Table of Contents (Mark One) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K xx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 or oo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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 (State or other jurisdiction of incorporation or organization) 511 Lobo Lane Little Elm, Texas (Address of principal executive offices) 75-2599762 (I.R.S. Employer Identification No.) 75068-5295 (Zip Code) 972-294-1010 Registrant’s telephone number, including area code Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to Section 12(g) of the Act: Title of each class Common Name of each exchange on which registered NYSE American LLC Preferred Stock (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: Large accelerated filer o Non-accelerated filer x Accelerated filer o 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. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x The aggregate market value of the common equity held by non-affiliates as of June 29, 2018, was $10,309,114, assuming a closing price of $0.7365 and outstanding shares held by non-affiliates of 13,997,440. APPLICABLE ONLY TO REGISTRANTS 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 Section 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 REGISTRANTS) Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of March 7, 2019, there were 32,666,454 shares of our Common Stock outstanding. Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held May 7, 2019 are incorporated by reference into DOCUMENTS INCORPORATED BY REFERENCE Part III hereof. RETRACTABLE TECHNOLOGIES, INC. FORM 10-K For the Fiscal Year Ended December 31, 2018 Table of Contents PART I Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services PART IV Item 15. Exhibits, Financial Statement Schedules Item 16. Form 10-K Summary SIGNATURES i 1 4 7 7 7 7 8 9 10 15 F-1 16 16 16 17 17 17 17 17 17 19 20 Table of Contents FORWARD-LOOKING STATEMENT WARNING PART I 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 decrease 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. Given these uncertainties, undue reliance should not be placed on forward-looking statements. Item 1. Business. DESCRIPTION OF BUSINESS General Development of Business Retractable Technologies, Inc. was incorporated in Texas in 1994. Our business is the manufacturing and marketing of safety medical products (predominately syringes) for the healthcare industry. We have manufacturing facilities in Little Elm, Texas and use manufacturers in China as well. We have developed several new products in the last few years, including the EasyPoint needle which can be used with, among other things, prefilled syringes. ® In 2007, we filed a lawsuit claiming that we have been blocked from gaining market access due to actions taken by BD. In August 2017, a district court dismissed our remaining claims against BD and entered a take nothing judgment. We filed for appeal. On March 26, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the take nothing judgment. We are evaluating this ruling and conferring with legal counsel regarding possible future action. Financial Information We have only one reporting segment. See Item 8 for our financial statements. Principal Products, Markets, and Distribution Our goal is to become a leading provider of safety medical products. Our principal products were designed to protect healthcare workers, patients, and others from needlestick injuries, cross-contamination through reuse, and reduce disposal costs. The VanishPoint products accomplish these goals by retracting the needle when the plunger handle is fully depressed while the needle is still in the patient. This pre-removal activation virtually eliminates exposure to the contaminated needle, reducing the risk of needlestick injuries. Activation is easily accomplished in one step, using one hand. Upon activation of the retraction mechanism, VanishPoint products are rendered unusable, reducing the risk of disposal-related injuries or reuse. ® ® VanishPoint syringe sales have historically comprised most of our sales. VanishPoint syringe sales were 93.0%, 89.9%, and 84.9% of our revenues ® ® in 2016, 2017, and 2018. ® Our VanishPoint safety products currently consist of tuberculin, insulin, and allergy antigen VanishPoint syringes; 0.5mL, 1 mL, 2mL, 3mL, 5mL, and 10mL VanishPoint syringes; and the VanishPoint autodisable syringe. We also sell the VanishPoint IV catheter; the VanishPoint blood collection tube holder; and the VanishPoint blood collection set. The Patient Safe syringe protects patients by reducing the risk of bloodstream infections associated with catheter hub contamination. Our Patient Safe products currently consist of 3mL, 5mL, 10mL, 20mL, 30mL, 60mL syringes and the Patient Safe Luer cap. ® ® ® ® ® ® ® ® ® 1 Table of Contents In the second quarter of 2016, we began selling the EasyPoint needle. EasyPoint needles made up 10.3% of revenues in 2018. The EasyPoint is a retractable needle that can be used with Luer lock syringes, Luer slip syringes, and prefilled syringes to give injections. The EasyPoint needle can also be used to aspirate fluids and collect blood. ® ® ® ® We currently have under development additional safety products that add to or build upon our current product line offering. These products include: retractable needles and syringes, glass syringes, dental syringes, IV catheter introducers, and blood collection sets. Our products are sold to and used by healthcare providers primarily in the U.S. (with 13.9% of revenues in 2018 generated from sales outside the U.S.) which include, but are not limited to, acute care hospitals, alternate care facilities, doctors’ offices, clinics, emergency centers, surgical centers, long-term care facilities, Veterans Administration facilities, military organizations, public health facilities, and prisons. Under the current supply chain system in the U.S. acute care market, the vast majority of decisions relating to the contracting for and purchasing of medical supplies are made by the representatives of group purchasing organizations (“GPOs”) and purchasing representatives rather than the end-users of the product (nurses, doctors, and testing personnel). The GPOs and larger manufacturers often enter into contracts which can prohibit or limit entry in the marketplace by competitors. We distribute our products throughout the U.S. through general line and specialty distributors. We also use international distributors. We have developed a national direct marketing network in order to market our products to health care customers and their purchaser representatives. Our marketers make contact with all of the departments that affect the decision-making process for safety products, including the purchasing agents. They call on acute care and alternate care sites and speak directly with the decision-makers of these facilities. We employ trained sales representatives and clinicians, including nurses and/or medical technologists that educate healthcare providers and healthcare workers on the use of safety devices through on-site clinical training, exhibits at related tradeshows, and publications of relevant articles in trade journals and magazines. These employees provide clinical support to customers. In addition to marketing our products, the network demonstrates the safety and cost effectiveness of our products to customers. The American Journal of Infection Control published an article in its November 2017 issue that estimates that more than 300,000 healthcare workers in the United States suffer sharps injuries (such as needlesticks) annually. The article is the most recent of a series of articles