10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2018

or

£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)

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.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company x
	Emerging growth company o

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 shares of Common Stock, no par value, outstanding on November 1, 2018.

RETRACTABLE TECHNOLOGIES, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2018

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		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
SIGNATURES		23

PART I—FINANCIAL INFORMATION

Item 1.       Financial Statements.

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED BALANCE SHEETS

(unaudited)

		September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	13,640,696		$	14,877,899
Accounts receivable, net		4,475,695			5,105,556
Inventories, net		7,385,413			6,206,161
Other current assets		404,530			418,154
Total current assets		25,906,334			26,607,770
Property, plant, and equipment, net		10,976,350			11,353,202
Income taxes receivable		188,456			188,456
Other assets		3,477			6,052
Total assets	$	37,074,617		$	38,155,480
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,908,336		$	4,957,750
Current portion of long-term debt		424,421			410,949
Accrued compensation		670,498			547,021
Dividends payable		55,113			55,113
Accrued royalties to shareholder		1,102,583			793,489
Insurance proceeds		312,424			466,293
Other accrued liabilities		1,046,480			657,923
Income taxes payable		10,234			11,407
Total current liabilities		8,530,089			7,899,945
Long-term debt, net of current maturities		2,726,146			3,081,409
Total liabilities		11,256,235			10,981,354
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		61,926,869			62,092,206
Accumulated deficit		(36,889,932	)		(35,699,525	)
Total stockholders’ equity		25,818,382			27,174,126
Total liabilities and stockholders’ equity	$	37,074,617		$	38,155,480

See accompanying notes to condensed unaudited financial statements

1

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

		Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Sales, net	$	9,863,272		$	10,412,036		$	25,011,066		$	24,981,833
Cost of sales
Cost of manufactured product		6,203,842			6,304,397			15,112,538			15,116,805
Royalty expense to shareholder		863,295			847,301			2,174,778			2,070,699
Total cost of sales		7,067,137			7,151,698			17,287,316			17,187,504
Gross profit		2,796,135			3,260,338			7,723,750			7,794,329
Operating expenses:
Sales and marketing		1,033,295			1,220,451			3,251,231			3,472,004
Research and development		146,487			159,921			432,179			465,765
General and administrative		1,676,579			1,912,824			5,196,224			6,346,731
Total operating expenses		2,856,361			3,293,196			8,879,634			10,284,500
Loss from operations		(60,226	)		(32,858	)		(1,155,884	)		(2,490,171	)
Interest and other income		39,290			19,477			102,133			44,155
Interest expense		(42,481	)		(52,962	)		(136,446	)		(159,053	)
Loss before income taxes		(63,417	)		(66,343	)		(1,190,197	)		(2,605,069	)
Provision for income taxes		—			283			210			848
Net loss		(63,417	)		(66,626	)		(1,190,407	)		(2,605,917	)
Preferred stock dividend requirements		(176,249	)		(176,249	)		(528,747	)		(528,747	)
Loss applicable to common shareholders	$	(239,666	)	$	(242,875	)	$	(1,719,154	)	$	(3,134,664	)
Basic loss per share	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.10	)
Diluted loss per share	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.10	)
Weighted average common shares outstanding:
Basic		32,666,454			32,166,454			32,666,454			31,722,010
Diluted		32,666,454			32,166,454			32,666,454			31,722,010

See accompanying notes to condensed unaudited financial statements

2

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

		Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Cash flows from operating activities
Net loss	$	(1,190,407	)	$	(2,605,917	)
Adjustments to reconcile loss to net cash used by operating activities:
Provision for doubtful accounts		—			(81,152	)
Share-based compensation		—			652,862
Depreciation and amortization		669,584			603,580
(Increase) decrease in operating assets:
Accounts receivable		629,861			(1,897,332	)
Inventories		(1,179,252	)		(336,023	)
Other current assets		13,624			(313,108	)
Increase (decrease) in operating liabilities:
Accounts payable		(49,414	)		574,258
Other accrued liabilities		821,128			507,768
Insurance proceeds		(153,869	)		876,250
Income taxes payable		(1,173	)		—
Net cash used by operating activities		(439,918	)		(2,018,814	)
Cash flows from investing activities
Purchase of property, plant, and equipment		(290,153	)		(172,305	)
Net cash used by investing activities		(290,153	)		(172,305	)
Cash flows from financing activities
Repayments of long-term debt		(341,795	)		(326,227	)
Proceeds from the sale of common stock		—			2,350,100
Payment of Preferred Stock dividends		(165,337	)		(165,339	)
Net cash provided (used) by financing activities		(507,132	)		1,858,534
Net decrease in cash and cash equivalents		(1,237,203	)		(332,585	)
Cash and cash equivalents at:
Beginning of period		14,877,899			16,199,043
End of period	$	13,640,696		$	15,866,458
Supplemental schedule of cash flow information:
Interest paid	$	136,445		$	159,053
Income taxes paid	$	1,050		$	2,000
Supplemental schedule of noncash investing and financing activities:
Preferred dividends declared, not paid	$	55,113		$	55,113

See accompanying notes to condensed unaudited financial statements

3

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, 2018:

		Common Stock		Series I Class B Preferred Stock		Series II Class B Preferred Stock		Series III Class B Preferred Stock		Series IV Class B Preferred Stock		Series V Class B Preferred Stock		Additional Paid-In Capital		Accumulated Deficit			Total
Balance at June 30, 2018	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	61,981,981	$	(36,826,515	)	$	25,936,911
Dividends		—		—		—		—		—		—		(55,112	)	—			(55,112	)
Net Loss		—		—		—		—		—		—		—		(63,417	)		(63,417	)
Balance at September 30, 2018	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	61,926,869	$	(36,889,932	)	$	25,818,382

The following shows the changes in stockholders’ equity for the three month period ended September 30, 2017:

		Common Stock		Series I Class B Preferred Stock		Series II Class B Preferred Stock		Series III Class B Preferred Stock		Series IV Class B Preferred Stock		Series V Class B Preferred Stock		Additional Paid-In Capital		Accumulated Deficit			Total
Balance at June 30, 2017	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	61,430,417	$	(34,502,778	)	$	27,709,084
Issuance of New Common Stock		—		—		—		—		—		—		570,100		—			570,100
Dividends		—		—		—		—		—		—		(55,112	)	—			(55,112	)
Share-based Compensation		—		—		—		—		—		—		182,551		—			182,551
Net Loss		—		—		—		—		—		—		—		(66,626	)		(66,626	)
Balance at September 30, 2017	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	62,127,956	$	(34,569,404	)	$	28,339,997

The following shows the changes in stockholders’ equity for the nine month period ended September 30, 2018:

		Common Stock		Series I Class B Preferred Stock		Series II Class B Preferred Stock		Series III Class B Preferred Stock		Series IV Class B Preferred Stock		Series V Class B Preferred Stock		Additional Paid-In Capital		Accumulated Deficit			Total
Balance at December 31, 2017	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	62,092,206	$	(35,699,525	)	$	27,174,126
Dividends		—		—		—		—		—		—		(165,337	)	—			(165,337	)
Net Loss		—		—		—		—		—		—		—		(1,190,407	)		(1,190,407	)
Balance at September 30, 2018	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	61,926,869	$	(36,889,932	)	$	25,818,382

See accompanying notes to condensed unaudited financial statements

4

RETRACTABLE TECHNOLOGIES, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

The following shows the changes in stockholders’ equity for the nine month period ended September 30, 2017:

		Common Stock		Series I Class B Preferred Stock		Series II Class B Preferred Stock		Series III Class B Preferred Stock		Series IV Class B Preferred Stock		Series V Class B Preferred Stock		Additional Paid-In Capital		Accumulated Deficit			Total
Balance at December 31, 2016	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	59,290,333	$	(31,963,487	)	$	28,108,291
Issuance of New Common Stock		—		—		—		—		—		—		2,350,100		—			2,350,100
Dividends		—		—		—		—		—		—		(165,339	)	—			(165,339	)
Share-based Compensation		—		—		—		—		—		—		652,862		—			652,862
Net Loss		—		—		—		—		—		—		—		(2,605,917	)		(2,605,917	)
Balance at September 30, 2017	$	—	$	98,500	$	171,200	$	129,245	$	342,500	$	40,000	$	62,127,956	$	(34,569,404	)	$	28,339,997

See accompanying notes to condensed unaudited financial statements

5

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 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.  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 April 2, 2018 for the year ended December 31, 2017.

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.

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 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 bad debt was $102 thousand as of December 31, 2017 and also as of September 30, 2018.

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, 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.

6

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.  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 excess or obsolete inventories or they may be written off.

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 associated with significant capital additions.  Gains or losses from property disposals are included in operations.

The 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

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 value of the underlying assets.

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.  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, 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 majority of accounts receivable are due from companies which are well-established entities. 

7

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 and nine months ended September 30, 2018 and 2017:

	Three Months ended September 30, 2018	Three Months ended September 30, 2017	Nine Months ended September 30, 2018	Nine Months ended September 30, 2017
Number of significant customers	3	3	2	2
Aggregate dollar amount of net sales to significant customers	$5.4 million	$5.1 million	$10.0 million	$9.4 million
Percentage of net sales to significant customers	55.2%	49.1%	39.9%	37.5%

The Company manufactures some of its products in Little Elm, Texas as well as utilizing manufacturers in China.  The Company obtained roughly 85.1% and 81.7% of its products in the first nine months of 2018 and 2017, respectively, from its Chinese manufacturers.  Purchases from Chinese manufacturers aggregated 79.9% and 80.1% of products in the three month periods ended September 30, 2018 and 2017, respectively.  In the event that the Company becomes unable to purchase products from its Chinese manufacturers, the Company would need to find an alternate manufacturer for its blood collection set, 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.

Revenue recognition

Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment.  When title and risk of ownership have passed to the customer, the Company has satisfied all performance obligations to the customer.  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 are recorded when issued and 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 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 $3,443,368 and $4,115,628 as of September 30, 2018 and December 31, 2017, 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.

