result of a reduction of labor force in ~~General and administrative expense, offset by an increase in Sales and marketing personnel.~~March of 2023.

~~Our operating~~The loss from operations was ~~$32.9~~$936 thousand compared to ~~an operating~~a loss of $691 thousand for the same period last ~~year~~year. The greater loss was due to an overall decrease in revenues.

The unrealized loss on debt and equity securities was $6.5 million due to the decreased market values of ~~$81 thousand due primarily to lower operating expenses.~~those securities.

~~Our effective tax rate on the net loss before~~The benefit for income taxes was ~~(0.4)% and (0.4)%~~$1.2 million for the ~~three months ended September 30, 2017 and September 30, 2016, respectively.~~third quarter of 2023 as compared to a benefit of $5.8 million in the third quarter of 2022.

Comparison of Nine Months Ended September 30, ~~2017~~2023 and September 30, ~~2016~~

2022

Domestic sales accounted for ~~81.5%~~75.5% and ~~88.4%~~54.4% of the revenues for the nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, respectively. Domestic revenues ~~increased 3.1%~~decreased 50.5% principally due to ~~higher volume.~~lack of sales to the U.S. government. Domestic unit sales ~~increased 5.1%~~decreased 46%. Domestic unit sales were ~~73.8%~~66.4% of total unit sales for the nine months ended

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September 30, ~~2017.~~2023. International ~~revenue and~~revenues decreased approximately 80.8% predominately due to fewer international vaccination-related sales. Overall unit sales ~~increased 78.6% and 82.5%, respectively, due~~decreased 66.9%. There is uncertainty as to the timing of ~~significant~~future international ~~sales. Our international orders may be subject to significant fluctuation over time. Overall unit sales increased 18.3%.~~orders.

~~The~~ Cost of manufactured product ~~increased 21.9%~~decreased 63.3% principally due to ~~higher volumes~~lower unit sales. Royalty expense decreased 55.3% due to the associated decrease in gross sales.

Operating expenses decreased 3.1% from the prior year. This is substantially due to decreases in stock option expense, consulting, and ~~higher manufacturing costs. Profit margins can fluctuate depending upon, among other things,~~reduced headcount. In the ~~cost~~first nine months of ~~manufactured product~~2023, we incurred approximately 30.9% more in sales and ~~the capitalized cost of product recorded~~marketing expenses, primarily in ~~inventory,~~travel and trade show expenses as well as ~~product mix. Royalty expense~~ increased ~~10.8% due~~headcount for sales representatives, in an effort to ~~higher gross sales.~~improve future revenues.

~~Gross profit decreased 3.4% primarily due to lower average price and higher manufacturing costs.~~

~~Operating expenses increased 6.6% or $635 thousand.~~ The ~~increase~~loss from operations was due to stock option expense, an increase in Sales and marketing personnel, travel expenses for Sales and marketing, higher payroll costs in Research and development, and bonuses paid to two officers. These increased expenses were offset by lower legal costs and reduced bad debt expense.

~~Our operating loss was $2.5~~$8.7 million compared to an ~~operating loss~~income from operations of $7.0 million for the same period last ~~year~~year. The loss was due to an overall decline in revenues and an increase in cost of ~~$1.6~~manufactured product on a per-unit basis.

The unrealized loss on debt and equity securities was $11.3 million due ~~primarily~~ to ~~lower gross profit and higher operating expenses.~~the decreased market values of those securities but we recognized a gain on sales of equity securities in the amount of $5.6 million.

~~Our effective tax rate on the net loss before~~The benefit for income taxes was ~~0.0%~~$1.9 million for the first nine months of 2023 as compared to $1.5 million in the first nine months of 2022.

Discussion of Balance Sheet and ~~(0.1)%~~Cash Flow Items

Cash flow provided by operations was $873 thousand for the nine months ended September 30, ~~2017~~2023 due to a number of factors. We recognized approximately $4.5 million in other income from the TIA during the first nine months of 2023. Changes in working capital also impacted cash flows from operating activities. Accounts receivable increased by $3.8 million, inventories increased by $2.0 million, and ~~September 30, 2016, respectively.~~

~~Discussion~~accounts payable decreased by $3.0 million. This was offset by a decrease of ~~Balance Sheet~~$9.5 million in income taxes receivable and ~~Statement of Cash Flow Items~~

~~Cash comprises 39.0% of total assets. Working capital was $19.8 million at September 30, 2017,~~ an increase of ~~$337 thousand from December 31, 2016.~~

$1.2 million in accrued liabilities.

