RETRACTABLE TECHNOLOGIES INC [RVP] Filings

10-Q 1 tmb-20240930x10q.htm 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2024

☐ 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) 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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐

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

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

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 ◻ No ◻

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: 29,937,159 shares of Common Stock outstanding, excluding 4,087,145 treasury shares, on November 1, 2024.

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2024

TABLE OF CONTENTS


	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	CONDENSED BALANCE SHEETS	1
	CONDENSED STATEMENTS OF OPERATIONS	2
	CONDENSED STATEMENTS OF CASH FLOWS	3
	CONDENSED 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	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
SIGNATURES		23

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements.

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED BALANCE SHEETS

(unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	3,917,246	$	12,667,550
Accounts receivable, net		8,674,774		10,671,721
Investments in debt and equity securities, at fair value		32,782,319		34,621,213
Inventories		21,301,008		17,581,368
Income taxes receivable		1,111,851		1,155,077
Other current assets		968,949		952,668
Total current assets		68,756,147		77,649,597

Property, plant, and equipment, net		88,936,910		93,478,521
Deferred tax asset		—		8,392,030
Other assets		114,803		152,064
Total assets	$	157,807,860	$	179,672,212

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,251,331	$	4,779,035
Current portion of long-term debt		325,155		303,991
Accrued compensation		809,937		865,105
Dividends payable		1,417,437		1,417,437
Accrued royalties to shareholder		884,570		1,376,555
Other accrued liabilities		1,325,080		630,571
Income taxes payable		5,864		4,802
Total current liabilities		8,019,374		9,377,496

Other long-term liabilities		65,344,155		69,773,538
Long-term debt, net of current maturities		986,750		1,233,519
Total liabilities		74,350,279		80,384,553

Commitments and contingencies – see Note 10

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		74,245		74,245
Common Stock, no par value		—		—
Additional paid-in capital		73,160,333		73,160,333
Retained earnings		22,955,481		38,785,559
Common stock in treasury – at cost		(12,888,678)		(12,888,678)
Total stockholders’ equity		83,457,581		99,287,659
Total liabilities and stockholders’ equity	$	157,807,860	$	179,672,212

See accompanying notes to condensed unaudited financial statements

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months		Three Months		Nine Months		Nine Months
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Sales, net	$	10,346,857	$	10,335,031	$	23,975,584	$	29,307,413
Cost of sales:
Cost of manufactured product		9,477,097		5,219,962		20,379,228		19,522,722
Royalty expense to shareholder		884,570		794,388		2,130,161		2,217,575
Total cost of sales		10,361,667		6,014,350		22,509,389		21,740,297
Gross profit (loss)		(14,810)		4,320,681		1,466,195		7,567,116

Operating expenses:
Sales and marketing		1,749,123		1,368,112		4,658,465		4,263,735
Research and development		174,695		150,957		516,050		419,475
General and administrative		3,197,116		3,737,479		10,176,367		11,592,965
Total operating expenses		5,120,934		5,256,548		15,350,882		16,276,175
Loss from operations		(5,135,744)		(935,867)		(13,884,687)		(8,709,059)

Other income - TIA		1,469,688		1,447,975		4,429,383		4,479,773
Unrealized gain (loss) on debt and equity securities		1,449,825		(6,538,568)		1,402,660		(11,298,207)
Gain on sale of equity securities		—		—		—		5,574,791
Interest and other income		293,550		768,863		855,387		1,197,329
Interest expense		(30,489)		(36,087)		(95,789)		(117,110)
Loss before income taxes		(1,953,170)		(5,293,684)		(7,293,046)		(8,872,483)
Provision (benefit) for income taxes		(31,181)		(1,233,188)		8,364,200		(1,934,393)
Net loss		(1,921,989)		(4,060,496)		(15,657,246)		(6,938,090)
Preferred Stock dividend requirements		(57,611)		(58,111)		(172,832)		(174,335)
Net loss applicable to common shareholders	$	(1,979,600)	$	(4,118,607)	$	(15,830,078)	$	(7,112,425)

Basic loss per share	$	(0.07)	$	(0.14)	$	(0.53)	$	(0.24)

Diluted loss per share	$	(0.07)	$	(0.14)	$	(0.53)	$	(0.24)

Weighted average common shares outstanding:
Basic		29,937,159		29,937,159		29,937,159		29,937,159
Diluted		29,937,159		29,937,159		29,937,159		29,937,159