8

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

Disaggregated information of revenue recognized from contracts with customers is as follows:

		For the three months ended September 30, 2018:
Geographic Segment		Syringes		Blood Collection Products		EasyPoint® Needles		Other Products		Total Product Sales
U.S. sales	$	6,454,432	$	466,392	$	1,803,904	$	22,968	$	8,747,696
North and South America sales (excluding U.S.)		803,414		240		—		—		803,654
Other international sales		290,760		12,490		—		8,672		311,922
Total	$	7,548,606	$	479,122	$	1,803,904	$	31,640	$	9,863,272

		For the three months ended September 30, 2017:
Geographic Segment		Syringes		Blood Collection Products		EasyPoint® Needles		Other Products		Total Product Sales
U.S. sales	$	7,019,389	$	309,012	$	1,016,226	$	14,220	$	8,358,847
North and South America sales (excluding U.S.)		1,896,492		1,700		—		2,700		1,900,892
Other international sales		117,447		30,800		—		4,050		152,297
Total	$	9,033,328	$	341,512	$	1,016,226	$	20,970	$	10,412,036

		For the nine months ended September 30, 2018:
Geographic Segment		Syringes		Blood Collection Products		EasyPoint® Needles		Other Products		Total Product Sales
U.S. sales	$	18,097,760	$	991,318	$	2,519,973	$	55,988	$	21,665,039
North and South America sales (excluding U.S.)		2,595,634		8,805		252		900		2,605,591
Other international sales		682,134		36,024		456		21,825		740,436
Total	$	21,375,528	$	1,036,147	$	2,520,681	$	78,713	$	25,011,066

		For the nine months ended September 30, 2017:
Geographic Segment		Syringes		Blood Collection Products		EasyPoint® Needles		Other Products		Total Product Sales
U.S. sales	$	18,260,242	$	821,869	$	1,232,979	$	46,757	$	20,361,847
North and South America sales (excluding U.S.)		3,531,574		2,944		—		193,934		3,728,452
Other international sales		829,680		42,954		—		18,900		891,534
Total	$	22,621,496	$	867,767	$	1,232,979	$	259,591	$	24,981,833

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Income taxes

The Tax Cuts and Job Act (“the Act”) was enacted on December 22, 2017, and the U.S. federal corporate tax rate was reduced from 35% to 21%.  U.S. generally accepted accounting principles require companies to account for the effects of changes in income tax rates and laws in the period the change is enacted. Financial results, including provisional amounts, have been calculated for the income tax effects of the change. The U.S. Securities and Exchange Commission issued Staff Accounting Bulletin 118 (SAB 118) allowing companies to use provisional estimates to record the effects of the Act.  SAB 118, as codified by Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update),” allows companies to complete accounting for these effects no later than one year from the enactment date of the Act.  During the quarter ended September 30, 2018, the Company completed its analysis of the provisional estimates made to record the effects of the Act.  There were no adjustments made to previously recorded amounts.

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 has established a valuation allowance for its net deferred tax asset as future taxable income cannot be reasonably assured.  Penalties 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.

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 or common stock issuable upon the conversion of convertible preferred stock.  The calculation of diluted EPS excluded 93,125 shares of Common Stock underlying issued and outstanding stock options for the three months ended September 30, 2017 as their effect was antidilutive.  The calculation of diluted EPS excluded 6,126 and 128,540 shares of Common Stock underlying issued and outstanding stock options for the nine months ended September 30, 2018 and September 30, 2017, respectively, as their effect was antidilutive.  The potential dilution, if any, is shown on the following schedule:

		Three Months Ended September 30, 2018			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
Net loss	$	(63,417	)	$	(66,626	)	$	(1,190,407	)	$	(2,605,917	)
Preferred dividend requirements		(176,249	)		(176,249	)		(528,747	)		(528,747	)
Loss applicable to common shareholders after assumed conversions	$	(239,666	)	$	(242,875	)	$	(1,719,154	)	$	(3,134,664	)
Average common shares outstanding		32,666,454			32,166,454			32,666,454			31,722,010
Average common and common equivalent shares outstanding – assuming dilution		32,666,454			32,166,454			32,666,454			31,722,010
Basic loss per share	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.10	)
Diluted loss per share	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.10	)

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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

Research and development costs are expensed as incurred.

Share-based compensation

The Company’s share-based payments are accounted for using the fair value method.  The Company records share-based compensation expense on a straight-line basis over the requisite service period.  The Company incurred the following share-based compensation costs:

		Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
Cost of sales	$	—	$	74,683	$	—	$	270,800
Sales and marketing		—		38,578		—		143,255
Research and development		—		12,458		—		45,174
General and administrative		—		56,832		—		193,633
	$	—	$	182,551	$	—	$	652,862

Insurance Proceeds

Receipts from insurance up to the amount of any loss recognized by the Company are considered recoveries.  Any such recoveries are recorded when they are received.  Insurance recoveries are not recognized as a component of earnings (loss) from operations until all repairs are made.

Recently Adopted Pronouncements

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 was effective for the Company’s quarter ended March 31, 2018.  The adoption of ASU 2016-18 did not have a material effect on the Company’s financial statements as the Company currently holds no restricted cash or restricted cash equivalents.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments” (ASU 2016-15), clarifying guidance on the classification of certain cash receipts and payments in the statement of cash flows.  This ASU was effective for the Company’s quarter ended March 31, 2018.  The adoption of ASU 2016-15 did not have a material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, as well as several subsequently issued clarifying amendments, 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.  The ASU, as amended, 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

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contract.  ASU No. 2014-09 allows for either full retrospective or modified retrospective adoption.  The ASU, as amended, was effective commencing with the Company’s quarter ended March 31, 2018.  The Company adopted this amended guidance on a Modified Retrospective basis in the first quarter of 2018.  The adoption of the ASU, as amended, had no impact on the opening balance of retained earnings.  The Company applied the guidance of ASU No. 2014-09, as amended, to those contracts that were not completed as of January 1, 2018.  In implementing the guidance of ASU 2014-09, as amended, the Company applied the practical expedients of FASB ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.”  Under ASU 2016-12, the Company applies the guidance of ASU 2014-09, as amended, to a portfolio of contracts with similar characteristics, as opposed to individual contracts, as applying the guidance to the portfolio does not materially differ from applying the guidance to individual contracts.  In addition, the Company accounts for shipping and handling as activities to fulfill the promise to transfer goods to a customer as opposed to a performance obligation.  Historically, freight and handling activities billed to customers have not been material.

In August 2018, the Securities and Exchange Commission (SEC) adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, “Disclosure Update and Simplification”. The amendments were effective November 5, 2018.   The amendments eliminate or revise several redundant or duplicative requirements between SEC rules and GAAP, including the elimination of the disclosure of the ratio of earnings to fixed charges and the presentation of dividends per share on the face of the statement of operations for interim periods.  Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC staff has indicated that it would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.  The Company has elected to adopt the provisions of Securities Act Release No. 33-10532 for the quarter ended September 30, 2018 and has presented condensed statements of changes in stockholders’ equity for the periods ended September 30, 2018 and 2017 in this quarterly report on Form 10-Q.

Recently Issued Pronouncements

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

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, as well as several subsequently issued clarifying amendments. Under the ASU, as amended, 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 guidance, lessor accounting is largely unchanged. The lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases”. This amendment clarifies Topic 842 and corrected unintended application of guidance and is effective concurrent with Topic 842 or upon issuance if Topic 842 was early adopted.  In August 2018, the FASB issued ASU 2018-11, “Leases (Topic 842):  Targeted Improvements”. This amendment provides additional transition options allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented and provides a practical expedient to lessors to elect, by class of underlying assets, to account for non-lease and lease

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components as a single arrangement.  The Company intends to adopt the provisions of ASU 2018-11 through a cumulative effect adjustment.  Topic 842, and its subsequent amendments, is effective for the Company’s quarter ending March 31, 2019, with early adoption permitted. The Company is currently evaluating the various accounting policy elections associated with this ASU, as amended, including transition methods and practical expedients, identifying contracts for evaluation, and reviewing contracts to determine if they contain leases.  While the Company is currently evaluating the timing and impact of adopting ASU 2016-02, as amended, the Company anticipates recording lease assets and liabilities less than $250,000 on its Condensed Balance Sheets, with no material impact to its Condensed Statements of Operations or to its accumulated deficit. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date. The Company expects to complete these procedures before the end of the year and determine any transition adjustments.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):  Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (a Consensus of the FASB Emerging Issues Task Force)”.  This amendment requires that implemented costs incurred in a hosting arrangement that is a service contract should be accounted for in accordance with ASC 350-40.  Accordingly, costs incurred during the preliminary project and post-implementation stages are expensed and costs associated with the application development phase are capitalized.  The amendment also requires that capitalized costs be amortized over the term of the hosting arrangement and that capitalized costs should be evaluated for impairment.  The amendment is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods.  The Company is currently assessing the impact that adoption of this ASU will have on its financial statements and related disclosures.

3.INVENTORIES

Inventories consist of the following:

		September 30, 2018		December 31, 2017
Raw materials	$	1,467,431	$	1,511,339
Finished goods		6,512,470		5,289,761
		7,979,901		6,801,100
Inventory reserve		(594,488	)	(594,939	)
	$	7,385,413	$	6,206,161

4.INCOME TAXES

The Company’s effective tax rate on the net earnings (loss) before income taxes was 0.0% for the nine months ended September 30, 2018 and September 30, 2017.  For the three months ended September 30, 2018 and September 30, 2017, the Company’s effective tax rate on the net earnings (loss) before income taxes was 0.0% and (0.4)%, respectively.

5.OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:

		September 30, 2018		December 31, 2017
Prepayments from customers	$	440,528	$	355,742
Accrued property taxes		331,284		14,681
Accrued professional fees		233,153		231,826
Other accrued expenses		41,515		55,674
Total	$	1,046,480	$	657,923

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6.COMMITMENTS AND CONTINGENCIES

In May 2010, the Company and an officer’s suit against Becton, Dickinson and Company (“BD”) 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 including, among other things, a requirement to notify certain customers and others regarding misleading disclosures.  In connection with BD’s subsequent appeal, on December 2, 2016, the United States Court of Appeals for the Fifth Circuit 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.  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.  The Company filed a notice of Appeal with the United States Court of Appeals for the Fifth Circuit on November 3, 2017.  Briefing for the appeal was completed by the parties on May 2, 2018 and oral argument occurred on October 3, 2018.

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.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, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
U.S. sales	$	8,747,696	$	8,358,847	$	21,665,039	$	20,361,847
North and South America sales (excluding U.S.)		803,654		1,900,892		2,605,591		3,728,452
Other international sales		311,922		152,297		740,436		891,534
Total sales	$	9,863,272	$	10,412,036	$	25,011,066	$	24,981,833

Long-lived assets by geography are as follows:

		September 30, 2018		December 31, 2017
Long-lived assets
U.S.	$	10,856,824	$	11,215,583
International		119,526		137,619
Total	$	10,976,350	$	11,353,202

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8.DIVIDENDS

The Company declared dividends in 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 January 6, 2017, April 24, 2017, July 20, 2017, and October 20, 2017.  The Company declared dividends in 2018 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on January 19, 2018, April 24, 2018, July 20, 2018, and October 23, 2018.