published over the past few years (several of which were published in the AOHP Journal). The data shows that the number of sharps injuries has remained essentially unchanged over the past several years. Sources and Availability of Raw Materials Our product components, including needle adhesives and packaging materials, are purchased from various suppliers. There is no scarcity of such materials or such suppliers. Intellectual Property Intellectual property rights, particularly patent rights, are material to our business. The patent rights are jointly owned by the Company and Thomas J. Shaw, our founder and CEO, and have varying expiration dates. Under the terms of an exclusive license agreement that has been in effect since 1995, the Company is exclusively licensed to use the patent rights held by Mr. Shaw, and Mr. Shaw receives a five percent (5%) royalty on gross sales of products subject to the license. The last unexpired U.S. patent covering VanishPoint syringes (as presently manufactured and marketed) will expire in 2020. Following the expiration of such patent, competitors will be permitted to attempt to copy the VanishPoint syringe as presently manufactured. Issued patents covering possible future modifications to the VanishPoint syringe and core technology of the VanishPoint syringe will expire during the years 2028 through 2032. If the VanishPoint syringes are modified to incorporate the modifications covered in the unexpired patents, ® ® ® ® ® 2 Table of Contents then competitors will not be permitted to attempt to copy such modified syringes in the countries where the patents remain in effect. Other patent applications covering inventions applicable to the VanishPoint syringe are pending. ® The Company has unexpired patents which relate to the EasyPoint ® technology and other products as well. The Company has registered the following trade names and trademarks for our products: VanishPoint , EasyPoint , Patient Safe , ® VanishPoint logos, RT and design, the VanishPoint and design, the spot design and the Company slogans “The New Standard for Safety” and “We Make ® Safety Safe” . ® ® ® ® ® We are involved in patent litigation detailed in Item 3. Seasonality Historically, unit sales have increased in the latter part of the year due, in part, to the demand for syringes during the flu season. Working Capital Items Our significant accounting policies are set forth in the notes to our financial statements in Item 8. Our inventory practices will vary in response to demand. Order backlog is not material to our business. Dependence on Customers Although our business has historically derived significant percentages of its revenues from a few customers, we do not believe that the loss of any one of these customers would have a material adverse effect on our business. Government Approval and Government Regulations For all products manufactured for sale in the domestic market, we have given notice of intent to market to the FDA, and the devices were shown to be substantially equivalent to the predicate devices for the stated intended use. For all products manufactured for sale in the domestic market and foreign market, we hold a Quality Management System certification to ISO 13485:2016. Additionally, for all products manufactured for sale into the applicable countries, we hold a Quality Management System certification in compliance with the Medical Device Single Audit Program (MDSAP). For all products manufactured for sale into European Union countries, we hold a Full Quality Assurance System certification to Directive 93/42/EEC Annex II (excluding section 4). All of these certifications are issued by our notified body, BSI, and are reviewed annually. We will continue to comply with applicable regulations of all countries in which our products are registered for sale. Competitive Conditions Major domestic competitors include BD and Medtronic Minimally Invasive Therapies (“Medtronic,” formerly known as Covidien). Terumo Medical Corp., Smiths Medical, and B Braun are additional competitors with smaller market shares. BD and Medtronic have controlling U.S. market share; greater financial resources; larger and more established sales, marketing, and distribution organizations; and greater market influence, including long-term and/or exclusive contracts. Additionally, BD may be able to use its resources to improve its products through research or acquisitions or develop new products which may compete with our products. We compete primarily on the basis of healthcare worker and patient safety, product performance, and quality. We believe our competitive advantages include, but are not limited to, our leadership in quality and innovation. We believe our products continue to be the most effective safety devices in today’s market. Our syringe products include passive safety activation, require less disposal space, and are activated while in the patient, 3 Table of Contents reducing exposure to the contaminated needle. Our price per unit is competitive or even lower than the competition once all the costs incurred during the life cycle of a syringe are considered. Such life cycle costs include disposal costs, testing and treatment costs for needlestick injuries, and treatment for contracted illnesses resulting from needlestick injuries. ® EasyPoint retractable needles offer unique safety benefits not found in other commercially available safety needles. Manually activated safety needles that compete with EasyPoint must be removed from the patient, exposing the contaminated needle prior to activation of the manual safety mechanism. EasyPoint needles allow for activation of the automated retraction mechanism while the needle is still in the patient, reducing exposure to the contaminated needle and effectively reducing the risk of needlestick injuries. EasyPoint retractable needles are compatible with Luer-fitting syringes, including pre-filled syringes. In addition, EasyPoint retractable needles may be activated with fluid in the syringe, making it applicable for aspiration procedures such as blood collection. ® ® ® ® Environmental Compliance We believe that we do not incur material costs in connection with compliance with environmental laws. Employees As of March 7, 2019, we had 125 employees. 123 of such employees were full time employees. Available Information We make available, free of charge on our website (www.retractable.com), our Form 10-K Annual Report and Form 10-Q Quarterly Reports and Current Reports on Form 8-K (and any amendments to such reports) as soon as reasonably practical after such reports are filed. Item 1A. Risk Factors. We could be subject to complex and costly regulation. Our business could suffer if we or our suppliers encounter manufacturing problems. We could be subject to risks associated with doing business outside of the U.S. Current or worsening economic conditions may adversely affect our business and financial condition. You should carefully consider the following material risks facing us. If any of these risks occur, our business, results of operations, or financial condition could be materially affected. We Compete in a Marketplace Dominated by BD We operate in a marketplace that is dominated by BD, the major syringe manufacturer in the U.S. We initiated a lawsuit in 2007 against BD. The suit was for patent infringement, antitrust practices, and false advertising. The court severed the patent claims from the other claims. The antitrust and false advertising case was dismissed in district court in August 2017 and we were awarded a take nothing judgment. We filed for appeal. On March 26, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the take nothing judgment. We are evaluating this ruling and conferring with legal counsel regarding possible future action. Although we have made limited progress in some areas, such as the alternate care and some international markets, 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. We believe this is due to BD’s activities, despite our litigation efforts described briefly above. We Have Generally Been Unable to Gain Sufficient Market Access to Achieve Profitable Operations We have a history of incurring net operating losses. We may experience operating losses in the future. If we are unable to gain sufficient market access and market share, we may be unable to continue to finance research and development as well as support operations and expansion of production. 