See accompanying notes to condensed unaudited financial statements

Table of Contents

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months		Nine Months
	Ended		Ended
	September 30, 2024		September 30, 2023
Cash flows from operating activities
Net loss	$	(15,657,246)	$	(6,938,090)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		5,683,496		5,826,203
Net unrealized (gain) loss on investments		(1,402,660)		11,298,207
Realized gain on investments		—		(5,574,791)
Accreted interest		—		9,157
Bond amortization		(763)		—
Deferred taxes		8,392,030		(2,014,939)
Provision for credit losses		414,598		452,547
Net realizable value inventory adjustment		(9,466)		172,203
Other income - TIA		(4,429,383)		(4,479,773)
(Increase) decrease in operating assets:
Accounts receivable		1,582,349		(3,797,674)
Inventories		(3,710,174)		(1,954,988)
Other current assets		(16,281)		167,166
Income taxes receivable		43,226		9,475,906
Other assets		37,261		25,008
Increase (decrease) in operating liabilities:
Accounts payable		(1,527,704)		(3,011,574)
Accrued liabilities		147,356		1,241,700
Income taxes payable		1,062		(23,263)
Net cash from (used) operating activities		(10,452,299)		873,005

Cash flows from investing activities
Purchase of property, plant, and equipment		(1,141,885)		(699,283)
Purchase of debt and equity securities		(757,683)		(68,287,428)
Proceeds from the sales of debt and equity securities		4,000,000		58,572,186
Net cash from (used) investing activities		2,100,432		(10,414,525)

Cash flows from financing activities
Repayments of long-term debt		(225,605)		(209,789)
Proceeds from Technology Investment Agreement (TIA)		—		2,563,229
Payment of preferred stock repurchase payable		—		(1,101,110)
Payment of preferred stock dividends		(172,832)		(174,333)
Net cash from (used) financing activities		(398,437)		1,077,997

Net decrease in cash and cash equivalents		(8,750,304)		(8,463,523)
Cash and cash equivalents at:
Beginning of period		12,667,550		19,721,345
End of period	$	3,917,246	$	11,257,822

Supplemental schedule of cash flow information:
Interest paid	$	94,691	$	71,867
Income taxes paid	$	—		—

Supplemental schedule of noncash investing and financing activities:
Preferred dividends declared, not paid	$	57,611	$	57,611

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, 2024:


			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, 2024	$	—	$	156,200	$	74,245	$	73,160,333	$	24,935,081	$	(12,888,678)	$	85,437,181
Dividends		—		—		—		—		(57,611)		—		(57,611)
Net Loss		—		—		—		—		(1,921,989)		—		(1,921,989)
Balance at September 30, 2024	$	—	$	156,200	$	74,245	$	73,160,333	$	22,955,481	$	(12,888,678)	$	83,457,581

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 nine-month period ended September 30, 2024:


			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, 2023	$	—	$	156,200	$	74,245	$	73,160,333	$	38,785,559	$	(12,888,678)	$	99,287,659
Dividends		—		—		—		—		(172,832)		—		(172,832)
Net Loss		—		—		—		—		(15,657,246)		—		(15,657,246)
Balance at September 30, 2024	$	—	$	156,200	$	74,245	$	73,160,333	$	22,955,481	$	(12,888,678)	$	83,457,581

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

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 29, 2024 for the year ended December 31, 2023.

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 credit losses is primarily determined by review of specific trade receivables based on historical collection rates and specific knowledge regarding the current creditworthiness of the customers. Those

Table of Contents

accounts that are doubtful of collection are included in the allowance. The Company considers historical experience, the current economic environment, customer credit ratings or bankruptcies, legal disputes, collections on past due amounts, pricing discrepancies, and reasonable and supportable forecasts to develop its allowance for credit losses. Management reviews these factors quarterly to determine if any adjustments are needed to the allowance. 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 credit losses was $597 thousand and $891 thousand as of September 30, 2024 and December 31, 2023, 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 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 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. The Company recorded $9.5 thousand and $101 thousand lower of cost or net realizable value inventory adjustment associated with the VanishPoint^® 3mL and EasyPoint^® needle product segments as of September 30, 2024 and December 31, 2023, respectively.

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. Once inventory items are deemed to be either excess or obsolete, they are written down to their net realizable value.

Investments in debt and equity securities

The Company holds mutual funds, debt, and equity securities as investments. These assets are held as trading securities and are carried at fair value as of the date of the Condensed Balance Sheets. Net unrealized and realized gains or 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 less accumulated depreciation. 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 costs associated with significant capital additions. Gains or losses from disposals are included in Interest and other income.

The Company's property, plant, and equipment primarily consist of buildings, 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

Table of Contents

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 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. Management considers any exposure from concentrations of credit risks to be limited.