9.PRIVATE PURCHASE

The Company approved three 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 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.  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 December 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 in the first quarter of 2017.  Mr. Cowan received his bonus in the fourth quarter of 2017.

11.STORM DAMAGE AND INSURANCE PROCEEDS

On March 26, 2017, a hail storm passed through Little Elm, Texas, 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 were also damaged.

The Company’s insurance carrier has assessed damages of $1,009,960 and the Company’s deductible is $5,000.  The Company received these funds from its carrier in the second quarter of 2017.  Repairs commenced during the third quarter of 2017.  The Company expects that all repairs will be completed in the fourth quarter.

During 2017, the Company incurred and recognized $538,667 in repairs due to the storm damage.  Repairs during the first nine months of 2018 were $203,289.  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.  The remaining insurance proceeds are expected to be recognized as income in the fourth quarter of 2018.

12.LONG-TERM DEBT

On April 10, 2018, the Company renewed its loan with American First National Bank, which renewal included a ten-year extension of the Company’s promissory note in the original principal amount of approximately $4.21 million ($3.03 million at date of renewal) and converted the interest rate to an adjustable interest rate equal to the prime rate plus 0.25%.  The note matures on April 10, 2028 and is secured by the Company’s land and buildings. The interest rate was 5.5% at September 30, 2018.

The following chart summarizes the Company’s obligations under this note to make future payments as of September 30, 2018 for years ending December 31:

2018	$	63,102
2019		246,995
2020		260,202
2021		273,703
2022		287,905
Thereafter		1,807,208
	$	2,939,115

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13.SUBSEQUENT EVENTS

On November 8, 2018, the Company terminated the employment approximately 20 employees earning total annual compensation of approximately $1.1 million.  Some of these positions may be filled in the future.  Under the proposed severance agreements, severance costs are expected to be a maximum of $250 thousand.

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, potential tariffs, our ability to maintain liquidity, our maintenance of patent protection, the impact of current and future Court decisions regarding current litigation, our ability to maintain favorable third party manufacturing and supplier arrangements and relationships, foreign trade risk, our ability to quickly increase capacity in response to an increase in demand, our ability to access the market, our ability to maintain or lower production costs, our ability to continue to finance research and development as well as operations and expansion of production, the impact of larger market players, specifically Becton, Dickinson and Company (“BD”), in providing devices to the safety market, and 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 syringes comprised 85.5% of our sales in the first nine months of 2018.  We also manufacture and market the EasyPoint® needle, 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 of bloodstream infections associated with catheter hub contamination.

In the second quarter of 2016, we began selling the EasyPoint® needle.  EasyPoint® needles made up 4.9% of revenues in the first nine months of 2017 and 10.1% of our revenues in the first nine months of 2018.  The EasyPoint® needle 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.

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

Our products have been and continue to be distributed nationally and internationally through numerous distributors.  Although we have made limited progress in some areas, such as the alternate care market, our volumes are not as high as they should be given the nature and quality of our products and the federal and state legislation requiring 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.

We continue to pursue various strategies to have better access to the hospital market, as well as other markets, including attempting to gain access to the market through our sales efforts, our innovative technology, introduction of new products, and, when necessary, litigation.

We have reported in the past that our progress is limited principally due to the practices engaged in by BD, the dominant maker and seller of disposable syringes.  We initiated an antitrust and false advertising lawsuit in 2007 against BD.  Although a district court judgment in 2015 awarded us approximately $340 million in antitrust

16

damages from BD and the Fifth Circuit affirmed a finding of false advertising liability against BD, we were ultimately awarded a take nothing judgment in August 2017 and the case was dismissed.  We appealed that ruling, briefing has been completed, and oral arguments occurred October 3, 2018.

Our litigation expenses were significantly less in 2017 than in prior years.  In the first nine months of 2018, our legal expenses, including litigation expenses, were significantly lower as compared to the first nine months of 2017.  We have expanded our sales and marketing staff in an effort to gain market share.  Costs related to additional compensation, bonuses to Ms. Larios and Mr. Cowan, and stock option expense related to options granted in 2016 were amortized in 2017 and affect comparability to 2017.

In January 2018, Congress imposed another two-year moratorium on the 2.3% medical device excise tax imposed by Internal Revenue Code section 4191.  Thus, the medical device excise tax is not expected to go into effect until January 1, 2020.

On November 8, 2018, we terminated the employment of approximately 20 employees earning total annual compensation of approximately $1.1 million.  Some of these positions may be filled in the future.  Under the proposed severance agreements, severance costs are expected to be a maximum of $250 thousand.

In 2016, we granted a right to three of our executive officers to purchase shares directly from the Company.  Thomas J. Shaw exercised such right on January 12, 2017, buying two million shares at market price for an aggregate purchase price of $1.78 million and purchased one million shares at market price on August 23, 2017 for an aggregate purchase price of $570,100.

We received approximately $1 million from our insurance carrier in the second quarter of 2017 and the majority of these funds have been used to repair our buildings from earlier storm damage.  The remaining insurance proceeds are expected to be recognized as income in the fourth quarter of 2018.

In the second quarter of 2018, the Company renewed its loan with American First National Bank, which renewal included a ten-year extension of the Company’s promissory note in the original principal amount of approximately $4.21 million and converted the interest rate to an adjustable interest rate equal to the prime rate plus 0.25%.

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 of 2018, our Chinese manufacturers produced approximately 85.1% of our products.  In the event that we become unable to purchase products from our Chinese manufacturers, we would 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.  New import tariffs on Chinese products could materially adversely affect us.  As of the date of this filing, syringes are not included among the Chinese products on which the United States has proposed tariffs.

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.

With increased volumes, our manufacturing unit costs have generally tended to decline.  Factors that could affect our unit costs include possible tariffs, increases in costs by third party manufacturers, changing production volumes, costs of petroleum products, and transportation costs.  Increases in such costs may not be recoverable through price increases of our products.

RESULTS OF OPERATIONS

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.  Dollar amounts have been rounded for ease of reading.  All period references are to the periods ended September 30, 2018 or 2017.

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Comparison of Three Months Ended September 30, 2018 and September 30, 2017

Domestic sales accounted for 88.7% and 80.3% of the revenues for the three months ended September 30, 2018 and 2017, respectively.  Domestic revenues increased 4.7% principally due to sales of EasyPoint® needles.  Domestic unit sales increased 19.7%.  Domestic unit sales were 85.8% of total unit sales for the three months ended September 30, 2018.  International revenue and unit sales decreased 45.7% and 49.6%, respectively, due to decreased volumes.  Our international orders may be subject to significant fluctuation over time.  Overall unit sales increased 0.2%.

The Cost of manufactured product decreased by 1.6% principally due to lower average cost.  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 sales mix.  Royalty expense increased 1.9% due to higher gross sales.

Gross profit decreased 14.2% primarily due to lower average sales prices.

Operating expenses decreased 13.3%.  The decrease was due to lower legal expenses, lower travel and entertainment costs, and lower employee costs.

Our operating loss was $60,226 compared to an operating loss for the same period last year of $32,858 due primarily to lower gross profit mitigated by lower operating expenses.

Our effective tax rate on the net loss before income taxes was 0.0% and (0.4)% for the three months ended September 30, 2018 and September 30, 2017, respectively.

Comparison of Nine Months Ended September 30, 2018 and September 30, 2017

Domestic sales accounted for 86.6% and 81.5% of the revenues for the nine months ended September 30, 2018 and 2017, respectively.  Domestic revenues increased 6.4% principally due to sales of EasyPoint® needles.  Domestic unit sales increased 14.2%.  Domestic unit sales were 81.3% of total unit sales for the nine months ended September 30, 2018.  International revenue and unit sales decreased 27.6% and 26.4%, respectively, due to decreased volumes.  Our international orders may be subject to significant fluctuation over time.  Overall unit sales increased 3.6%.

The Cost of manufactured product was flat due to higher volumes offset by lower average 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 sales mix.  Royalty expense increased 5.0% due to higher gross sales.

Gross profit decreased 0.9% primarily due to slightly higher royalty costs.

Operating expenses decreased 13.7%.  The decrease was due to lower legal expenses, bonuses paid in 2017, lower employee cost, reduction in share-based compensation, and lower travel and entertainment costs.

Our operating loss was $1.2 million compared to an operating loss for the same period last year of $2.5 million due primarily to lower operating expenses.

Our effective tax rate on the net loss before income taxes was 0.0% for the nine months ended September 30, 2018 and September 30, 2017.

Discussion of Balance Sheet and Statement of Cash Flow Items

Cash comprised 36.8% of total assets at September 30, 2018.  Working capital was $17.4 million at September 30, 2018, a decrease of $1.3 million from December 31, 2017.

18

Cash flow used by operations was $440 thousand for the nine months ended September 30, 2018 due primarily to increased inventory.

We also received approximately $1.0 million in 2017 from our insurance carrier which has been used to repair damage to our buildings from a hail storm.  We expect that all repairs will be completed and approved by our insurance adjuster during the fourth quarter of 2018.  The remaining insurance proceeds are expected to be recognized as income in the fourth quarter of 2018.

LIQUIDITY

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 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 the need to manufacture all (as opposed to 14.9%) of our products in the U.S. or find other manufacturers.  This could temporarily increase unit costs as we ramp up domestic production.

The mix of domestic and international sales 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 China can have a significant effect on the carrying costs of Inventory as well as Cost of sales.  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.

Seasonality

Historically, unit sales have increased during the flu season.

Cash Requirements

Due to funds received from prior litigation, 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.  We have taken steps to decrease our legal costs and we continue to evaluate these costs.  We terminated approximately 20 employees in the fourth quarter of 2018 which may reduce future costs, although some of the positions may be filled in the future.  In the future, if such cost cutting measures prove insufficient, we may reduce the number of units being produced, further reduce the workforce, reduce the salaries of officers and other employees, and/or defer royalty payments.  Some increases in compensation were made in 2017 due to hiring additional sales personnel and nonrecurring bonuses made to two officers.

19

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 granted a right to three of our executive officers to engage in private purchases of stock at market prices.  Thomas J. Shaw exercised such right on January 12, 2017, buying two million shares at market price for an aggregate purchase price of $1.78 million and purchased one million shares at market price on August 23, 2017 for an aggregate purchase price of $570,100.

CAPITAL RESOURCES

There were no material commitments for capital expenditures in the third quarter of 2018.

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.

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 W. Cowan (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; 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, 2018, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes during the third quarter of 2018 or subsequent to September 30, 2018 in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.       Legal Proceedings.

Please refer to Note 6 to the financial statements for a complete description of all legal proceedings.

Item 1A.    Risk Factors.

There were no material changes in our Risk Factors as set forth in our most recent annual and quarterly reports which are available on EDGAR.