4 Table of Contents We Are Challenged by Uncertainties in Obtaining and Enforcing Intellectual Property Rights Our main competitive strength is our technology. We are dependent on patent rights, and if the patent rights are invalidated or circumvented, our business would be adversely affected. Patent protection is considered, in the aggregate, to be of material importance in the design, development, and marketing of products. ® VanishPoint syringes comprised 84.9% of sales in 2018 and a principal remaining patent protecting those syringes (as presently manufactured and marketed) will expire in 2020. Following the expiration of such patent, competitors will be permitted to attempt to copy the VanishPoint syringe as presently manufactured. Issued patents covering possible future modifications to the VanishPoint syringe and core technology of the VanishPoint syringe will expire during the years 2028 through 2032. If the VanishPoint syringes are modified to incorporate the modifications covered in the unexpired patents, then competitors will not be permitted to attempt to copy such modified syringes in the countries where the patents remain in effect. There is no assurance that the modifications will be incorporated or profitably sold. Other patent applications covering inventions applicable to the VanishPoint syringe are pending. ® ® ® ® ® When the current patents for the VanishPoint syringes and other products expire, we may experience a significant and rapid loss of sales, and our competitive position in the marketplace may weaken if other competitors use our technology. Such occurrences could have a material adverse effect on profitability. ® We do not maintain patent or trademark protection in all foreign countries, but, where possible, have taken steps to protect our patents and trademarks in those countries where we market our products or where we believe other manufacturers are most likely to attempt to replicate our technology. Our lack of patent and trademark protection in certain foreign countries heightens the risk that our designs may be copied by a competitor in those countries. Our Patents Are Subject to Litigation We have been sued by BD and MDC Investment Holdings, Inc. for patent infringement. This case has been administratively closed until our case against BD is resolved. Patent litigation and challenges involving our patents are costly and unpredictable and may deprive us of market exclusivity for a patented product or, in some cases, third party patents may prevent us from marketing and selling a product in a particular geographic area. We Are Vulnerable to New Technologies Because we have a narrow focus on particular product lines and technology (currently, predominantly retractable needle products), we are vulnerable to the development of superior competing products and to changes in technology which could eliminate or reduce the need for our products. If a superior technology is created, the demand for our products could greatly diminish. Our Competitors Have Greater Resources Our competitors have greater financial resources, larger and more established sales and marketing and distribution organizations, and greater market influence, including long-term contracts. These competitors may be able to use these resources to improve their products through research and acquisitions or develop new products, which may compete more effectively with our products. If our competitors choose to use their resources to create products superior to ours, we may be unable to sell our products and our ability to continue operations would be weakened. Operations May Be Affected By Foreign Trade Policy We are subject to risks associated with foreign trade policy. In 2018, we used Chinese manufacturers to produce 85.3% of our products. Trade protection measures, including tariffs, and/or changes to import or export requirements could materially adversely impact our operations. As of the date of this filing, syringes are not included among the Chinese products on which the U.S. has proposed tariffs. We cannot predict the impact of potential changes to U.S. foreign trade policy. Additionally, we derive 13.9% of our revenues from international sales. International sales, particularly in emerging market countries, are further subject to a variety of regulatory, economic, and political risks as well. 5 Table of Contents Our New Products May Not Replace Lost VanishPoint Sales After 2020 ® Presently existing patent coverage for VanishPoint syringes (as presently manufactured) will expire in 2020. Following the patent expiration, expected declines in sales of VanishPoint syringes, which currently comprise 84.9% of our revenues, means that our future success is dependent on new products. We have engaged in research and development for many years to develop other commercially successful products. Often, new products take a number of years to develop and sales of a new product may be disappointing. Based on industry-wide trends, we anticipate that demand may increase for one of our newer products, the EasyPoint needle. Sales in 2017 and 2018 for this product were 6.0% and 10.3%, respectively, of our total revenues. ® ® ® The Majority of Our Sales Are Filled Using Third Party Manufacturers Most international sales, as well as a substantial portion of domestic sales, are filled by production from Chinese manufacturers. In the event that we become unable to purchase such product 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. Even with increased domestic production, we may not be able to avoid a disruption in supply. In 2018, the 1mL and 3mL syringes made up 75.4% of our unit sales and 75.7% of our revenues. We have a strong relationship with our Chinese manufacturers and we communicate with them frequently. ® Fluctuations in Supplies of Inventory Could Temporarily Increase Costs Fluctuations in the cost and availability of raw materials and inventory and the ability to maintain favorable third party manufacturing arrangements and relationships could result in the need to manufacture all of our products in the U.S. or find other manufacturers. This could temporarily increase unit costs as we ramp up domestic production. We Are Controlled by One Shareholder Thomas J. Shaw, our President and Chief Executive Officer, has investment or voting power over a total of 55.9% of the outstanding Common Stock. Mr. Shaw therefore has the ability to direct our operations and financial affairs and to elect members of our Board of Directors. His interests may not always coincide with the Company’s interests or the interests of other stockholders. This concentration of ownership, for example, may have the effect of delaying, deferring, or preventing a change in control, impeding a merger, consolidation, takeover, or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could materially adversely affect the market price of our Common Stock. Mr. Shaw’s rights under the Technology