RETRACTABLE TECHNOLOGIES INC

Previous 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.

Current 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.

Previous 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.

Current wording

We have been manufacturing and marketing our products since 1997. Syringes comprised 68.8% of our sales in the first six months of 2025. EasyPoint®products accounted for 27.6% and other products, including our IV safety catheter and blood collection products, were 3.6% of our sales in the first six months of 2025. The significant increase in unit sales of our EasyPoint®needle products for the first six months of 2025 positively affected our overall net revenues, but the lower selling price attributable to the products resulted in a reduction of the total average selling price for the periods presented.

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%. 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.

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. The announcement was part of a 90-day agreement while the U.S. and China negotiated a broader deal on trade and tariffs. As a result, and until a final trade deal has been announced, Management believes the tariff rate on needles and syringes imported from China will be 130% and the remaining products we import will be 30%. As foreign trade policy continues to evolve and as new trade deals are being negotiated, uncertainty as to future tariff rates and affected products remains. Tariffs are expected to have a continuing material impact to our results of operations and financial position.

Previous wording

We have recently adapted some equipment to increase our domestic manufacturing capabilities.** **The adaptations to existing equipment will allow us to produce 0.5 mL syringes domestically. Once operational, we will no longer rely on imports for these products, and they will no longer be affected by tariff costs. We expect that commercial quantities will be available in the second half of 2025.

Current wording

We have recently adapted some equipment to increase our domestic manufacturing capabilities.** **The adaptations to existing equipment will allow us to produce 0.5 mL syringes domestically. Once operational, we will no longer rely on imports for these products. We expect that commercial quantities will be available in the second half of 2025.

Previous 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.

Current wording

We believe domestic customers 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, if any, of the remaining inventory might still remain in the market.

Previous 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.

Current wording

As detailed in Note 4 to the financial statements, we held $30.0 million in debt and equity securities as of June 30, 2025, which represented 20.4% of our total assets.

Previous 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.

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. Purchases from our retail pharmacy customers may differ from purchasing patterns of general line distributors. Second quarter EasyPoint® sales volumes increased primarily for this reason.

Previous 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.

Current wording

A material portion of our net loss for the six months ended June 30, 2025 is comprised of approximately $5.6 million in unrealized loss in debt and equity securities on the Condensed Statements of Operations.

Previous 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

Current wording

Domestic sales accounted for 81.3% and 83.2% of total revenues for the three months ended June 30, 2025 and 2024, respectively. Domestic revenues increased 69.3%, while domestic unit sales increased 81.8%. Domestic unit sales represented 68.9% of total unit sales for the three months ended June 30, 2025. The increase in unit sales did not translate into a proportional increase in domestic revenues, primarily due to a decrease in average selling price. The average selling price was impacted by product mix and higher transaction fees associated with distributor agreements. The average selling price reduction was significantly impacted by the increase in EasyPoint®needle sales in relation to all products sold.

Previous wording

International revenues for the three months ended March 31, 2025 remained consistent compared to the same period in 2024. However, average selling price per unit declined relative to the first quarter of 2024, primarily due to a shift in product mix. International sales for the three months ended March 31, 2024 included a higher proportion of premium-priced Blood Collection Sets and Easy Point Needles, which typically yield higher average selling price. There remains uncertainty regarding the timing of future international orders.

Current wording

International revenues for the three months ended June 30, 2025 increased 92.6% compared to the same period in 2024. However, average selling price per unit declined relative to the second quarter of 2024, primarily due to a shift in product mix. International sales for the three months ended June 30, 2025 included Easy Point Needles sold at a discount to certain international customers which reduced the overall average selling price. There remains uncertainty regarding the timing of future international orders.

Previous 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.

Current wording

Cost of manufactured product increased 66.1% principally due to an increase in tariffs, additional period costs related to increased domestic production activities, and inventory write-downs related to certain product lots approaching their expiration dates.** **Royalty expense increased 39.4% primarily due to the increase in gross sales, slightly offset by a decrease in royalties payable to a shareholder under a sublicensing agreement.