20

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

None.

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 23, 2018.

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, 2018, no dividends were in arrears.

Series II Class B Convertible Preferred Stock

For the nine months ended September 30, 2018, no dividends were in arrears.

Series III Class B Convertible Preferred Stock

For the nine months ended September 30, 2018, the amount of dividends in arrears was $96,934 and the total arrearage was $4,243,000 as of September 30, 2018.

Series IV Class B Convertible Preferred Stock

For the nine months ended September 30, 2018, the amount of dividends in arrears was $256,875 and the total arrearage was $6,398,000 as of September 30, 2018.

Series V Class B Convertible Preferred Stock

For the nine months ended September 30, 2018, the amount of dividends in arrears was $9,600 and the total arrearage was $1,006,000 as of September 30, 2018.

Item 5.   Other Information.

Our next annual meeting of shareholders will be held on May 7, 2019, rather than in September.  As a result, the deadlines for receipt of shareholder proposals and director nominations set forth in our proxy statement relating to the meeting held September 7, 2018 must be revised.  Both such deadlines for the next annual meeting of shareholders will be January 2, 2019.

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

21

Exhibit No.

Description of Document

101

The following materials from Retractable Technologies, Inc.’s Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of September 30, 2018 and December 31, 2017, (ii) Condensed Statements of Operations for the three months and nine months ended September 30, 2018 and 2017, (iii) Condensed Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 and (iv) Notes to Condensed Financial Statements

22

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, 2018	RETRACTABLE TECHNOLOGIES, INC.
		(Registrant)
		BY:	/s/ Douglas W. Cowan
			DOUGLAS W. COWAN
			VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND CHIEF ACCOUNTING OFFICER

23

EX-31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER Exhibit 31.1

I, Thomas J. Shaw, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Retractable Technologies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:      November 14, 2018

/s/ Thomas J. Shaw

THOMAS J. SHAW

PRESIDENT, CHAIRMAN, AND

CHIEF EXECUTIVE OFFICER

EX-31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER Exhibit 31.2

I, Douglas W. Cowan, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Retractable Technologies, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:      November 14, 2018

/s/ Douglas W. Cowan

DOUGLAS W. COWAN

VICE PRESIDENT,

CHIEF FINANCIAL OFFICER,

AND CHIEF ACCOUNTING OFFICER

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Solely in connection with the filing of the Quarterly Report of Retractable Technologies, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2018, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Thomas J. Shaw, Chief Executive Officer, and Douglas W. Cowan, Chief Financial Officer, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer.

Date:      November 14, 2018

/s/ Thomas J. Shaw

THOMAS J. SHAW

PRESIDENT, CHAIRMAN, AND

CHIEF EXECUTIVE OFFICER

/s/ Douglas W. Cowan

DOUGLAS W. COWAN

VICE PRESIDENT, CHIEF FINANCIAL OFFICER,

AND CHIEF ACCOUNTING OFFICER

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 01, 2018
Document and Entity Information
Entity Registrant Name	RETRACTABLE TECHNOLOGIES INC
Entity Central Index Key	0000946563
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		32,666,454
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3

XML

CONDENSED BALANCE SHEETS - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 13,640,696	$ 14,877,899
Accounts receivable, net	4,475,695	5,105,556
Inventories, net	7,385,413	6,206,161
Other current assets	404,530	418,154
Total current assets	25,906,334	26,607,770
Property, plant, and equipment, net	10,976,350	11,353,202
Income taxes receivable	188,456	188,456
Other assets	3,477	6,052
Total assets	37,074,617	38,155,480
Current liabilities:
Accounts payable	4,908,336	4,957,750
Current portion of long-term debt	424,421	410,949
Accrued compensation	670,498	547,021
Dividends payable	55,113	55,113
Accrued royalties to shareholder	1,102,583	793,489
Insurance proceeds	312,424	466,293
Other accrued liabilities	1,046,480	657,923
Income taxes payable	10,234	11,407
Total current liabilities	8,530,089	7,899,945
Long-term debt, net of current maturities	2,726,146	3,081,409
Total liabilities	11,256,235	10,981,354
Commitments and contingencies - See Note 6
Preferred stock, $1 par value:
Additional paid-in capital	61,926,869	62,092,206
Accumulated deficit	(36,889,932)	(35,699,525)
Total stockholders' equity	25,818,382	27,174,126
Total liabilities and stockholders' equity	37,074,617	38,155,480
Series I, Class B
Preferred stock, $1 par value:
Preferred stock	98,500	98,500
Series II, Class B
Preferred stock, $1 par value:
Preferred stock	171,200	171,200
Series III, Class B
Preferred stock, $1 par value:
Preferred stock	129,245	129,245
Series IV, Class B
Preferred stock, $1 par value:
Preferred stock	342,500	342,500
Series V, Class B
Preferred stock, $1 par value:
Preferred stock	$ 40,000	$ 40,000

XML

CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2018	Dec. 31, 2017
CONDENSED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 1	$ 1
Common stock, par value (in dollars per share)	$ 0	$ 0

XML

CONDENSED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Sales, net	$ 9,863,272	$ 10,412,036	$ 25,011,066	$ 24,981,833
Cost of sales
Total cost of sales	7,067,137	7,151,698	17,287,316	17,187,504
Gross profit	2,796,135	3,260,338	7,723,750	7,794,329
Operating expenses:
Sales and marketing	1,033,295	1,220,451	3,251,231	3,472,004
Research and development	146,487	159,921	432,179	465,765
General and administrative	1,676,579	1,912,824	5,196,224	6,346,731
Total operating expenses	2,856,361	3,293,196	8,879,634	10,284,500
Loss from operations	(60,226)	(32,858)	(1,155,884)	(2,490,171)
Interest and other income	39,290	19,477	102,133	44,155
Interest expense	(42,481)	(52,962)	(136,446)	(159,053)
Loss before income taxes	(63,417)	(66,343)	(1,190,197)	(2,605,069)
Provision for income taxes		283	210	848
Net loss	(63,417)	(66,626)	(1,190,407)	(2,605,917)
Preferred stock dividend requirements	(176,249)	(176,249)	(528,747)	(528,747)
Loss applicable to common shareholders	$ (239,666)	$ (242,875)	$ (1,719,154)	$ (3,134,664)
Basic loss per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.05)	$ (0.10)
Diluted loss per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.05)	$ (0.10)
Weighted average common shares outstanding:
Basic (in shares)	32,666,454	32,166,454	32,666,454	31,722,010
Diluted (in shares)	32,666,454	32,166,454	32,666,454	31,722,010
Cost of manufactured product
Cost of sales
Total cost of sales	$ 6,203,842	$ 6,304,397	$ 15,112,538	$ 15,116,805
Royalty expense to shareholder
Cost of sales
Total cost of sales	$ 863,295	$ 847,301	$ 2,174,778	$ 2,070,699

XML

CONDENSED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash flows from operating activities
Net loss	$ (1,190,407)	$ (2,605,917)
Adjustments to reconcile loss to net cash used by operating activities:
Provision for doubtful accounts		(81,152)
Share-based compensation		652,862
Depreciation and amortization	669,584	603,580
(Increase) decrease in operating assets:
Accounts receivable	629,861	(1,897,332)
Inventories	(1,179,252)	(336,023)
Other current assets	13,624	(313,108)
Increase (decrease) in operating liabilities:
Accounts payable	(49,414)	574,258
Other accrued liabilities	821,128	507,768
Insurance proceeds	(153,869)	876,250
Income taxes payable	(1,173)
Net cash used by operating activities	(439,918)	(2,018,814)
Cash flows from investing activities
Purchase of property, plant, and equipment	(290,153)	(172,305)
Net cash used by investing activities	(290,153)	(172,305)
Cash flows from financing activities
Repayments of long-term debt	(341,795)	(326,227)
Proceeds from sale of common stock		2,350,100
Payment of Preferred Stock dividends	(165,337)	(165,339)
Net cash provided (used) by financing activities	(507,132)	1,858,534
Net decrease in cash and cash equivalents	(1,237,203)	(332,585)
Cash and cash equivalents at:
Beginning of period	14,877,899	16,199,043
End of period	13,640,696	15,866,458
Supplemental schedule of cash flow information:
Interest paid	136,445	159,053
Income taxes paid	1,050	2,000
Supplemental schedule of noncash investing and financing activities:
Preferred dividends declared, not paid	$ 55,113	$ 55,113

XML

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)	Preferred Stock Series I, Class B	Preferred Stock Series II, Class B	Preferred Stock Series III, Class B	Preferred Stock Series IV, Class B	Preferred Stock Series V, Class B	Additional Paid-in Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2016	$ 98,500	$ 171,200	$ 129,245	$ 342,500	$ 40,000	$ 59,290,333	$ (31,963,487)	$ 28,108,291
Increase (Decrease) in Stockholders' Equity
Issuance of New Common Stock						2,350,100		2,350,100
Dividends						(165,339)		(165,339)
Share-based compensation						652,862		652,862
Net Loss							(2,605,917)	(2,605,917)
Balance at Sep. 30, 2017	98,500	171,200	129,245	342,500	40,000	62,127,956	(34,569,404)	28,339,997
Balance at Jun. 30, 2017	98,500	171,200	129,245	342,500	40,000	61,430,417	(34,502,778)	27,709,084
Increase (Decrease) in Stockholders' Equity
Issuance of New Common Stock						570,100		570,100
Dividends						(55,112)		(55,112)
Share-based compensation						182,551		182,551
Net Loss							(66,626)	(66,626)
Balance at Sep. 30, 2017	98,500	171,200	129,245	342,500	40,000	62,127,956	(34,569,404)	28,339,997
Balance at Dec. 31, 2017	98,500	171,200	129,245	342,500	40,000	62,092,206	(35,699,525)	27,174,126
Increase (Decrease) in Stockholders' Equity
Dividends						(165,337)		(165,337)
Net Loss							(1,190,407)	(1,190,407)
Balance at Sep. 30, 2018	98,500	171,200	129,245	342,500	40,000	61,926,869	(36,889,932)	25,818,382
Balance at Jun. 30, 2018	98,500	171,200	129,245	342,500	40,000	61,981,981	(36,826,515)	25,936,911
Increase (Decrease) in Stockholders' Equity
Dividends						(55,112)		(55,112)
Net Loss							(63,417)	(63,417)
Balance at Sep. 30, 2018	$ 98,500	$ 171,200	$ 129,245	$ 342,500	$ 40,000	$ 61,926,869	$ (36,889,932)	$ 25,818,382

XML

BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2018

BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION

BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION

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 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. 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 April 2, 2018 for the year ended December 31, 2017. 