License Agreement, as the owner of the technology we produce, present similar conflicts of interest. We Face Inherent Product Liability Risks As a manufacturer and provider of safety needle products, we face an inherent business risk of exposure to product liability claims. If a product liability claim is made and damages are in excess of our product liability coverage, our competitive position could be weakened by the amount of money we could be required to pay to compensate those injured by our products. In the event of a recall, we have recall insurance. Our Business May Be Affected By Changes in the Health Care Regulatory Environment In the U.S. and internationally, government authorities may enact changes in regulatory requirements, reform existing reimbursement programs, and/or make changes to patient access to health care, all of which could adversely affect the demand for our products and/or put downward pressure on our prices. Future health care rulemaking could affect our business. We cannot predict the timing or impact of any future rulemaking or changes in the law. 6 Table of Contents Item 1B. Unresolved Staff Comments. Not applicable and none. Item 2. Properties. Our headquarters are located at 511 Lobo Lane, on 35 acres, which we own, overlooking Lake Lewisville in Little Elm, Texas. The headquarters are in good condition and houses our administrative offices and manufacturing facility. The manufacturing facility produced approximately 14.4% of the units that were manufactured in 2018. In the event that we become unable to purchase product 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. The 5mL and 10mL syringes are sold principally in the international market. In 2018, we used approximately 15% of our current U.S. productive capacity. ® A loan in the original principal amount of approximately $4,210,000 is secured by our land and buildings. See Note 8 to our financial statements for more information. In the opinion of Management, the property and equipment are suitable for their intended use and are adequately covered by an insurance policy. Item 3. Legal Proceedings. In May 2010, our and Mr. Shaw’s suit against 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 us $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 we are entitled. On August 17, 2017, District Court for the Eastern District of Texas issued the Court’s Final Judgment ordering that we take nothing in our suit against BD and dismissing the case. We filed a notice of Appeal with the United States Court of Appeals for the Fifth Circuit on November 3, 2017. Oral arguments occurred on October 3, 2018. On March 26, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the District Court’s take nothing judgment. In September 2007, BD and MDC Investment Holdings, Inc. (“MDC”) sued us in the United States District Court for the Eastern District of Texas, Texarkana Division, initially alleging that we are 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. We 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 we subsequently dropped our 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 claims in the separate proceeding described above. Item 4. Mine Safety Disclosures. Not applicable. 7 Table of Contents PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. MARKET INFORMATION Our Common Stock has been listed on the NYSE American (or its predecessor entities) under the symbol “RVP” since May 4, 2001. SHAREHOLDERS As of March 7, 2019, there were 32,666,454 shares of Common Stock held by 199 shareholders of record, not including Cede & Co. participants or beneficial owners thereof. DIVIDENDS We have not ever declared or paid any dividends on the Common Stock. We have no current plans to pay any cash dividends on the Common Stock. We intend to retain all earnings, except those required to be paid to the holders of the Preferred Stock as resources allow, to support operations and future growth. Dividends on Common Stock cannot be paid so long as preferred dividends are unpaid. As of December 31, 2018, there was an aggregate of $11.8 million in preferred dividends in arrears. As of December 31, 2017, there was an aggregate of $11.3 million in preferred dividends in arrears. EQUITY COMPENSATION PLAN INFORMATION The following table sets forth information relating to our equity compensation plans as of December 31, 2018: Equity Compensation Plan Information Plan category Equity compensation plans approved by security holders Total Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted average exercise price of outstanding options, warrants and rights (b) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c) 1,357,803 1,357,803 $ $ 1.54 1.54 — — 8 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return for our Common Stock from December 31, 2013 to December 31, 2018, to the total returns for the Russell Microcap and Becton, Dickinson and Company (or “BDX”), a peer issuer. The graph assumes an investment of $100 in the aforementioned equities as of December 31, 2013, and that all dividends are reinvested. ® PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Purchases by affiliate(s) during 2018 were not repurchases by or on behalf of the issuer. Based on our review, affiliates properly filed Section 16(a) beneficial ownership reports. Item 6. Selected Financial Data. The following selected financial data is qualified by reference to, and should be read in conjunction with, our audited financial statements and the notes to those statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere herein. The selected Statements of Operations data presented below for the years ended December 31, 2015 and 2014 and the Balance Sheet data as of December 31, 2016, 2015, and 2014 have been derived from our audited financial statements, which are not included herein. (In thousands except for earnings per share, shares, and percentages) Sales, net Cost of sales Gross profit Total operating expenses Income from insurance proceeds Loss from operations Litigation proceeds Interest and other income Interest expense Income (loss) before income taxes Provision (benefit) for income taxes Net income (loss) Preferred Stock dividend requirements $ 2018 $ 33,275 23,053 10,222 11,803 261 (1,320) — 144 (177) (1,353) (13) (1,340) (705) 9 As of and for the Years Ended December 31, 2016 2015 2017 $ 34,494 24,522 9,972 13,750 — (3,778) — 65 (211) (3,924) (188) (3,736) (705) $ 29,827 19,485 10,342 13,849 — (3,507) — 26 (213) (3,694) 1 (3,695) (705) $ 29,552 18,987 10,565 13,773 — (3,208) 7,725 25 (220) 4,322 8 4,314 (709) 2014 34,521 22,499 12,022 14,180 — (2,158) — 34 (223) (2,347) 8 (2,355) (915) Table of Contents Deemed capital contribution on extinguishment of preferred stock Income (loss) applicable to common shareholders Earnings (loss) per share — basic Earnings (loss) per share — diluted Weighted average shares outstanding — basic Weighted average shares outstanding — diluted Current assets Current liabilities Property, plant, and equipment, net Total assets Long-term debt, net of current maturities Stockholders’ equity Redeemable Preferred Stock (in shares) Capital leases Cash dividends per common share Gross profit margin 2018 — (2,045) (0.06) (0.06) 32,666,454 32,666,454 23,847 8,539 10,852 36,792 2,640 25,614 781,445 — — 30.7% $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ As of and for the Years Ended December 31, 2016 2017 2015 — (4,441) (0.14) (0.14) 31,958,121 31,958,121 26,608 7,900 11,353 38,155 3,081 27,174 781,445 — — 28.9% $ $ $ $ $ $ $ $ $ $ — (4,400) (0.15) (0.15) 29,354,437 29,354,437 26,677 7,172 12,092 38,779 3,498 28,108 781,445 — — 34.7% $ $ $ $ $ $ $ $ $ $ 2,306 5,911 0.21 0.20 27,822,593 29,481,294 30,811 8,096 11,468 42,294 3,417 30,781 781,445 — — 35.8% $ $ $ $ $ $ $ $ $ $ 2014 — (3,270) (0.12) (0.12) 27,375,450 27,375,450 33,983 15,100 10,853 45,106 3,425 26,581 987,445 — — 34.8% Events that could affect the trends indicated above include changes in manufacturing costs, changing average sales prices, changing raw material cost, the gaining of market access, protection of our patents, foreign currency exchange rates, the Medical Device Excise Tax, the impact of flu season requirements, new or changing regulations or changes in trade policy, or new products. As our products are made from petroleum products, the changing cost of oil and transportation may have an impact on our costs to the extent increases may not be recoverable through price increases of our products and reductions in oil prices may not quickly affect petroleum product prices. