RETRACTABLE TECHNOLOGIES INC

Previous wording

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: tariffs, material changes in demand; our ability to maintain liquidity; our maintenance of patent protection; our ability to maintain favorable third party manufacturing and supplier arrangements and relationships; foreign trade risk; our ability to access the market; production costs; the impact of larger market players in providing devices to the safety 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.

Current wording

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: tariffs; material changes in demand; our ability to maintain liquidity; our maintenance of patent protection; our ability to maintain favorable third party manufacturing and supplier arrangements and relationships; foreign trade risk; our ability to access the market; production costs; the impact of larger market players in providing devices to the safety 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.

Previous wording

We have been manufacturing and marketing our products since 1997. Syringes comprised 70.7% of our sales in the first nine months of 2024. EasyPoint®products accounted for 24.4% and other products, including our IV safety catheter and blood collection products, were 4.8% of our sales in the first nine months of 2024.

Current wording

We have been manufacturing and marketing our products since 1997. Syringes comprised 83.9% of our sales in the first three months of 2025. EasyPoint®products accounted for 11.9% and other products, including our IV safety catheter and blood collection products, were 4.2% of our sales in the first three months of 2025.

Previous wording

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 previously noted, 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 our results of operations and financial position. To date, the Company has incurred $568 thousand in tariff expenses and due to existing orders from our Chinese manufacturers, we expect to incur a total of approximately $1.5 million in tariff expenses through February 2025. We are working to lessen the financial impact of the tariffs, including shifting a larger portion of manufacturing of 1mL, 3mL, and EasyPoint® needles to our domestic manufacturing facility, but while these actions would decrease tariff expenses, they would lead to an increase in compensation expense as we must hire additional manufacturing personnel. Certain products must be purchased from third party suppliers as we do not currently have the machinery to manufacture our entire product line in our U.S. facility. When equipment was added to our U.S. facility pursuant to the TIA, it was strictly for product lines typically used in the administration of vaccines, as required by the TIA. We have sued the USTR and other defendants involved in the issuance of the recent tariff adjustment as described in Note 8 to the financial statements seeking an injunction and, ultimately, a decision that the tariffs be set aside, as well as certain costs, fees, and other relief. Some of our requests for injunctions were denied as described in Note 8 to the financial statements and therefore we are currently subject to the tariffs during the pendency of the case. Tariffs at the

Current wording

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%. In April 2025, an additional imposition of tariffs at a rate of 145% went into effect on products imported from China. The April 2025 tariff rate applies to our non-syringe and non-needle products, and is in addition to the 100% tariffs on syringes and needles. On May 12, 2025 and effective on May 14, 2025, the tariff rate has been reduced to 30% as a baseline to replace the 145% rate announced in April. As a result, we believe the tariff rate on needles and syringes imported from China will be 130% and the remaining products we import will be 30%. This most recent change will be part of a 90-day agreement while the U.S. and China work to solidify a broader deal on tariffs and trade policy. While we have manufacturing capabilities to manufacture most of the products we currently sell domestically, some of our products are sourced exclusively from China. 62.7% and 90.4% of the products we obtained in the first quarter of 2025 and 2024, respectively, were purchased from our manufacturers in China, most of which are now impacted by the tariffs. Tariffs are expected to have a material impact to our results of operations and financial position. Approximately $3.1 million was spent on tariff expenses from September 2024 to May 1, 2025, and of this amount $1.5 million was expended in the first quarter of 2025. We are working to lessen the financial impact of the tariffs, including shifting a larger portion of manufacturing of 1mL, 3mL, and EasyPoint® needles to our domestic manufacturing facility, but while these actions would decrease tariff expenses, they have led to an annualized estimated $3.8 million increase in compensation and benefits expense as we have hired additional manufacturing personnel.

Previous wording

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. There are currently no plans to further expand our production or administrative facilities, nor do we have material commitments for additional manufacturing equipment purchases. At the request of the US government, the TIA was transferred to a successor agreement, identified as Other Transaction Agreement in April 2023. Such agreement contains no additional requirements, and, for the purposes of this report, the agreement shall continue to be referred to herein as the “TIA”. The successor agreement governs ongoing terms established by the TIA until June 30, 2030, which includes maintenance of equipment, availability of capacity, and US government preference in the event of a public health emergency.