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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 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 bad debt was $102 thousand as of December 31, 2017 and also as of September 30, 2018.

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, 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

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.  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 excess or obsolete inventories or they may be written off.

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 associated with significant capital additions.  Gains or losses from property disposals are included in operations.

The 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	3to13years
Office furniture and equipment	3to10years
Buildings	39years
Building improvements	15years

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 value of the underlying assets.

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.  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, 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 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 and nine months ended September 30, 2018 and 2017:

	Three Months ended			Three Months ended			Nine Months ended			Nine Months ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Number of significant customers		3			3			2			2
Aggregate dollar amount of net sales to significant customers		$5.4 million			$5.1 million			$10.0 million			$9.4 million
Percentage of net sales to significant customers		55.2	%		49.1	%		39.9	%		37.5	%

The Company manufactures some of its products in Little Elm, Texas as well as utilizing manufacturers in China.  The Company obtained roughly 85.1% and 81.7% of its products in the first nine months of 2018 and 2017, respectively, from its Chinese manufacturers. Purchases from Chinese manufacturers aggregated 79.9% and 80.1% of products in the three month periods ended September 30, 2018 and 2017, respectively. In the event that the Company becomes unable to purchase products from its Chinese manufacturers, the Company would need to find an alternate manufacturer for its blood collection set, 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.

Revenue recognition

Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment.  When title and risk of ownership have passed to the customer, the Company has satisfied all performance obligations to the customer.  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 are recorded when issued and 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 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 $3,443,368 and $4,115,628 as of September 30, 2018 and December 31, 2017, 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’s international distribution agreements generally do not provide for any returns.

Disaggregated information of revenue recognized from contracts with customers is as follows:

	For the three months ended September 30, 2018:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	6,454,432	$	466,392	$	1,803,904	$	22,968	$	8,747,696
North and South America sales (excluding U.S.)		803,414		240		—		—		803,654
Other international sales		290,760		12,490		—		8,672		311,922
Total	$	7,548,606	$	479,122	$	1,803,904	$	31,640	$	9,863,272

	For the three months ended September 30, 2017:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	7,019,389	$	309,012	$	1,016,226	$	14,220	$	8,358,847
North and South America sales (excluding U.S.)		1,896,492		1,700		—		2,700		1,900,892
Other international sales		117,447		30,800		—		4,050		152,297
Total	$	9,033,328	$	341,512	$	1,016,226	$	20,970	$	10,412,036

	For the nine months ended September 30, 2018:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	18,097,760	$	991,318	$	2,519,973	$	55,988	$	21,665,039
North and South America sales (excluding U.S.)		2,595,634		8,805		252		900		2,605,591
Other international sales		682,134		36,024		456		21,825		740,436
Total	$	21,375,528	$	1,036,147	$	2,520,681	$	78,713	$	25,011,066

	For the nine months ended September 30, 2017:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	18,260,242	$	821,869	$	1,232,979	$	46,757	$	20,361,847
North and South America sales (excluding U.S.)		3,531,574		2,944		—		193,934		3,728,452
Other international sales		829,680		42,954		—		18,900		891,534
Total	$	22,621,496	$	867,767	$	1,232,979	$	259,591	$	24,981,833

Income taxes

The Tax Cuts and Job Act ("the Act") was enacted on December 22, 2017, and the U.S. federal corporate tax rate was reduced from 35% to 21%.  U.S. generally accepted accounting principles require companies to account for the effects of changes in income tax rates and laws in the period the change is enacted. Financial results, including provisional amounts, have been calculated for the income tax effects of the change. The U.S. Securities and Exchange Commission issued Staff Accounting Bulletin 118 (SAB 118) allowing companies to use provisional estimates to record the effects of the Act. SAB 118, as codified by Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update),” allows companies to complete accounting for these effects no later than one year from the enactment date of the Act.  During the quarter ended September 30, 2018, the Company completed its analysis of the provisional estimates made to record the effects of the Act.  There were no adjustments made to previously recorded amounts.

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 has established a valuation allowance for its net deferred tax asset as future taxable income cannot be reasonably assured.  Penalties 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.

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 or common stock issuable upon the conversion of convertible preferred stock. The calculation of diluted EPS excluded 93,125 shares of Common Stock underlying issued and outstanding stock options for the three months ended September 30, 2017 as their effect was antidilutive. The calculation of diluted EPS excluded 6,126 and 128,540 shares of Common Stock underlying issued and outstanding stock options for the nine months ended September 30, 2018 and September 30, 2017, respectively, as their effect was antidilutive.  The potential dilution, if any, is shown on the following schedule:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Net loss	$	(63,417)	$	(66,626)	$	(1,190,407)	$	(2,605,917)
Preferred dividend requirements		(176,249)		(176,249)		(528,747)		(528,747)
Loss applicable to common shareholders after assumed conversions	$	(239,666)	$	(242,875)	$	(1,719,154)	$	(3,134,664)
Average common shares outstanding		32,666,454		32,166,454		32,666,454		31,722,010
Average common and common equivalent shares outstanding – assuming dilution		32,666,454		32,166,454		32,666,454		31,722,010
Basic loss per share	$	(0.01)	$	(0.01)	$	(0.05)	$	(0.10)
Diluted loss per share	$	(0.01)	$	(0.01)	$	(0.05)	$	(0.10)

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

Research and development costs are expensed as incurred.

Share-based compensation

The Company's share-based payments are accounted for using the fair value method.  The Company records share-based compensation expense on a straight-line basis over the requisite service period.  The Company incurred the following share-based compensation costs:

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Cost of sales	$	—	$	74,683	$	—	$	270,800
Sales and marketing		—		38,578		—		143,255
Research and development		—		12,458		—		45,174
General and administrative		—		56,832		—		193,633
	$	—	$	182,551	$	—	$	652,862

Insurance Proceeds

Receipts from insurance up to the amount of any loss recognized by the Company are considered recoveries.  Any such recoveries are recorded when they are received.  Insurance recoveries are not recognized as a component of earnings (loss) from operations until all repairs are made.

Recently Adopted Pronouncements

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 was effective for the Company’s quarter ended March 31, 2018.  The adoption of ASU 2016-18 did not have a material effect on the Company’s financial statements as the Company currently holds no restricted cash or restricted cash equivalents.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments” (ASU 2016-15), clarifying guidance on the classification of certain cash receipts and payments in the statement of cash flows.  This ASU was effective for the Company’s quarter ended March 31, 2018.  The adoption of ASU 2016-15 did not have a material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, as well as several subsequently issued clarifying amendments, 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.  The ASU, as amended, 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.  The ASU, as amended, was effective commencing with the Company’s quarter ended March 31, 2018.  The Company adopted this amended guidance on a Modified Retrospective basis in the first quarter of 2018.  The adoption of the ASU, as amended, had no impact on the opening balance of retained earnings.  The Company applied the guidance of ASU No. 2014-09, as amended, to those contracts that were not completed as of January 1, 2018.  In implementing the guidance of ASU 2014-09, as amended, the Company applied the practical expedients of FASB ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.”  Under ASU 2016-12, the Company applies the guidance of ASU 2014-09, as amended, to a portfolio of contracts with similar characteristics, as opposed to individual contracts, as applying the guidance to the portfolio does not materially differ from applying the guidance to individual contracts.  In addition, the Company accounts for shipping and handling as activities to fulfill the promise to transfer goods to a customer as opposed to a performance obligation.  Historically, freight and handling activities billed to customers have not been material.

In August 2018, the Securities and Exchange Commission (SEC) adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, “Disclosure Update and Simplification”. The amendments were effective November 5, 2018.   The amendments eliminate or revise several redundant or duplicative requirements between SEC rules and GAAP, including the elimination of the disclosure of the ratio of earnings to fixed charges and the presentation of dividends per share on the face of the statement of operations for interim periods.  Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC staff has indicated that it would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.  The Company has elected to adopt the provisions of Securities Act Release No. 33-10532 for the quarter ended September 30, 2018 and has presented condensed statements of changes in stockholders’ equity for the periods ended September 30, 2018 and 2017 in this quarterly report on Form 10-Q.

Recently Issued Pronouncements

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

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, as well as several subsequently issued clarifying amendments. Under the ASU, as amended, 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 guidance, lessor accounting is largely unchanged. The lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases”. This amendment clarifies Topic 842 and corrected unintended application of guidance and is effective concurrent with Topic 842 or upon issuance if Topic 842 was early adopted.  In August 2018, the FASB issued ASU 2018-11, “Leases (Topic 842):  Targeted Improvements”. This amendment provides additional transition options allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented and provides a practical expedient to lessors to elect, by class of underlying assets, to account for non-lease and lease components as a single arrangement.  The Company intends to adopt the provisions of ASU 2018-11 through a cumulative effect adjustment.  Topic 842, and its subsequent amendments, is effective for the Company’s quarter ending March 31, 2019, with early adoption permitted. The Company is currently evaluating the various accounting policy elections associated with this ASU, as amended, including transition methods and practical expedients, identifying contracts for evaluation, and reviewing contracts to determine if they contain leases.  While the Company is currently evaluating the timing and impact of adopting ASU 2016-02, as amended, the Company anticipates recording lease assets and liabilities less than $250,000 on its Condensed Balance Sheets, with no material impact to its Condensed Statements of Operations or to its accumulated deficit. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date. The Company expects to complete these procedures before the end of the year and determine any transition adjustments.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):  Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (a Consensus of the FASB Emerging Issues Task Force)”.  This amendment requires that implemented costs incurred in a hosting arrangement that is a service contract should be accounted for in accordance with ASC 350-40.  Accordingly, costs incurred during the preliminary project and post-implementation stages are expensed and costs associated with the application development phase are capitalized.  The amendment also requires that capitalized costs be amortized over the term of the hosting arrangement and that capitalized costs should be evaluated for impairment.  The amendment is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods.  The Company is currently assessing the impact that adoption of this ASU will have on its financial statements and related disclosures.

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INVENTORIES

9 Months Ended

Sep. 30, 2018

INVENTORIES

INVENTORIES

3.    INVENTORIES

Inventories consist of the following:

	September 30, 2018		December 31, 2017
Raw materials	$	1,467,431	$	1,511,339
Finished goods		6,512,470		5,289,761
		7,979,901		6,801,100
Inventory reserve		(594,488)		(594,939)
	$	7,385,413	$	6,206,161

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INCOME TAXES

9 Months Ended

Sep. 30, 2018

INCOME TAXES

INCOME TAXES

4.    INCOME TAXES

The Company’s effective tax rate on the net earnings (loss) before income taxes was 0.0% for the nine months ended September 30, 2018 and September 30, 2017. For the three months ended September 30, 2018 and September 30, 2017, the Company's effective tax rate on the net earnings (loss) before income taxes was 0.0% and (0.4)%, respectively.