The following table reflects our significant customers for the three-month and nine-month periods ended September 30, 2024 and 2023:


	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Number of significant customers		2			3			3			3
Aggregate dollar amount of net sales to significant customers	$	5.5	million	$	5.7	million	$	12.8	million	$	14.3	million
Percentage of net sales to significant customers		53.2%			55.0%			53.4%			49.0%

The Company manufactures some of its products in Little Elm, Texas as well as utilizing manufacturers in China. The Company obtained 90% of its products in the first nine months of both 2024 and 2023 from its Chinese manufacturers. Purchases from Chinese manufacturers aggregated 87.3% and 91% of products in the third quarter

Table of Contents

of 2024 and 2023, respectively. In the event that the Company becomes unable to purchase products from its Chinese manufacturers, the Company 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 and EasyPoint^® needles.

On September 13, 2024, the Office of the U.S. Trade Representative (“USTR”) revealed final adjustments to increase tariffs on certain goods imported from China under Section 301 of the Trade Act of 1974. Among those products included were syringes and needles, at a rate of 100%. As noted above, for the first nine months of 2024, 90% of the products the Company obtained were purchased from our manufacturers in China, most of which are impacted by the tariffs. The adjusted tariffs were effective on September 27, 2024. Tariffs are expected to have a material impact to the Company’s results of operations and financial position. The Company is working to lessen the financial impact of the tariffs, including shifting a larger portion of manufacturing of 1mL, 3mL, and EasyPoint® needles to its domestic manufacturing facility.

Revenue recognition

The Company recognizes revenue when control of performance obligations passes to the customer, generally 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. When rebates are issued, 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 in the Condensed Statements of Operations. Accounts payable included estimated contractual allowances for $1.8 million and $2.2 million as of September 30, 2024 and December 31, 2023, 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 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’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.

On February 5, 2024, the Company initiated a voluntary recall of its EasyPoint Needle lot number K220402 which was shipped within the U.S. between July 20, 2022 and September 20, 2023. The Company shipped 477,600 units of

Table of Contents

the products into the market and is working with customers and distributors to determine how many of the units remain unused and subject to the recall. The recall is due to the possible detachment of the needle cannula from the needle holder, which could result in serious injury. The Company has advised its customers and distributors to review their inventory for the affected products, segregate and quarantine the affected products, discontinue any distribution of the affected products, inform all personnel not to use the affected products, and report and return remaining inventory to the Company. The Company submitted a Removal Report with the U.S. Food and Drug Administration and has continued to provide monthly updates. The estimated time for the completion of the recall is December 31, 2024. The Company estimates that the potential expense related to the recall is approximately $116 thousand.

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 of its intellectual property. Such licensing agreements provide licensee with right to use the Company’s intellectual property. The Company accounts for revenue generated under these licensing agreements in accordance with ASC 606. A license may be perpetual or time limited in its application. The Company has concluded that its licensing agreement is distinct as the customer can benefit from the license on their own. In accordance with ASC 606, the licensing agreement is considered functional as it is without professional services, updates and technical support. The Company has determined the current licensing agreement is sales-based or usage-based as defined in ASC 606. In accordance with ASC 606, the Company recognizes revenue from sales-based or usage-based license at the later of a) subsequent sale or usage occurrence or b) the performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied). The Company recognized $38 thousand and $227 thousand in licensing fees for the three and nine months ended September 30, 2024. No licensing fees were recognized for the three and nine months ended September 30, 2023. 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. 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, 2024:
			Blood						Total
			Collection		EasyPoint^®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	4,470,036	$	290,926	$	4,860,327	$	7,319	$	9,628,608
North and South America sales (excluding U.S.)		569,970		—		—		—		569,970
Other international sales		132,817		7,790		3,572		4,100		148,279
Total	$	5,172,823	$	298,716	$	4,863,899	$	11,419	$	10,346,857

Table of Contents


	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
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 nine months ended September 30, 2024:
			Blood
			Collection		EasyPoint^®		Other			Total
Geographic Segment	Syringes		Products		Needles		Products			Revenue
U.S. sales	$	14,655,118	$	991,924	$	5,615,759	$	20,545	$	21,283,346
North and South America sales (excluding U.S.)		1,325,507		96		59,040		6,240		1,390,883
Other international revenue		961,429		151,650		178,276		10,000		1,301,355
Total	$	16,942,054	$	1,143,670	$	5,853,075	$	36,785	$	23,975,584


	For the nine months ended September 30, 2023:
			Blood						Total
			Collection		EasyPoint^®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	17,022,384	$	1,123,808	$	3,944,284	$	26,385	$	22,116,861
North and South America sales (excluding U.S.)		5,596,992		—		—		226,290		5,823,282
Other international sales		959,548