Cash ~~flow~~ used by ~~operations~~investing activities was ~~$2.0~~$10.4 million for the nine months ended September 30, ~~2017~~2023 due primarily to the purchase of $68.3 million of debt and equity securities, which was offset by $58.6 million of proceeds from the sale of debt and equity securities.

Cash provided by financing activities was $1.1 million for the nine months ended September 30, 2023. This was primarily due to proceeds from the government under the TIA for payments on our ~~net loss.~~

~~We also received approximately $1.0~~orders for fixed assets but was offset by our payment of $1.1 million ~~from our insurance carrier which is being used to repair damage to our buildings from a hail storm, as~~in connection with the private stock exchange discussed ~~herein. We also received $2.35 million from selling Common Stock at market price to our CEO, Thomas J. Shaw.~~

in Note 11.

LIQUIDITY AND CAPITAL RESOURCES

At the present time, Management does not intend to publicly raise equity capital. Due to the funds received from prior litigation and direct purchases of our stock, we have sufficient cash reserves and intend to rely on operations, cash reserves, and debt financing, when available, as the primary ongoing sources of cash. Our ability to obtain additional funds through loans is uncertain.

~~Historical Sources of Liquidity~~

We have historically funded operations primarily from the proceeds from revenues, private placements, litigation settlements, and loans.

~~Internal Sources of Liquidity~~

~~Margins~~ We may fund operations going forward from revenues, cash reserves, and ~~Market Access~~

To routinely achieve positive or break even quarters, we need increased access to hospital markets which has been difficult to obtain. We will continue to attempt to gain access to the market through our sales efforts, innovative technology, the introduction of new products, and, when necessary, litigation.

~~We continue to focus on methods of upgrading our manufacturing capability and efficiency in order to reduce costs.~~

~~Fluctuations in the cost and availability of raw materials and inventory and our ability to maintain favorable manufacturing arrangements and relationships could result in~~investments if the need to ~~manufacture all (as opposed to 18.3%)~~access those funds arises.

On July 13, 2023, we received a refund of ~~our products~~previously paid estimated state tax payments of approximately $8 million. This amount was reported as cash on the balance sheet at September 30, 2023 and increased cash balances in the ~~U.S. This could temporarily increase unit costs~~third quarter of 2023. The $8 million was recorded as ~~we ramp up domestic production.~~Income Taxes Receivable on the Condensed Balance Sheets at December 31, 2022 through June 30, 2023.

Margins

The mix of domestic and international sales ~~as well as product mix,~~ affects the average sales price of our products. Generally, the higher the ratio of domestic sales to international sales, the higher the average sales price will be. Some international sales of our products are shipped directly from China to the customer. The number of units produced by us versus manufactured in

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China can have a significant effect on the carrying costs of ~~inventory~~Inventory as well as Cost of sales. Generally, an overall increase in units sold can positively affect our margins. The cost of raw materials used in manufacturing and transportation costs can also significantly affect our margins. We will continue to evaluate the appropriate mix of products manufactured domestically and those manufactured in China to achieve economic benefits as well as to maintain our domestic manufacturing capability.

~~Fluctuations~~Cash Requirements

We believe we will have adequate means to meet our short-term needs to fund operations for at least 12 months from the date of issuance of the financial statements.Besides cash reserves and expected income from operations, we also have access to our investments which may be liquidated in the ~~cost~~event that we need to access the funds for operations. Expected short-term uses of ~~oil (since~~cash include payroll and benefits, royalty expense, inventory purchases, contractual obligations, payment of income taxes, quarterly preferred stock dividends, and other operational priorities. Our liabilities are our ~~products~~bank debt as set forth as Long-term debt on our Condensed Balance Sheets and other liabilities detailed herein in Note 7to the financial statements. We believe we will have adequate means to meet our currently foreseeable long-term liquidity needs. In the event that our long-term cash requirements exceed our current reserves and our ability to generate cash from operations, management would necessarily undertake to reduce our operational cash requirements.