Previous 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.

Current wording

The provision for income taxes was $1.8 thousand as compared to a provision for income taxes of $8.3 million 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

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.

Current wording

Tariffs are expected to continue to materially increase our costs in future periods. Approximately $2.1 million was spent on tariff expenses in the first six months of 2025. These costs are included in Cost of manufactured product.

Previous 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.

Current wording

The loss from operations was $9.8 million compared to a loss of approximately $8.7 million for the same period last year. The decreased loss was due to lower operating expenses, but was impacted by lower gross profit.

Previous wording

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

Current wording

The unrealized loss on debt and equity securities was $5.6 million due to the decreased market values of those securities.

Previous 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.

Current wording

Cash flow used by operations was $5.2 million for the six months ended June 30, 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 $3.0 million in other income from the TIA, offset by $5.6 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 increased by $388 thousand, inventories increased nearly $1.9 million, and accounts payable decreased by $230 thousand.

Previous wording

Cash flow from investing activities was $762 thousand for the first quarter of 2025, primarily reflecting $1.0 million in proceeds from the sale of debt and equity securities, partially offset by purchases of property, plant, and equipment and additional investments in debt and equity securities. The $1 million obtained as a result of the sale of securities was used to fund operating activities during the first quarter of 2025.

Current wording

Cash flow from investing activities was $4.3 million for the six months ended June 30, 2025, primarily reflecting $5.0 million in proceeds from the sale of debt and equity securities, partially offset by purchases of property, plant, and equipment and additional investments in debt and equity securities. The $5 million obtained as a result of the sale of securities was used to fund operating activities during the first six months of 2025.

Previous 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.

Current wording

Cash used by financing activities was $280 thousand for the six months ended June 30, 2025. This was primarily due to repayments of long-term debt and payment of preferred stock dividends.

Previous wording

We have historically funded operations primarily from the proceeds from revenues, private placements, litigation settlements, and loans. We may fund operations going forward from revenues, cash reserves, and investments in trading securities should the need to access those funds arise.

Current wording

We have historically funded operations primarily from the proceeds from revenues, private placements, litigation settlements, and loans. We may fund operations going forward from revenues, cash reserves, and investments in trading securities should the need to access those funds arise. As detailed in Note 8 to the financial statements, we received a settlement payment of $1.9 million in May 2025.

Previous wording

The imposition of tariffs on our products will have a material effect on our operating results and liquidity. Additional capital improvements and increases to our manufacturing workforce will also increase expenses in the near-term as a result of the tariffs and our expected increase in domestic manufacturing. The conversion of existing equipment plus the purchase of additional molds to produce products which have never been produced domestically is expected to cost approximately $1 million, some of which has already been expended. Those products accounted for roughly 15.9% of our overall domestic unit sales and 19.2% of our domestic syringe unit sales. The overall impact of additional workforce needed to produce these and other products is an increase of approximately $3.8 million on an annual basis.

Current wording

equipment plus the purchase of additional molds to produce products which have never been produced domestically is expected to cost approximately $1 million, most of which has already been expended. Those products accounted for roughly 9.4% of our overall domestic unit sales and 16.0% of our domestic syringe unit sales for the three months ended June 30, 2025. The products accounted for roughly and 12.0% of our overall domestic unit sales and 17.3% of our domestic syringe unit sales for the six months ended June 30, 2025. The overall impact of additional workforce needed to produce these and other products is an increase of approximately $3.8 million on an annual basis, although the Company recently reduced its manufacturing and manufacturing support staff by approximately $1.6 million on an annual basis as we refine our manufacturing process and continue to evaluate our importing practices.

Previous 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.

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 were substantially completed in the second quarter of 2025.

Previous 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.

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 June 30, 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 $2.0 million. These credits are recognized as a liability and included in Accounts payable on the Condensed Balance Sheets.