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OTHER ACCRUED LIABILITIES

9 Months Ended

Sep. 30, 2018

OTHER ACCRUED LIABILITIES

OTHER ACCRUED LIABILITIES

5.    OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following:

	September 30, 2018		December 31, 2017
Prepayments from customers	$	440,528	$	355,742
Accrued property taxes		331,284		14,681
Accrued professional fees		233,153		231,826
Other accrued expenses		41,515		55,674
Total	$	1,046,480	$	657,923

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2018

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

6.    COMMITMENTS AND CONTINGENCIES

In May 2010, the Company and an officer's suit against Becton, Dickinson and Company (“BD”) 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 including, among other things, a requirement to notify certain customers and others regarding misleading disclosures.  In connection with BD’s subsequent appeal, on December 2, 2016, the United States Court of Appeals for the Fifth Circuit 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.  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.  The Company filed a notice of Appeal with the United States Court of Appeals for the Fifth Circuit on November 3, 2017. Briefing for the appeal was completed by the parties on May 2, 2018 and oral argument occurred on October 3, 2018.

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.

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BUSINESS SEGMENT

9 Months Ended

Sep. 30, 2018

BUSINESS SEGMENT

BUSINESS SEGMENT

7.    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		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
U.S. sales	$	8,747,696	$	8,358,847	$	21,665,039	$	20,361,847
North and South America sales (excluding U.S.)		803,654		1,900,892		2,605,591		3,728,452
Other international sales		311,922		152,297		740,436		891,534
Total sales	$	9,863,272	$	10,412,036	$	25,011,066	$	24,981,833

Long-lived assets by geography are as follows:

	September 30, 2018		December 31, 2017
Long-lived assets
U.S.	$	10,856,824	$	11,215,583
International		119,526		137,619
Total	$	10,976,350	$	11,353,202

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DIVIDENDS

9 Months Ended

Sep. 30, 2018

DIVIDENDS

DIVIDENDS

8.    DIVIDENDS

The Company declared dividends in 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 January 6, 2017, April 24, 2017, July 20, 2017, and October 20, 2017. The Company declared dividends in 2018 in the amounts of $12,313 and $42,800 paid to Series I Class B and Series II Class B Preferred Stockholders, respectively, on January 19, 2018, April 24, 2018, July 20, 2018, and October 23, 2018.

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PRIVATE PURCHASE

9 Months Ended

Sep. 30, 2018

PRIVATE PURCHASE

PRIVATE PURCHASE

9.    PRIVATE PURCHASE

The Company approved three 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 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.  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 December 9, 2018. The approximate dollar value of these potential future purchases cannot be predicted.

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BONUSES

9 Months Ended

Sep. 30, 2018

BONUSES

BONUSES

10.  BONUSES

In February of 2017, Mr. Cowan and Ms. Larios were each granted cash bonuses of $250,000.  Ms. Larios received her bonus in the first quarter of 2017. Mr. Cowan received his bonus in the fourth quarter of 2017.

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STORM DAMAGE AND INSURANCE PROCEEDS

9 Months Ended

Sep. 30, 2018

STORM DAMAGE AND INSURANCE PROCEEDS

STORM DAMAGE AND INSURANCE PROCEEDS

11.  STORM DAMAGE AND INSURANCE PROCEEDS

On March 26, 2017, a hail storm passed through Little Elm, Texas, 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 were also damaged.

The Company’s insurance carrier has assessed damages of $1,009,960 and the Company’s deductible is $5,000.  The Company received these funds from its carrier in the second quarter of 2017. Repairs commenced during the third quarter of 2017 .  The Company expects that all repairs will be completed in the fourth quarter.

During 2017, the Company incurred and recognized $538,667 in repairs due to the storm damage. Repairs during the first nine months of 2018 were $203,289. 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. The remaining insurance proceeds are expected to be recognized as income in the fourth quarter of 2018.

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LONG-TERM DEBT

9 Months Ended

Sep. 30, 2018

LONG-TERM DEBT

LONG-TERM DEBT

12.  LONG-TERM DEBT

On April 10, 2018, the Company renewed its loan with American First National Bank, which renewal included a ten-year extension of the Company’s promissory note in the original principal amount of approximately $4.21 million ($3.03 million at date of renewal) and converted the interest rate to an adjustable interest rate equal to the prime rate plus 0.25%.  The note matures on April 10, 2028 and is secured by the Company’s land and buildings. The interest rate was 5.5% at September 30, 2018.

The following chart summarizes the Company’s obligations under this note to make future payments as of September 30, 2018 for years ending December 31:

2018	$	63,102
2019		246,995
2020		260,202
2021		273,703
2022		287,905
Thereafter		1,807,208
	$	2,939,115

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2018

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

13.  SUBSEQUENT EVENTS

On November 8, 2018, the Company terminated the employment approximately 20 employees earning total annual compensation of approximately $1.1 million.  Some of these positions may be filled in the future.  Under the proposed severance agreements, severance costs are expected to be a maximum of $250 thousand.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting estimates

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.

Cash and cash equivalents

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

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 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 bad debt was $102 thousand as of December 31, 2017 and also as of September 30, 2018.

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, 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

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.  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 excess or obsolete inventories or they may be written off.

Property, plant, and equipment

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 associated with significant capital additions.  Gains or losses from property disposals are included in operations.

The 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	3to13years
Office furniture and equipment	3to10years
Buildings	39years
Building improvements	15years

Long-lived assets

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 value of the underlying assets.

Financial instruments

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.  The fair value of long-term liabilities, based on Management’s estimates, approximates their reported values.

Concentration risks

Concentration risks

The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash, cash equivalents, 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 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 and nine months ended September 30, 2018 and 2017:

	Three Months ended			Three Months ended			Nine Months ended			Nine Months ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Number of significant customers		3			3			2			2
Aggregate dollar amount of net sales to significant customers		$5.4 million			$5.1 million			$10.0 million			$9.4 million
Percentage of net sales to significant customers		55.2	%		49.1	%		39.9	%		37.5	%

The Company manufactures some of its products in Little Elm, Texas as well as utilizing manufacturers in China.  The Company obtained roughly 85.1% and 81.7% of its products in the first nine months of 2018 and 2017, respectively, from its Chinese manufacturers. Purchases from Chinese manufacturers aggregated 79.9% and 80.1% of products in the three month periods ended September 30, 2018 and 2017, respectively. In the event that the Company becomes unable to purchase products from its Chinese manufacturers, the Company would need to find an alternate manufacturer for its blood collection set, 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.

Revenue recognition

Revenue recognition

Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment.  When title and risk of ownership have passed to the customer, the Company has satisfied all performance obligations to the customer.  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 are recorded when issued and 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 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 $3,443,368 and $4,115,628 as of September 30, 2018 and December 31, 2017, 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’s international distribution agreements generally do not provide for any returns.

Disaggregated information of revenue recognized from contracts with customers is as follows:

	For the three months ended September 30, 2018:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	6,454,432	$	466,392	$	1,803,904	$	22,968	$	8,747,696
North and South America sales (excluding U.S.)		803,414		240		—		—		803,654
Other international sales		290,760		12,490		—		8,672		311,922
Total	$	7,548,606	$	479,122	$	1,803,904	$	31,640	$	9,863,272

	For the three months ended September 30, 2017:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	7,019,389	$	309,012	$	1,016,226	$	14,220	$	8,358,847
North and South America sales (excluding U.S.)		1,896,492		1,700		—		2,700		1,900,892
Other international sales		117,447		30,800		—		4,050		152,297
Total	$	9,033,328	$	341,512	$	1,016,226	$	20,970	$	10,412,036

	For the nine months ended September 30, 2018:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	18,097,760	$	991,318	$	2,519,973	$	55,988	$	21,665,039
North and South America sales (excluding U.S.)		2,595,634		8,805		252		900		2,605,591
Other international sales		682,134		36,024		456		21,825		740,436
Total	$	21,375,528	$	1,036,147	$	2,520,681	$	78,713	$	25,011,066

	For the nine months ended September 30, 2017:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	18,260,242	$	821,869	$	1,232,979	$	46,757	$	20,361,847
North and South America sales (excluding U.S.)		3,531,574		2,944		—		193,934		3,728,452
Other international sales		829,680		42,954		—		18,900		891,534
Total	$	22,621,496	$	867,767	$	1,232,979	$	259,591	$	24,981,833

Income taxes

Income taxes

The Tax Cuts and Job Act ("the Act") was enacted on December 22, 2017, and the U.S. federal corporate tax rate was reduced from 35% to 21%.  U.S. generally accepted accounting principles require companies to account for the effects of changes in income tax rates and laws in the period the change is enacted. Financial results, including provisional amounts, have been calculated for the income tax effects of the change. The U.S. Securities and Exchange Commission issued Staff Accounting Bulletin 118 (SAB 118) allowing companies to use provisional estimates to record the effects of the Act. SAB 118, as codified by Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update),” allows companies to complete accounting for these effects no later than one year from the enactment date of the Act.  During the quarter ended September 30, 2018, the Company completed its analysis of the provisional estimates made to record the effects of the Act.  There were no adjustments made to previously recorded amounts.

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 has established a valuation allowance for its net deferred tax asset as future taxable income cannot be reasonably assured.  Penalties 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.

Earnings per share

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 or common stock issuable upon the conversion of convertible preferred stock. The calculation of diluted EPS excluded 93,125 shares of Common Stock underlying issued and outstanding stock options for the three months ended September 30, 2017 as their effect was antidilutive. The calculation of diluted EPS excluded 6,126 and 128,540 shares of Common Stock underlying issued and outstanding stock options for the nine months ended September 30, 2018 and September 30, 2017, respectively, as their effect was antidilutive.  The potential dilution, if any, is shown on the following schedule:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Net loss	$	(63,417)	$	(66,626)	$	(1,190,407)	$	(2,605,917)
Preferred dividend requirements		(176,249)		(176,249)		(528,747)		(528,747)
Loss applicable to common shareholders after assumed conversions	$	(239,666)	$	(242,875)	$	(1,719,154)	$	(3,134,664)
Average common shares outstanding		32,666,454		32,166,454		32,666,454		31,722,010
Average common and common equivalent shares outstanding – assuming dilution		32,666,454		32,166,454		32,666,454		31,722,010
Basic loss per share	$	(0.01)	$	(0.01)	$	(0.05)	$	(0.10)
Diluted loss per share	$	(0.01)	$	(0.01)	$	(0.05)	$	(0.10)

Shipping and handling costs

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

Research and development costs

Research and development costs are expensed as incurred.