Capital Resources

Since the execution of the TIA on July 1, 2020, we have significantly expanded our facilities. There are ~~petroleum based)~~no remaining capital projects.

CRITICAL ACCOUNTING ESTIMATES

We are responsible for developing estimates for amounts reported as assets and ~~transportation~~liabilities, and revenues and expenses in conformity with U.S. generally accepted accounting principles (“GAAP”). Those estimates require that we develop assumptions of future events based on past experience and expectations of economic factors. Among the more critical estimates management makes is the estimate for customer rebates. The amount reported as a contractual allowance for rebates involves examination of past historical trends related to our sales to customers and the ~~volume~~related credits issued once the contractual obligations of ~~units purchased from our Chinese manufacturers may~~the customers have been met. The establishment of a liability for future claims of rebates against sales in the current period requires that we have an ~~impact on~~understanding of the ~~unit costs~~relevant sales with respect to product categories, sales distribution channels, and the likelihood of contractual obligations being satisfied. We examine the results of estimates against actual results historically and use the determination to further develop our ~~product. Increases~~basis for assumptions in ~~such costs may not be recoverable through price increases~~future periods, as well as the accuracy of ~~our products. Reductions in oil prices may not quickly affect petroleum product prices.~~

~~Seasonality~~

~~Historically, unit sales have increased during the flu season.~~

~~Cash Requirements~~

~~Due to funds received from prior litigation and direct purchases of stock,~~past estimates. While we believe that we have sufficient ~~cash~~historical data, and a firm basis for establishing reserves for contractual obligations, there is an inherent risk that our estimates and ~~intend to rely on operations, cash reserves, and debt financing, when available, as~~ the ~~primary ongoing sources of cash. We have taken steps to decrease our legal costs and we continue to evaluate these costs.~~underlying assumptions may not reflect actual future results. In the ~~future, if we need to take cost cutting measures, we may reduce the number of units being produced, reduce the workforce, reduce the salaries of officers and other employees,~~event that these estimates and/or ~~defer royalty payments. Some increases in compensation were made in 2016 and 2017.~~

~~External Sources of Liquidity~~

We have obtained several loans since our inception, which have, together with the proceeds from the sales of equities and litigation efforts, enabled us to pursue development and production of our products. Our ability to obtain additional funds through loans is uncertain. Due to the current market price of our Common Stock, it is unlikely we would choose to raise funds by the public sale of equity.

We have approved three of our executive officers to engage in private purchases of stock at market prices. Thomas J. Shaw, CEO, exercised his purchase rights on January 12, 2017, buying two million shares at market price for an aggregate purchase price of $1.78 million, and he exercised the remainder of his purchase rights on August 23, 2017 by purchasing one million shares at market price for aggregate consideration of $570,100.

As discussed in Note 11 to the financial statements, we received $1,004,960 from our insurance carrier in the second quarter of 2017 and began repairing the building using these funds in the third quarter of 2017.

~~CAPITAL RESOURCES~~

~~We have committed to make necessary repairs~~assumptions are incorrect, adjustments to our ~~building from storm damage using insurance proceeds, as discussed herein.~~reserves may have a material impact on future results.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

~~No update.~~

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, Management, with the participation of our President, Chairman, and Chief Executive Officer, Thomas J. Shaw (the “CEO”), and our Vice President and Chief Financial Officer, ~~Douglas~~John W. ~~Cowan~~Fort III (the “CFO”), acting in their capacities as our principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in our periodic reports is: i) recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms;

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and ii) accumulated and communicated to our Management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based upon this evaluation, the CEO and CFO concluded that, as of September 30, ~~2017,~~2023, our disclosure controls and procedures were effective.

We initially reported a material weakness in our Annual Report on Form 10-K for the year ended December 31, 2015, filed on March 30, 2016, in connection with the accounting for raw materials. We have remedied this weakness by running parallel accounting systems and increased review procedures, both of which give credence to reliable results. Additionally, we intend to fully implement the Oracle accounting system by the end of 2017.