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation. 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 decrease 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 BD, in providing devices to the safety market, and other factors referenced in Item 1A. Risk Factors. Given these uncertainties, undue reliance should not be placed on forward-looking statements. 10 Table of Contents Overview We have been manufacturing and marketing our products since 1997. VanishPoint syringes comprised 84.9% of our sales in 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 10.3% of revenues in 2018. The EasyPoint is a retractable needle that can be used with Luer lock syringes, Luer slip syringes, and prefilled syringes to give injections. The EasyPoint needle can also be ® used to aspirate fluids and collect blood. Based on industry-wide trends, we anticipate that demand may increase for the EasyPoint needle. ® ® ® ® 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 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 and oral arguments occurred October 3, 2018. On March 26, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the take nothing judgment. We are evaluating this ruling and conferring with legal counsel regarding possible future action. Our litigation expenses were significantly less in 2017 and 2018 than previous years. 2017 costs related to additional compensation, bonuses to Ms. Larios and Mr. Cowan, and stock option expense related to options granted in 2016 affect comparability of 2018 results to 2017 results. In November 2018, we terminated 19 employees earning total annual compensation of approximately $1.12 million. Some of these positions may be filled in the future. Severance costs associated with the 2018 terminations were $244 thousand. 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. In 2016, we granted a right to three of our executive officers to purchase shares directly from the Company. Thomas J. Shaw was the only officer to exercise such right prior to expiration, buying a total of three million shares in two transactions in 2017 for an aggregate purchase price of $2.35 million. We received approximately $1 million from our insurance carrier in the second quarter of 2017 and used these funds to repair our buildings from earlier storm damage. The remaining proceeds of $261 thousand were recognized as Insurance proceeds in the fourth quarter of 2018. 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 2018, our Chinese manufacturers 11 Table of Contents produced approximately 85.3% 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. ® 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 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 contains 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 the forward-looking statements. All period references are to our fiscal years ended December 2018, 2017, or 2016. Dollar amounts have been rounded for ease of reading. Comparison of Year Ended December 31, 2018 and Year Ended December 31, 2017 Domestic sales accounted for 86.1% and 78.3% of the revenues in 2018 and 2017, respectively. Domestic revenues increased 6.0% principally due to increased volume mitigated by lower average price. Domestic unit sales increased 12.0%. Domestic unit sales were 81.0% of total unit sales for 2018. International revenues decreased from $7.5 million in 2017 to $4.6 million in 2018, primarily due to lower volumes. Overall unit sales decreased 3.8%. Our international orders may be subject to significant fluctuation over time. Such orders may fluctuate due to health initiatives at various times as well as economic conditions. Cost of manufactured product decreased $1.5 million principally due to lower volumes and lower unit cost of manufacture. Royalty expense increased $80 thousand due to increased gross sales. Gross profit margins increased from 28.9% in 2017 to 30.7% in 2018 principally due to lower cost of manufacturing. Operating expenses decreased 14.2% from the prior year due to lower legal expense, no bonuses paid in 2018, lower travel and entertainment cost, decreased costs of engineering samples, and no stock option expense in 2018. These decreases were mitigated by severance costs. Recognition of Insurance proceeds of $261 thousand is due to actual building repairs being less than the insurance payment. The loss from operations was $1.3 million in 2018 compared to a loss from operations of $3.8 million in 2017. We recorded $188 thousand in tax benefits in connection with the enactment of the Tax Cut and Jobs Act (the “Act”) on December 22, 2017. The Act established new tax provisions that affect us including the elimination of the corporate alternative minimum tax and changing rules related to uses and limitations of net operating loss carry forwards created after December 31, 2017. Carry forward credits from alternative minimum taxes paid in prior years became refundable in tax years beginning January 1, 2018. Such credits were, however, subject to sequestration. However, in January 2019, the IRS had a ruling that provided that Alternative Minimum Tax payments are not subject to sequestration, bringing the total benefit to $202 thousand, an increase of $13 thousand from last year. 12 Table of Contents Cash flow from operations was negative $1.2 million in 2018 due to our Net loss, increased inventory, and use of Insurance proceeds for repairs. The decrease in cash was mitigated by a decrease in accounts receivable and an increase in liabilities. In 2018, we transferred $3 million from our cash accounts into securities with maturities of one to three years. This transfer significantly affects our net decrease in cash in 2018. However, the securities may increase investment income in the future. Comparison of Year Ended December 31, 2017 and Year Ended December 31, 2016 Domestic sales accounted for 78.3% and 88.2% of the revenues in 2017 and 2016, respectively. Domestic revenues increased 2.7% principally due to increased sales of EasyPoint and the blood collection set. Domestic unit sales increased 7.1%. Domestic unit sales were 69.5% of total unit sales for 2017. International revenues increased from $3.5 million in 2016 to $7.5 million in 2017, primarily due to increased volumes mitigated by lower average prices. Overall unit sales increased 28.3%. Our international orders may be subject to significant fluctuation over time. Such orders may fluctuate due to health initiatives at various times as well as economic conditions. ® Cost of manufactured product increased $4.7 million principally due to higher volumes. Royalty expense increased $337 thousand due to increased gross sales. Gross profit margins decreased from 34.7% in 2016 to 28.9% in 2017 principally due to a larger portion of international sales which bear a lower average sales price. Operating