Share-based compensation

Share-based compensation

The Company's share-based payments are accounted for using the fair value method.  The Company records share-based compensation expense on a straight-line basis over the requisite service period.  The Company incurred the following share-based compensation costs:

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Cost of sales	$	—	$	74,683	$	—	$	270,800
Sales and marketing		—		38,578		—		143,255
Research and development		—		12,458		—		45,174
General and administrative		—		56,832		—		193,633
	$	—	$	182,551	$	—	$	652,862

Insurance Proceeds

Insurance Proceeds

Receipts from insurance up to the amount of any loss recognized by the Company are considered recoveries.  Any such recoveries are recorded when they are received.  Insurance recoveries are not recognized as a component of earnings (loss) from operations until all repairs are made.

Recently Adopted Pronouncements and Recently Issued Pronouncements

Recently Adopted Pronouncements

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 was effective for the Company’s quarter ended March 31, 2018.  The adoption of ASU 2016-18 did not have a material effect on the Company’s financial statements as the Company currently holds no restricted cash or restricted cash equivalents.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments” (ASU 2016-15), clarifying guidance on the classification of certain cash receipts and payments in the statement of cash flows.  This ASU was effective for the Company’s quarter ended March 31, 2018.  The adoption of ASU 2016-15 did not have a material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, as well as several subsequently issued clarifying amendments, 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.  The ASU, as amended, 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.  The ASU, as amended, was effective commencing with the Company’s quarter ended March 31, 2018.  The Company adopted this amended guidance on a Modified Retrospective basis in the first quarter of 2018.  The adoption of the ASU, as amended, had no impact on the opening balance of retained earnings.  The Company applied the guidance of ASU No. 2014-09, as amended, to those contracts that were not completed as of January 1, 2018.  In implementing the guidance of ASU 2014-09, as amended, the Company applied the practical expedients of FASB ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.”  Under ASU 2016-12, the Company applies the guidance of ASU 2014-09, as amended, to a portfolio of contracts with similar characteristics, as opposed to individual contracts, as applying the guidance to the portfolio does not materially differ from applying the guidance to individual contracts.  In addition, the Company accounts for shipping and handling as activities to fulfill the promise to transfer goods to a customer as opposed to a performance obligation.  Historically, freight and handling activities billed to customers have not been material.

In August 2018, the Securities and Exchange Commission (SEC) adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, “Disclosure Update and Simplification”. The amendments were effective November 5, 2018.   The amendments eliminate or revise several redundant or duplicative requirements between SEC rules and GAAP, including the elimination of the disclosure of the ratio of earnings to fixed charges and the presentation of dividends per share on the face of the statement of operations for interim periods.  Among the amendments is the requirement to present the changes in shareholders’ equity in the interim financial statements (either in a separate statement or footnote) in quarterly reports on Form 10-Q. The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC staff has indicated that it would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its Form 10-Q for the quarter that begins after the effective date of the amendments.  The Company has elected to adopt the provisions of Securities Act Release No. 33-10532 for the quarter ended September 30, 2018 and has presented condensed statements of changes in stockholders’ equity for the periods ended September 30, 2018 and 2017 in this quarterly report on Form 10-Q.

Recently Issued Pronouncements

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

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, as well as several subsequently issued clarifying amendments. Under the ASU, as amended, 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 guidance, lessor accounting is largely unchanged. The lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases”. This amendment clarifies Topic 842 and corrected unintended application of guidance and is effective concurrent with Topic 842 or upon issuance if Topic 842 was early adopted.  In August 2018, the FASB issued ASU 2018-11, “Leases (Topic 842):  Targeted Improvements”. This amendment provides additional transition options allowing entities to recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented and provides a practical expedient to lessors to elect, by class of underlying assets, to account for non-lease and lease components as a single arrangement.  The Company intends to adopt the provisions of ASU 2018-11 through a cumulative effect adjustment.  Topic 842, and its subsequent amendments, is effective for the Company’s quarter ending March 31, 2019, with early adoption permitted. The Company is currently evaluating the various accounting policy elections associated with this ASU, as amended, including transition methods and practical expedients, identifying contracts for evaluation, and reviewing contracts to determine if they contain leases.  While the Company is currently evaluating the timing and impact of adopting ASU 2016-02, as amended, the Company anticipates recording lease assets and liabilities less than $250,000 on its Condensed Balance Sheets, with no material impact to its Condensed Statements of Operations or to its accumulated deficit. However, the ultimate impact of adopting ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date. The Company expects to complete these procedures before the end of the year and determine any transition adjustments.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):  Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (a Consensus of the FASB Emerging Issues Task Force)”.  This amendment requires that implemented costs incurred in a hosting arrangement that is a service contract should be accounted for in accordance with ASC 350-40.  Accordingly, costs incurred during the preliminary project and post-implementation stages are expensed and costs associated with the application development phase are capitalized.  The amendment also requires that capitalized costs be amortized over the term of the hosting arrangement and that capitalized costs should be evaluated for impairment.  The amendment is effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods.  The Company is currently assessing the impact that adoption of this ASU will have on its financial statements and related disclosures.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of estimated useful lives of property, plant and equipment

Production equipment	3to13years
Office furniture and equipment	3to10years
Buildings	39years
Building improvements	15years

Schedule of significant customers

	Three Months ended			Three Months ended			Nine Months ended			Nine Months ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Number of significant customers		3			3			2			2
Aggregate dollar amount of net sales to significant customers		$5.4 million			$5.1 million			$10.0 million			$9.4 million
Percentage of net sales to significant customers		55.2	%		49.1	%		39.9	%		37.5	%

Schedule of disaggregated information of revenue recognized from contracts with customers

	For the three months ended September 30, 2018:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	6,454,432	$	466,392	$	1,803,904	$	22,968	$	8,747,696
North and South America sales (excluding U.S.)		803,414		240		—		—		803,654
Other international sales		290,760		12,490		—		8,672		311,922
Total	$	7,548,606	$	479,122	$	1,803,904	$	31,640	$	9,863,272

	For the three months ended September 30, 2017:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	7,019,389	$	309,012	$	1,016,226	$	14,220	$	8,358,847
North and South America sales (excluding U.S.)		1,896,492		1,700		—		2,700		1,900,892
Other international sales		117,447		30,800		—		4,050		152,297
Total	$	9,033,328	$	341,512	$	1,016,226	$	20,970	$	10,412,036

	For the nine months ended September 30, 2018:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	18,097,760	$	991,318	$	2,519,973	$	55,988	$	21,665,039
North and South America sales (excluding U.S.)		2,595,634		8,805		252		900		2,605,591
Other international sales		682,134		36,024		456		21,825		740,436
Total	$	21,375,528	$	1,036,147	$	2,520,681	$	78,713	$	25,011,066

	For the nine months ended September 30, 2017:
			Blood						Total
			Collection		EasyPoint®		Other		Product
Geographic Segment	Syringes		Products		Needles		Products		Sales
U.S. sales	$	18,260,242	$	821,869	$	1,232,979	$	46,757	$	20,361,847
North and South America sales (excluding U.S.)		3,531,574		2,944		—		193,934		3,728,452
Other international sales		829,680		42,954		—		18,900		891,534
Total	$	22,621,496	$	867,767	$	1,232,979	$	259,591	$	24,981,833

Schedule of earnings per share

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Net loss	$	(63,417)	$	(66,626)	$	(1,190,407)	$	(2,605,917)
Preferred dividend requirements		(176,249)		(176,249)		(528,747)		(528,747)
Loss applicable to common shareholders after assumed conversions	$	(239,666)	$	(242,875)	$	(1,719,154)	$	(3,134,664)
Average common shares outstanding		32,666,454		32,166,454		32,666,454		31,722,010
Average common and common equivalent shares outstanding – assuming dilution		32,666,454		32,166,454		32,666,454		31,722,010
Basic loss per share	$	(0.01)	$	(0.01)	$	(0.05)	$	(0.10)
Diluted loss per share	$	(0.01)	$	(0.01)	$	(0.05)	$	(0.10)

Schedule of share-based compensation costs

	Three Months		Three Months		Nine Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Cost of sales	$	—	$	74,683	$	—	$	270,800
Sales and marketing		—		38,578		—		143,255
Research and development		—		12,458		—		45,174
General and administrative		—		56,832		—		193,633
	$	—	$	182,551	$	—	$	652,862

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INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2018

INVENTORIES

Schedule of inventories

	September 30, 2018		December 31, 2017
Raw materials	$	1,467,431	$	1,511,339
Finished goods		6,512,470		5,289,761
		7,979,901		6,801,100
Inventory reserve		(594,488)		(594,939)
	$	7,385,413	$	6,206,161

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OTHER ACCRUED LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2018

OTHER ACCRUED LIABILITIES

Schedule of other accrued liabilities

	September 30, 2018		December 31, 2017
Prepayments from customers	$	440,528	$	355,742
Accrued property taxes		331,284		14,681
Accrued professional fees		233,153		231,826
Other accrued expenses		41,515		55,674
Total	$	1,046,480	$	657,923

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BUSINESS SEGMENT (Tables)

9 Months Ended

Sep. 30, 2018

BUSINESS SEGMENT

Summary of sales and long-lived assets by geography

Revenues by geography are as follows:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
U.S. sales	$	8,747,696	$	8,358,847	$	21,665,039	$	20,361,847
North and South America sales (excluding U.S.)		803,654		1,900,892		2,605,591		3,728,452
Other international sales		311,922		152,297		740,436		891,534
Total sales	$	9,863,272	$	10,412,036	$	25,011,066	$	24,981,833

Long-lived assets by geography are as follows:

	September 30, 2018		December 31, 2017
Long-lived assets
U.S.	$	10,856,824	$	11,215,583
International		119,526		137,619
Total	$	10,976,350	$	11,353,202

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LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2018

LONG-TERM DEBT

Schedule of future payments of long-term debt

The following chart summarizes the Company’s obligations under this note to make future payments as of September 30, 2018 for years ending December 31:

2018	$	63,102
2019		246,995
2020		260,202
2021		273,703
2022		287,905
Thereafter		1,807,208
	$	2,939,115