Current wording

Recent additions of manufacturing equipment and facilities under the 2020 TIA have increased our production capacity and our overhead costs. Under the TIA and its successor agreement, until June 30, 2030 we must continue to abide by ongoing terms which include maintenance of equipment, availability of capacity, and US government preference in the event of a public health emergency.

Previous wording

Over the past several years, we have experienced certain cost increases in raw materials, but those costs primarily affect our domestic manufacturing because the finished goods we purchased from China (being 90% of our products) have been subject to a long-term fixed price contract. Other factors that could affect our unit costs include tariffs, supplier cost increases, and changing production volumes. Increases in costs may not be recoverable through price increases of our products.

Current wording

Over the past several years, we have experienced certain cost increases in raw materials. Those costs primarily affected our domestic manufacturing because the finished goods we purchased from China were subject to a long-term fixed price contract. Sensitivity to cost fluctuations are likely to become more pronounced as we transition away from production under such a fixed price contract. Other factors that could affect our unit costs include tariffs, supplier cost increases, increases in workforce costs associated with increased domestic production, and changing production volumes. Increases in costs may not be recoverable through price increases of our products.

Previous wording

We believe domestic customers have retained products provided for vaccination purposes in inventory, leading to a decrease in our 2023-2024 domestic sales. Customers have reported that demand was diminished due to their remaining syringe inventory. It is difficult to estimate how much of the remaining inventory might still remain in the market.

Current wording

We believe domestic customers have retained products provided for vaccination purposes in inventory. Customers have reported that demand was diminished due to their remaining syringe inventory. It is difficult to estimate how much of the remaining inventory might still remain in the market.

Previous wording

As detailed in Note 4 to the financial statements, we held $32.8 million in debt and equity securities as of September 30, 2024, which represented 20.8% of our total assets.

Current wording

As detailed in Note 4 to the financial statements, we held $32.3 million in debt and equity securities as of March 31, 2025, which represented 21.6% of our total assets.

Previous wording

Historically, unit sales have increased during the flu season. From approximately 2020-2022, the effect of flu season sales was less impactful due to the dramatic increase in sales attributable to COVID-19 vaccinations. Seasonal trends for syringe sales may now be following pre-pandemic patterns. Additionally, we believe there may be more demand for EasyPoint® products during flu season.

Current wording

Historically, unit sales have increased during the flu season. From 2020-2022, seasonal effects of the flu season on our revenues were less impactful due to the dramatic increase in sales attributable to COVID-19 vaccinations. Seasonal trends for syringe sales may now be following pre-pandemic patterns. Additionally, there may be more demand for EasyPoint® products during the flu season, particularly in the retail pharmacy market. Overall demand may be affected by public sentiment and acceptance of the safety and efficacy of vaccinations. While some products in our catalog of products are unrelated to the administration of vaccines, changes in the acceptance of vaccinations could have a material impact on our business.

Previous wording

A material portion of our net losses for the nine months ended September 30, 2024 is comprised of the approximately $8.4 million change in valuation allowance which occurred in the second quarter of 2024 on the deferred tax asset which is included as a provision for income taxes on the Condensed Statements of Operations. The devaluation of the deferred tax asset was related to our determination that, based on current information, it was more likely than not that we wouldn’t be in a position to use loss carryforwards against future taxable net income based on a variety of factors and accounting guidelines. The announced implementation of tariffs on imported syringes from China was one of the factors considered in this determination.

Current wording

A material portion of our net losses for the three months ended March 31, 2025 is comprised of approximately $7.2 million in unrealized loss in debt and equity securities on the Condensed Statements of Operations.

Previous wording

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

Current wording

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 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.

Previous wording

Domestic sales accounted for 93.1% and 90.9% of the revenues for the three months ended September 30, 2024 and 2023, respectively. Domestic revenues were essentially flat while domestic unit sales increased 29.6%. Domestic unit sales were 92.4% of total unit sales for the three months ended September 30, 2024. The increase in unit sales not contributing to domestic revenues was primarily driven by a decrease in the average selling price, largely due to higher sales of our EasyPoint® needles, which typically have a lower average selling price. International revenues decreased approximately 23.8%. The decrease in international revenues is primarily due to the timing of international shipments. Overall unit sales increased 22%. There is uncertainty as to the timing of future international orders.