expenses decreased 0.7% from the prior year due to decreased legal expenses and no impairment costs incurred in 2017, offset by increased staffing in Sales and marketing, stock option expense, and bonuses paid in 2017. The loss from operations was $3.8 million in 2017 compared to $3.5 million in 2016. We recorded $188 thousand in tax benefits in connection with the enactment of the Tax Cut and Jobs Act (the “Act”) on December 22, 2017. The Act established new tax provisions that affect us including the elimination of the corporate alternative minimum tax and changing rules related to uses and limitations of net operating loss carry forwards created after December 31, 2017. Carry forward credits from alternative minimum taxes paid in prior years became refundable in tax years beginning January 1, 2018. Cash flow from operations was a negative $2.9 million for 2017 due to our Net loss, increased accounts receivable and other current assets, mitigated by noncash expenses of depreciation and stock option expense, lower inventory levels, increased liabilities, and insurance proceeds. LIQUIDITY AND CAPITAL RESOURCES At the present time, Management does not intend to publicly raise equity capital. Due to the funds received from prior litigation and direct purchase of 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. In 2018, we transferred $3 million from our cash accounts into securities with maturities of one to three years. This transfer significantly affects our net decrease in cash in 2018. However, the securities may increase investment income in the future. Historical Sources of Liquidity We have historically funded operations primarily from the proceeds from revenues, private placements, litigation settlements, and loans. 13 Table of Contents 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 14.4%) 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. 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 also decreased our workforce, as discussed in the Overview of this Item 7. 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. 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 was the only officer to exercise such right prior to expiration, buying a total of three million shares in two transactions in 2017 for an aggregate purchase price of $2.35 million. Capital Resources In 2017, we received approximately $1 million to make necessary repairs to our buildings from storm damage. Such repairs were completed in 2018. The remaining insurance proceeds of $261 thousand were recognized in the fourth quarter of 2018. There were no material commitments for capital projects as of December 31, 2018. OFF-BALANCE SHEET ARRANGEMENTS None. 14 Table of Contents CONTRACTUAL OBLIGATIONS Contractual Obligations and Commercial Commitments The following chart summarizes our material obligations and commitments to make future payments under contracts for long-term debt and operating leases as of December 31, 2018: Contractual Obligations Long-term debt Operating leases Total Total Less Than 1 Year Payments Due by Period 1-3 Years 3-5 Years More Than 5 Years $ $ 3,046,008 165,849 3,211,857 $ $ 406,361 81,694 488,055 $ $ 522,166 84,155 606,321 $ $ 587,041 — 587,041 $ $ 1,530,440 — 1,530,440 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. Not applicable. 15 Table of Contents Item 8. Financial Statements and Supplementary Data. RETRACTABLE TECHNOLOGIES, INC. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31, 2018 AND 2017 F-1 Table of Contents RETRACTABLE TECHNOLOGIES, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Financial Statements: Balance Sheets as of December 31, 2018 and 2017 Statements of Operations for the years ended December 31, 2018, 2017, and 2016 Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017, and 2016 Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016 Notes to Financial Statements Selected Quarterly Financial Data - Unaudited Financial Statement Schedule: Schedule II: Schedule of Valuation and Qualifying Accounts for the years ended December 31, 2018, 2017, and 2016 F-2 Page F-3 F-4 F-5 F-6 F-8 F-9 F-27 17 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Retractable Technologies, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Retractable Technologies, Inc. (the “Company”) as of December 31, 2018 and 2017, the related statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and schedules (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by Management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Moss Adams LLP Dallas, TX March 28, 2019 We have served as the Company’s auditor since 2016. F-3 Table of Contents ASSETS Current assets: RETRACTABLE TECHNOLOGIES, INC. BALANCE SHEETS Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $149,665 and $101,872, respectively Held-to-maturity securities, at amortized cost Inventories, net Income taxes receivable Other current assets Total current assets Property, plant, and equipment, net Held-to-maturity securities, at amortized cost (non-current) Income taxes receivable Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Current portion of long-term debt Accrued compensation Dividends payable Accrued royalties to shareholder Insurance proceeds Other accrued liabilities Income taxes payable Total current liabilities Long-term debt, net of current maturities Total liabilities Commitments and contingencies — See Note 9 Stockholders’ equity: Preferred Stock, $1 par value: Class B; authorized: 5,000,000 shares Series I, Class B; outstanding: 98,500 shares (liquidation preference of $615,625) Series II, Class B; outstanding: 171,200 shares (liquidation preference of $2,140,000) Series III, Class B; outstanding: 129,245 shares (liquidation preference of $1,615,563) Series IV, Class B; outstanding: 342,500 shares (liquidation preference of $3,767,500) Series V, Class B; outstanding: 40,000 (liquidation preference of $176,000) Common Stock, no par value; authorized: 100,000,000 shares; outstanding: 32,666,454 Additional paid-in capital Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity See accompanying notes to financial statements F-4 December 31, 2018 2017 9,647,292 4,912,356 996,233 7,545,094 100,887 644,803 23,846,665 10,851,747 1,989,923 100,835 2,849 36,792,019 5,369,677 406,361 540,852 55,113 769,324 — 1,387,287 10,025 8,538,639 2,639,647 11,178,286 98,500 171,200 129,245 342,500 40,000 — 61,871,756 (37,039,468) 25,613,733 36,792,019 $ $ $ $ 14,877,899 5,105,556 — 6,206,161 — 418,154 26,607,770 11,353,202 — 188,456 6,052 38,155,480 4,957,750 410,949 547,021 55,113 793,489 466,293 657,923 11,407 7,899,945 3,081,409 10,981,354 98,500 171,200 129,245 342,500 40,000 — 62,092,206 (35,699,525) 27,174,126 38,155,480 $ $ $ $ Table of Contents Sales, net Cost of Sales Costs of manufactured product Royalty expense to shareholder Total cost of sales Gross profit Operating expenses: Sales and marketing Research and development General and administrative Impairment of assets Total operating expenses Income from insurance proceeds Loss from operations Interest and other income Interest expense Loss before income taxes Provision (benefit) for income taxes Net loss Preferred Stock dividend requirements Loss applicable to common shareholders Basic loss per share Diluted loss per share Weighted average common shares outstanding: Basic Diluted RETRACTABLE TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS 2018 33,274,702 $ Years Ended December 31, 2017 34,493,838 $ $ 20,108,798 2,944,102 23,052,900 10,221,802 4,404,441 621,365 6,776,705 — 11,802,511 260,514 (1,320,195) 144,124 (177,190) (1,353,261) (13,318) (1,339,943) (704,996) (2,044,939) (0.06) (0.06) $ $ $ 21,658,062 2,864,188 24,522,250 9,971,588 