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts receivable and Property, plant and equipment (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($) item	Dec. 31, 2017 USD ($)
Accounts receivable
Number of products consigned to customers | item	0
Allowance for bad debt | $	$ 102	$ 102
Production equipment | Minimum
Property, plant, and equipment
Useful lives	3 years
Production equipment | Maximum
Property, plant, and equipment
Useful lives	13 years
Office furniture and equipment | Minimum
Property, plant, and equipment
Useful lives	3 years
Office furniture and equipment | Maximum
Property, plant, and equipment
Useful lives	10 years
Buildings
Property, plant, and equipment
Useful lives	39 years
Building Improvements
Property, plant, and equipment
Useful lives	15 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration risks (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) customer	Sep. 30, 2017 USD ($) customer	Sep. 30, 2018 USD ($) customer	Sep. 30, 2017 USD ($) customer
Concentration risks
Number of significant customers | customer	3	3	2	2
Aggregate dollar amount of net sales to significant customers	$ 9,863,272	$ 10,412,036	$ 25,011,066	$ 24,981,833
Sales | Customer Concentration Risk
Concentration risks
Aggregate dollar amount of net sales to significant customers	$ 5,400,000	$ 5,100,000	$ 10,000,000	$ 9,400,000
Percentage of net sales to significant customers (as a percent)	55.20%	49.10%	39.90%	37.50%
Cost of Goods, Product Line | Supplier Concentration Risk
Concentration risks
Percentage of net sales to significant customers (as a percent)	79.90%	80.10%	85.10%	81.70%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue recognition and Income taxes (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) item	Sep. 30, 2017 USD ($)	Dec. 31, 2017 USD ($)
Revenue recognition
Collection period of receivables			30 days
Estimated contractual allowance	$ 3,443,368		$ 3,443,368		$ 4,115,628
Period for return of incorrect shipments			10 days
Number of times overstocking returns are limited | item			2
Period for return of product due to overstock			12 months
Maximum percentage of distributor's total purchase for the prior 12-month period			1.00%
Total Product Sales	9,863,272	$ 10,412,036	$ 25,011,066	$ 24,981,833
Income taxes
Income tax at the federal statutory rate (as a percent)			21.00%		35.00%
Syringes
Revenue recognition
Total Product Sales	7,548,606	9,033,328	$ 21,375,528	22,621,496
Blood Collection Products
Revenue recognition
Total Product Sales	479,122	341,512	1,036,147	867,767
Easy Point Needles
Revenue recognition
Total Product Sales	1,803,904	1,016,226	2,520,681	1,232,979
Other Products
Revenue recognition
Total Product Sales	31,640	20,970	78,713	259,591
UNITED STATES
Revenue recognition
Total Product Sales	8,747,696	8,358,847	21,665,039	20,361,847
UNITED STATES | Syringes
Revenue recognition
Total Product Sales	6,454,432	7,019,389	18,097,760	18,260,242
UNITED STATES | Blood Collection Products
Revenue recognition
Total Product Sales	466,392	309,012	991,318	821,869
UNITED STATES | Easy Point Needles
Revenue recognition
Total Product Sales	1,803,904	1,016,226	2,519,973	1,232,979
UNITED STATES | Other Products
Revenue recognition
Total Product Sales	22,968	14,220	55,988	46,757
North and South America sales (excluding U.S.)
Revenue recognition
Total Product Sales	803,654	1,900,892	2,605,591	3,728,452
North and South America sales (excluding U.S.) | Syringes
Revenue recognition
Total Product Sales	803,414	1,896,492	2,595,634	3,531,574
North and South America sales (excluding U.S.) | Blood Collection Products
Revenue recognition
Total Product Sales	240	1,700	8,805	2,944
North and South America sales (excluding U.S.) | Easy Point Needles
Revenue recognition
Total Product Sales			252
North and South America sales (excluding U.S.) | Other Products
Revenue recognition
Total Product Sales		2,700	900	193,934
Other international sales
Revenue recognition
Total Product Sales	311,922	152,297	740,436	891,534
Other international sales | Syringes
Revenue recognition
Total Product Sales	290,760	117,447	682,134	829,680
Other international sales | Blood Collection Products
Revenue recognition
Total Product Sales	12,490	30,800	36,024	42,954
Other international sales | Easy Point Needles
Revenue recognition
Total Product Sales			456
Other international sales | Other Products
Revenue recognition
Total Product Sales	$ 8,672	$ 4,050	$ 21,825	$ 18,900

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings per share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Earnings per share
Stock options excluded from calculation of diluted EPS		93,125	6,126	128,540
Net loss	$ (63,417)	$ (66,626)	$ (1,190,407)	$ (2,605,917)
Preferred stock dividend requirements	(176,249)	(176,249)	(528,747)	(528,747)
Loss applicable to common shareholders	$ (239,666)	$ (242,875)	$ (1,719,154)	$ (3,134,664)
Average common shares outstanding	32,666,454	32,166,454	32,666,454	31,722,010
Average common and common equivalent shares outstanding - assuming dilution	32,666,454	32,166,454	32,666,454	31,722,010
Basic loss per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.05)	$ (0.10)
Diluted loss per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.05)	$ (0.10)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Share-based compensation (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017
Share-based compensation costs:
Share-based compensation expense	$ 182,551	$ 652,862
Cost of Sales
Share-based compensation costs:
Share-based compensation expense	74,683	270,800
Selling and Marketing Expense
Share-based compensation costs:
Share-based compensation expense	38,578	143,255
Research and Development Expense
Share-based compensation costs:
Share-based compensation expense	12,458	45,174
General and Administrative Expense
Share-based compensation costs:
Share-based compensation expense	$ 56,832	$ 193,633

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Issued Pronouncements (Details)	Sep. 30, 2018 USD ($)
ASU 2016-02
Recently Issued Pronouncements
Maximum lease assets and liabilities	$ 250,000

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INVENTORIES (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
INVENTORIES
Raw materials	$ 1,467,431	$ 1,511,339
Finished goods	6,512,470	5,289,761
Inventory, gross	7,979,901	6,801,100
Inventory reserve	(594,488)	(594,939)
Inventory, net	$ 7,385,413	$ 6,206,161

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INCOME TAXES (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
INCOME TAXES
Effective tax rate (as a percent)	0.00%	(0.40%)	0.00%	0.00%

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OTHER ACCRUED LIABILITIES (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
OTHER ACCRUED LIABILITIES
Prepayments from customers	$ 440,528	$ 355,742
Accrued property taxes	331,284	14,681
Accrued professional fees	233,153	231,826
Other accrued expenses	41,515	55,674
Total	$ 1,046,480	$ 657,923

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COMMITMENTS AND CONTINGENCIES (Details)	Sep. 09, 2013 USD ($)	Sep. 30, 2007 item
Becton Dickinson and Company Case
COMMITMENTS AND CONTINGENCIES
Value of damages awarded | $	$ 113,508,014
BD and MDC Investment Holdings Inc Case
COMMITMENTS AND CONTINGENCIES
Number of U.S. patents infringed upon | item		2

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BUSINESS SEGMENT (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Sales by geography
Total sales	$ 9,863,272	$ 10,412,036	$ 25,011,066	$ 24,981,833
Long-lived assets
Long-lived assets	10,976,350		10,976,350		$ 11,353,202
UNITED STATES
Sales by geography
Total sales	8,747,696	8,358,847	21,665,039	20,361,847
Long-lived assets
Long-lived assets	10,856,824		10,856,824		11,215,583
North and South America sales (excluding U.S.)
Sales by geography
Total sales	803,654	1,900,892	2,605,591	3,728,452
Other international sales
Sales by geography
Total sales	311,922	$ 152,297	740,436	$ 891,534
International
Long-lived assets
Long-lived assets	$ 119,526		$ 119,526		$ 137,619

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DIVIDENDS (Details) - USD ($)									9 Months Ended
	Oct. 23, 2018	Jul. 20, 2018	Apr. 24, 2018	Jan. 19, 2018	Oct. 20, 2017	Jul. 20, 2017	Apr. 24, 2017	Jan. 06, 2017	Sep. 30, 2018	Sep. 30, 2017
Dividends
Preferred dividends declared									$ 55,113	$ 55,113
Series I, Class B
Dividends
Preferred dividends declared	$ 12,313	$ 12,313	$ 12,313	$ 12,313	$ 12,313	$ 12,313	$ 12,313	$ 12,313
Series II, Class B
Dividends
Preferred dividends declared	$ 42,800	$ 42,800	$ 42,800	$ 42,800	$ 42,800	$ 42,800	$ 42,800	$ 42,800

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PRIVATE PURCHASE (Details)			3 Months Ended	9 Months Ended
	Aug. 23, 2017 USD ($) shares	Jan. 12, 2017 USD ($) shares	Sep. 30, 2017 USD ($)	Sep. 30, 2018 item	Sep. 30, 2017 USD ($)	Dec. 09, 2018 shares
PRIVATE PLACEMENT
Number of executive officers | item				3
Issuance of New Common Stock | $			$ 570,100		$ 2,350,100
Executive officers | Thomas J. Shaw | Private Placement
PRIVATE PLACEMENT
Issuance of new Common stock (in shares)	1,000,000	2,000,000
Issuance of New Common Stock | $	$ 570,100	$ 1,780,000
Executive officers | Mr. Cowan | Private Placement
PRIVATE PLACEMENT
Number of shares authorized for purchase						500,000
Executive officers | Ms. Larios | Private Placement
PRIVATE PLACEMENT
Number of shares authorized for purchase						500,000

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BONUSES (Details) - Executive officers	Feb. 28, 2017 USD ($)
Mr. Cowan
Cash bonus granted	$ 250,000
Ms. Larios
Cash bonus granted	$ 250,000

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STORM DAMAGE AND INSURANCE PROCEEDS (Details)		9 Months Ended	12 Months Ended
	Mar. 26, 2017 USD ($) building	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
STORM DAMAGE AND INSURANCE PROCEEDS
Number of buildings damaged due to storm | building	2
Insurance proceeds for assessed damages	$ 1,009,960
Deduction of insurance proceeds for assessed damages	$ 5,000
Repair expenses due to the storm damage		$ 203,289	$ 538,667
Remaining insurance proceeds		$ 312,424	$ 466,293

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LONG-TERM DEBT - (Details) - American First National Bank - USD ($) $ in Thousands		9 Months Ended
	Apr. 10, 2018	Sep. 30, 2018	Apr. 09, 2018
Long-term debt
Renewal term	10 years
Original principal amount	$ 3,030		$ 4,210
Prime rate (as a percent)		0.25%
Interest rate (as a percent)		5.50%

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LONG-TERM DEBT - Future payments (Details)	Sep. 30, 2018 USD ($)
Future payments of long-term debt
2018	$ 63,102
2019	246,995
2020	260,202
2021	273,703
2022	287,905
Thereafter	1,807,208
Long term debt total	$ 2,939,115

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SUBSEQUENT EVENTS (Details) - Subsequent Events $ in Thousands	Nov. 08, 2018 USD ($) employee
SUBSEQUENT EVENTS
Number of employees terminated | employee	20
Total annual compensation	$ 1,100
Maximum
SUBSEQUENT EVENTS
Severance costs	$ 250