Current wording

Domestic sales accounted for 89.6% and 87.4% of total revenues for the three months ended March 31, 2025 and 2024, respectively. Domestic revenues increased 11.9%, while domestic unit sales increased 17.2%. Domestic unit sales

Previous wording

Cost of manufactured product increased 81.6% principally due to a rise in the volume of units sold, higher period costs associated with increased sales, and additional period costs related to increased domestic production activities.** **Royalty expense increased 11.4% primarily due to the increase in gross sales and royalties received from sublicenses.

Current wording

Cost of manufactured product increased 50.3% principally due to an increase in tariffs and additional period costs related to increased domestic production activities.** **Royalty expense increased 8.8% primarily due to the increase in gross sales, slightly offset by a decrease in royalties received from sublicenses.

Previous wording

Tariffs are expected to materially increase our costs in future periods.

Current wording

Tariffs are expected to continue to materially increase our costs in future periods. Approximately $1.5 million was spent on tariff expenses in the first quarter of 2025. These costs are included in Cost of manufactured product.

Previous wording

The loss from operations was $13.9 million compared to a loss of $8.7 million for the same period last year. The increased loss was due to lower gross profit for the current period.

Current wording

The loss from operations was $4.7 million compared to a loss of approximately $3 million for the same period last year. The increased loss was due to lower gross profit for the current period.

Previous wording

The unrealized gain on debt and equity securities was $1.5 million due to the increased market values of those securities.

Current wording

The unrealized loss on debt and equity securities was $7.2 million due to the decreased market values of those securities.

Previous wording

The provision for income taxes was $8.4 million for the first nine months of 2024 as compared to a benefit for income taxes of $1.9 million in the first nine months of 2023. The year-to-date income tax provision is primarily related to fully reserving our deferred tax asset in the second quarter of 2024.

Current wording

The provision for income taxes was $286 thousand as compared to a provision for income taxes of $86 thousand for the same period in 2024. The difference is primarily related to fully reserving our deferred tax asset in the second quarter of 2024.

Previous wording

Cash and investments comprise 23.3% of total assets. Cash flow used by operations was $10.5 million for the nine months ended September 30, 2024 due to a number of factors. We recognized approximately $4.4 million in other income from the TIA during the first nine months of 2024, offset by an increase of $8.4 million in valuation allowance related to deferred tax assets which is material to the adjustments to total cash flow from operations. Changes in working capital also impacted cash flows from operating activities. Accounts receivable decreased by $1.6 million, inventories increased by $3.7 million, and accounts payable decreased by $1.5 million.

Current wording

Cash flow used by operations was $1.5 million in the first quarter of 2025 due to a number of factors. Aside from the various reconciling items used in determining the overall use of cash, our net loss for the period was the predominant factor. We recognized approximately $1.5 million in other income from the TIA, offset by $7.2 million in unrealized loss in debt and equity securities which is material to the adjustments to total cash flow from operations. Changes in working capital also impacted cash flows from operating activities. Accounts receivable decreased by $2.5 million, inventories increased nearly $2.0 million, and accounts payable increased by $433 thousand.

Previous wording

Cash flow used by financing activities was $398 thousand for the nine months ended September 30, 2024 due to repayments of long-term debt and payment of preferred stock dividends.

Current wording

Cash used by financing activities was $140 thousand for the first quarter of 2025. This was primarily due to repayments of long-term debt and payment of preferred stock dividends.

Previous wording

The mix of domestic and international sales, along with 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. Additionally, product mix plays a role, with syringe sales typically having higher average selling prices and gross profit margins than our other product lines. Some international sales of our products are shipped directly from China to the customer. The number of units produced by us versus manufactured in China can have a significant effect on the carrying costs of 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, transportation costs, and the impact of tariffs 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.

Current wording

The mix of domestic and international sales, along with 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. Additionally, product mix plays a role, with syringe sales typically having higher average selling prices and gross profit margins than our other product lines. Some international sales of our products are shipped directly from China to the customer. The number of units produced by us versus manufactured in China can have a significant effect on the carrying costs of 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, transportation costs, and the impact of tariffs can also significantly affect our margins.