4,658,548 740,567 8,351,053 — 13,750,168 — (3,778,580) 65,695 (210,761) (3,923,646) (187,608) (3,736,038) (704,996) (4,441,034) (0.14) (0.14) $ $ $ $ $ $ 2016 29,826,636 16,957,073 2,527,508 19,484,581 10,342,055 4,025,786 571,842 8,795,310 456,119 13,849,057 — (3,507,002) 26,522 (213,295) (3,693,775) 1,132 (3,694,907) (704,996) (4,399,903) (0.15) (0.15) 32,666,454 32,666,454 31,958,121 31,958,121 29,354,437 29,354,437 See accompanying notes to financial statements F-5 Table of Contents Balance as of December 31, 2015 Stock options exercised Dividends Stock option compensation Net loss RETRACTABLE TECHNOLOGIES, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Series I Class B Shares Amount 98,500 $ 98,500 Series II Class B Shares 171,200 Amount $ 171,200 Series III Class B Shares 129,245 Amount $ 129,245 Series IV Class B Shares 342,500 Amount $ 342,500 Series V Class B Shares 40,000 Amount 40,000 $ Common Shares 28,619,874 Amount — $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,046,580 — — — Balance as of December 31, 2016 98,500 98,500 171,200 171,200 129,245 129,245 342,500 342,500 40,000 40,000 29,666,454 Issuance of new Common Stock Dividends Stock option compensation Net loss — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 3,000,000 — — — Balance as of December 31, 2017 98,500 98,500 171,200 171,200 129,245 129,245 342,500 342,500 40,000 40,000 32,666,454 Dividends Net loss — — — — — — — — — — — — — — — — — — — — — — Balance as of December 31, 2018 98,500 $ 98,500 171,200 $ 171,200 129,245 $ 129,245 342,500 $ 342,500 40,000 $ 40,000 32,666,454 $ See accompanying notes to financial statements F-6 — — — — — — — — — — — — — Table of Contents RETRACTABLE TECHNOLOGIES, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY Balance as of December 31, 2015 $ 58,268,036 $ (28,268,580) $ 30,780,901 Additional Paid-in Capital Accumulated Deficit Total Stock options exercised Dividends Stock option compensation Net loss Balance as of December 31, 2016 Issuance of new Common Stock Dividends Stock option compensation Net loss Balance as of December 31, 2017 Dividends Net loss 855,021 (220,450) 387,726 — — — 855,021 (220,450) 387,726 — (3,694,907) (3,694,907) 59,290,333 (31,963,487) 28,108,291 2,350,100 (220,450) 672,223 — — — 2,350,100 (220,450) 672,223 — (3,736,038) (3,736,038) 62,092,206 (35,699,525) 27,174,126 (220,450) — (220,450) — (1,339,943) (1,339,943) Balance as of December 31, 2018 $ 61,871,756 $ (37,039,468 ) $ 25,613,733 See accompanying notes to financial statements F-7 Table of Contents RETRACTABLE TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS Cash flows from operating activities: Net loss Adjustments to reconcile net loss to net cash used by operating activities: 2018 Years Ended December 31, 2017 2016 $ (1,339,943) $ (3,736,038) $ (3,694,907) Depreciation and amortization Share-based compensation Inventories reserve Provision for doubtful accounts Impairment of assets (Increase) decrease in assets: Accounts receivable Inventories Other current assets Income taxes receivable Other assets Increase (decrease) in liabilities: Accounts payable Other accrued liabilities Insurance proceeds Income taxes payable Net cash used by operating activities Cash flows from investing activities: Purchase of property, plant, and equipment Investments Net cash used by investing activities Cash flows from financing activities: Repayments of long-term debt Proceeds from long-term debt Proceeds from sale of common stock Proceeds from the exercise of stock options Payment of Preferred Stock dividends Net cash provided (used) by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at: Beginning of period End of period Supplemental schedule of cash flow information: Interest paid Income taxes paid Supplemental schedule of noncash investing and financing activities: Preferred dividends declared, not paid 886,814 — (297,731) 47,793 — 145,407 (1,041,202) (226,649) (13,266) — 411,927 699,030 (466,293) (1,382) (1,195,495) (382,156) (2,986,156) (3,368,312) (446,350) — — — (220,450) (666,800) 834,951 672,223 — 24,272 — (1,861,990) 811,063 (225,606) (188,456) — 485,994 (205,342) 466,293 — (2,922,636) (91,878) — (91,878) (436,280) — 2,350,100 — (220,450) 1,693,370 872,868 387,726 176,424 92,000 456,119 1,541,159 (897,023) 1,375,484 — (750) (1,225,762) 119,342 — 2,408 (794,912) (1,947,172) — (1,947,172) (263,200) 525,017 — 855,021 (220,755) 896,083 (5,230,607) (1,321,144) (1,846,001) 14,877,899 9,647,292 177,190 1,173 55,113 $ $ $ $ 16,199,043 14,877,899 210,761 1,031 55,113 $ $ $ $ 18,045,044 16,199,043 213,295 2,000 55,113 $ $ $ $ See accompanying notes to financial statements F-8 Table of Contents NOTES TO FINANCIAL STATEMENTS 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 small diameter tube adapter; the blood collection tube holder; 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. ® ® ® ® ® ® 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 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 Balance Sheets and are shown in Note 7, 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. F-9 Table of Contents Investments — Held-to-Maturity Securities The Company holds high-grade debt securities. Since Management has the intent and ability to hold these securities until they mature, these investments have been accounted for as held-to-maturity investments. The investments are carried at amortized cost. Premiums and discounts on investments in debt securities are amortized over the contractual lives of these securities. The method of amortization results in a constant effective yield on these securities. 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, 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 Office furniture, fixtures, and equipment Buildings Building improvements Long-lived assets 3 to 13 years 3 to 10 years 39 years 15 years The Company assesses the recoverability of long-lived assets using an assessment of the estimated undiscounted future cash flows related to such assets. In the event that assets are found to be carried at amounts which are in excess of estimated gross future cash flows, the assets will be adjusted for impairment to a level commensurate with fair value determined using a discounted cash flow analysis or appraised values of the underlying assets. During 2016, the Company recognized an impairment charge of $456,119 associated with its Patient Safe production equipment. The Company determined it was more cost effective to outsource this production through an overseas manufacturer, and thus the Company’s Patient Safe production equipment was taken out of service. Minimal cash flows were expected to be generated by this equipment. Accordingly, the Company reduced the carrying value of the Patient Safe production equipment to an estimated fair value of zero. ® ® ® Fair Value Measurements For assets and liabilities that are measured using quoted prices in active markets, total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, adjusted for contract restrictions and other terms specific to that asset or liability. For these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using a fair value model, such as a discounted cash flow model or Black-Scholes model. Financial instruments Short-term financial instruments, including cash and cash equivalents, certificates of deposit, accounts receivable, accounts payable, and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on Management’s estimates, equals their recorded values. Investments in U.S. Treasury Notes are classified as held-to-maturity and are presented at their amortized cost, net of discounts and premiums. The fair value of long-term liabilities, based on Management’s