Changes in Internal Control Over Financial Reporting

There have been no changes during the third quarter of ~~2017~~2023 or subsequent to September 30, ~~2017~~2023 in our internal control over financial reporting that ~~has~~have materially affected or isare reasonably likely to materially affect our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Please refer to Note 68 to the financial statements for a complete description of all legal proceedings.

Item 1A. Risk Factors.

There were no material changes in ~~the~~our Risk Factors ~~applicable to the Company~~ as set forth in our ~~Form 10-K~~most recent annual ~~report for 2016.~~and quarterly reports which are available on EDGAR.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~There were no unregistered sales of equity securities, other than as previously disclosed in a Current Report on Form 8-K filed August 24, 2017.~~

~~Item 3.~~ ~~Defaults Upon Senior Securities.~~

~~Working Capital Restrictions and Limitations on the Payment of Dividends~~

~~The Company declared a dividend to the Series I Class B and Series II Class B Convertible Preferred Shareholders in the aggregate amount of $55,113. This dividend was paid on October 20, 2017.~~

The certificates of designation for each of the outstanding series of Class B Convertible Preferred Stock each currently provide that, if a dividend upon any shares of Preferred Stock is in arrears, no dividends may be paid or declared upon any stock ranking junior to such stock and generally no junior preferred stock may be redeemed. However, under certain conditions, and for certain Series of Class B Convertible Preferred Stock, we may purchase junior stock when dividends are in arrears.

~~Series I Class B Convertible Preferred Stock~~

~~For~~ ~~the nine months ended September 30, 2017, no dividends were in arrears.~~

~~Series II Class B Convertible Preferred Stock~~

~~For~~ ~~the nine months ended September 30, 2017, no dividends were in arrears.~~

~~Series III Class B Convertible Preferred Stock~~

~~For~~ ~~the nine months ended September 30, 2017, the amount of dividends in arrears was $96,934 and the total arrearage was $4,113,000 as of September 30, 2017.~~

~~Series IV Class B Convertible Preferred Stock~~Item 5. Other Information.

~~For~~ On August 22, 2023, Thomas J. Shaw, President, Chairman, and Chief Executive Officer, adopted a written plan for the ~~nine months ended September 30, 2017,~~purchase of Retractable Technologies, Inc. common stock intended to satisfy the ~~amount~~affirmative defense conditions of ~~dividends in arrears was $256,875~~Rule 10b5–1(c). The plan provides that trading may begin November 20, 2023 and may continue through November 19, 2024 if not earlier terminated. During this period, the ~~total arrearage was $6,055,000 as~~plan instructs a broker-dealer to purchase common stock for an aggregate purchase price of ~~September 30, 2017.~~up to $800,000 within certain price parameters.

~~Series V Class B Convertible Preferred Stock~~

~~For~~ ~~the nine months ended September 30, 2017, the amount of dividends in arrears was $9,600 and the total arrearage was $993,000 as of September 30, 2017.~~

Item 6.Exhibits.


Exhibit No.		Description of Document

31.1		Certification of Principal Executive Officer

31.2		Certification of Principal Financial Officer

32		Certification Pursuant to 18 U.S.C. Section 1350

101		The following materials from Retractable Technologies, Inc.’s Form 10-Q for the ~~quarter~~period ended September 30, ~~2017,~~2023, formatted in inline XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, (ii) Condensed Statements of Operations for the three ~~months~~ and nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, (iii) Condensed Statements of Cash Flows for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022, (iv) Condensed Statement of Changes in Stockholders’ Equity for the three and ~~(iv)~~nine months ended September 30, 2023 and 2022; and (v) Notes to Condensed Financial Statements

104		Interactive Data File (formatted Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE: November 14, ~~2017~~2023	RETRACTABLE TECHNOLOGIES, INC.
		(Registrant)


	By:		/s/ John W. Fort III
		~~BY:~~	~~/s/ Douglas~~JOHN W. ~~Cowan~~
			~~DOUGLAS W. COWAN~~ FORT III VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND CHIEF ACCOUNTING OFFICER