Previous wording

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 event that we need to access the funds for operations. Expected short-term uses of cash include payroll and benefits, royalty expense, inventory purchases, tariffs, contractual obligations, payment of income taxes, quarterly preferred stock dividends, and other operational priorities. Our liabilities are our bank debt as set forth as Long-term debt on our Condensed Balance Sheets and other liabilities detailed herein in Note 6 **to the financial statements. We believe we will have adequate means to meet our currently foreseeable long-term liquidity needs although the new tariffs and our costs related to an increase in domestic manufacturing will increase our expenses materially. For the next 1-3 years, we believe our liquidity will decline materially but expect that we may be able to satisfy our long-term cash requirements using a combination of cash and liquidation of our equity investments. If cash needs cannot be met using existing cash and investments, management would reduce operational costs.

Current wording

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 event that we need to access the funds for operations. Expected short-term uses of cash include payroll and benefits, royalty expense, inventory purchases, tariffs, contractual obligations, payment of income taxes, quarterly preferred stock dividends, and other operational priorities. Our liabilities are our bank debt as set forth as Long-term debt on our Condensed Balance Sheets and other liabilities detailed herein in Note 6 **to the financial statements. We believe we will have adequate means to meet our currently foreseeable long-term liquidity needs although the new tariffs and our costs related to an increase in domestic manufacturing will increase our expenses materially. For the next 1-3 years, we believe our liquidity will decline materially, but we expect that we may be able to satisfy our long-term cash requirements using a combination of cash and liquidation of our equity investments. If cash needs cannot be met using existing cash and investments, management would further reduce operational costs. In the event that the foregoing is insufficient, we may liquidate certain assets.

Previous wording

We expect to spend approximately $1 million over the next few months using existing cash reserves to convert a portion of our domestic equipment to align to our plan to produce more units at our U.S. facility. While additional equipment expenditures may be necessary in the future, this near-term equipment conversion is expected to be completed by the second quarter of 2025.

Current wording

To produce more units at our U.S. facility, we expect to spend approximately $1 million to purchase molds and convert domestic equipment, some of which has already been expended. While additional equipment expenditures may be necessary in the future, these near-term equipment expenditures are expected to be completed in the second quarter of 2025.

Previous wording

We are responsible for developing estimates for amounts reported as assets and 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 distributors and the related credits issued once our distributors have satisfied their contractual obligations. The estimate includes consideration of historical redemption rates, discount rates, a combination of estimated distributor inventories based on tracking information provided by the distributors or if known, inventory turnover rates. The establishment of a liability for future claims of rebates against sales in the current period requires that we have an understanding of the 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 basis for assumptions in future periods, as well as the accuracy of past estimates. Based on distributors purchasing and claiming rebates practices, we do not expect significant changes to the current inputs and assumption used in the estimate calculations. While we believe that we have sufficient historical data, and a firm basis for establishing reserves for contractual obligations, there is an inherent risk that our estimates and the underlying assumptions may not reflect actual future results. In the event that these estimates and/or assumptions are incorrect, adjustments to our reserves may have a material impact on future results. As of September 30, 2024, we estimate that the total potential future credits to be issued as a result of prior purchases which have not yet been claimed is $1.8 million.

Current wording

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 distributors and the related credits issued once our distributors have satisfied their contractual obligations. The estimate includes consideration of historical redemption rates, discount rates, a combination of estimated distributor inventories based on tracking information provided by the distributors or if known, inventory turnover rates. The establishment of a liability for future claims of rebates against sales in the current period requires that we have an understanding of the 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 basis for assumptions in future periods, as well as the accuracy of past estimates. Based on distributors’ purchasing and claiming rebates practices, we do not expect significant changes to the current inputs and assumption used in the estimate calculations. While we believe that we have sufficient historical data, and a firm basis for establishing reserves for contractual obligations, there is an inherent risk that our estimates and the underlying assumptions may not reflect actual future results. In the event that these estimates and/or assumptions are incorrect, adjustments to our reserves may have a material impact on future results. As of March 31, 2025, we estimate that the total potential future credits to be issued as a result of prior purchases which have not yet been claimed is $1.7 million.