estimates, approximates their reported values. F-10 Table of Contents Concentration risks The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash, cash equivalents, certificates of deposit, U.S. Treasury Notes, 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 in 2018, 2017, and 2016: Number of significant customers Aggregate dollar amount of net sales to significant customers Percentage of net sales to significant customers 2018 2 13.1 million $ 39.2% Years Ended December 31, 2017 $ 2 14.0 million $ 40.5% 2016 1 9.4 million 31.4% The Company increased its allowance for doubtful accounts by approximately $48 thousand in 2018 due to additional potential nonpayment. The Company manufactures some of its products in Little Elm, Texas, as well as utilizing manufacturers in China. There are multiple sources of these materials. The Company obtained roughly 85.3% of its products in 2018 from its Chinese manufacturers. Purchases from Chinese manufacturers aggregated 82.9% and 78.4% of products in 2017 and 2016, 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 The Company recognizes revenue when it has satisfied all performance obligations to the customer, generally when title and risk of loss pass 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 recognized in the period the related sales are recognized and is reviewed at the end of each quarter and adjusted for changes in levels of products for which there is no tracking report. Additionally, if it becomes clear that tracking reports will not be provided by individual distributors, the provision is further adjusted. The estimated contractual allowance is included in Accounts payable in the Balance Sheets and deducted from revenues in the Statements of Operations. Accounts payable included estimated contractual allowances for $3,896,341 and $4,115,628 as of December 31, 2018 and 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. F-11 Table of Contents 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. The Company requires certain customers to pay in advance of product shipment. Such prepayments from customers are recorded in Other accrued liabilities and are generally recognized as revenue within 30 to 60 days of receipt at the time product is shipped. Disaggregated information of revenue recognized from contracts with customers is as follows: Geographic Segment U.S. sales North and South America sales (excluding U.S.) Other international sales Total Geographic Segment U.S. sales North and South America sales (excluding U.S.) Other international sales Total Geographic Segment U.S. sales North and South America sales (excluding U.S.) Other international sales Total For the year ended December 31, 2018: Blood Collection Products EasyPoint ® Needles Other Products 1,365,936 8,805 48,101 1,422,842 $ $ 3,401,389 252 11,768 3,413,409 $ $ 75,766 66,564 30,075 172,405 For the year ended December 31, 2017: Blood Collection Products EasyPoint ® Needles Other Products 1,098,667 3,859 43,473 1,145,999 $ $ 2,065,777 — — 2,065,777 $ $ 57,010 193,934 21,400 272,344 For the year ended December 31, 2016: Blood Collection Products EasyPoint ® Needles Other Products 571,242 2,778 16,834 590,854 $ $ 1,339,386 — — 1,339,386 $ $ 48,557 95,374 15,402 159,333 $ $ $ $ $ $ Total Product Sales 28,646,574 3,597,444 1,030,684 33,274,702 Total Product Sales 27,015,712 6,380,745 1,097,381 34,493,838 Total Product Sales 26,308,246 2,741,518 776,872 29,826,636 $ $ $ $ $ $ Syringes 23,803,483 3,521,823 940,740 28,266,046 Syringes 23,794,258 6,182,952 1,032,508 31,009,718 Syringes 24,349,061 2,643,366 744,636 27,737,063 F-12 $ $ $ $ $ $ Table of Contents 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 2018, the Company completed its analysis of the provisional estimates made to record the effects of the Act. On January 14, 2019, the IRS issued a statement saying that alternative minimum tax (“AMT”) refunds for taxable years beginning after December 31, 2017 will not be subject to sequestration. Prior to this statement from the IRS, refundable AMT credits under Section 53(e) were subject to sequestration, as required by the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. The previously recorded AMT receivable was reduced in anticipation of sequestration. Based upon this development, the Company recorded an additional tax benefit of approximately $13 thousand for the year ended December 31, 2018 to reflect the full amount of refundable AMT credits. 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 Statements of Operations. Earnings per share The Company computes basic earnings per share (“EPS”) by dividing net earnings or loss 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 79,441 shares of Common Stock underlying issued and outstanding stock options at December 31, 2017, as their effect was antidilutive. The potential dilution, if any, is shown on the following schedule: Net loss Preferred dividend requirements Loss applicable to common shareholders Weighted average common shares outstanding Weighted average common and common equivalent shares outstanding - assuming dilution Basic loss per share Diluted loss per share $ $ $ $ F-13 2018 (1,339,943) (704,996) (2,044,939) Years Ended December 31, 2017 (3,736,038) (704,996) (4,441,034) $ $ 32,666,454 31,958,121 32,666,454 (0.06) (0.06) $ $ 31,958,121 (0.14) (0.14) 2016 (3,694,907) (704,996) (4,399,903) 29,354,437 29,354,437 (0.15) (0.15) $ $ $ $ Table of Contents Shipping and handling costs The Company classifies shipping and handling costs as part of Cost of sales in the 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: Cost of sales Sales and marketing Research and development General and administrative 2018 Years Ended December 31, 2017 2016 — — — — — $ $ 272,811 143,255 45,174 210,983 672,223 $ $ 141,782 77,583 23,623 144,738 387,726 $ $ Options awarded to employees in 2016 were amortized over twelve months. The Company amortized four months’ expense for options granted in September 2016 and amortized the remainder in 2017. Non-employee Directors’ option expense was all expensed in the fourth quarter of 2016. The Company early-adopted FASB Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” for its annual period ended December 31, 2016. This ASU addresses several aspects of the accounting for share-based compensation transactions including: (a) income tax consequences when awards vest or are settled, (b) classification of awards as either equity or liabilities, (c) a policy election to account for forfeitures as they occur rather than on an estimated basis and (d) classification of excess tax impacts on the statement of cash flows. As a result of adoption, excess tax benefits in 2016 resulting from the exercise of non-qualified stock options were recognized in the income tax provision rather than in additional-paid-in capital. As there were previously no excess income tax benefits recognized in additional-paid-in capital or other material changes to the Company’s accounting for share based compensation resulting from adoption of this ASU, no cumulative effect adjustments were required. 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 proceeds are not recognized as a component of earnings (loss) from operations until all repairs are made. F-14 Table of Contents 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 elected to adopt the provisions of Securities Act Release No. 33-10532 for the quarter ended September 30, 2018. F-15 Table of Contents 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,” as well as subsequent clarifying amendments. 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 has completed 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. The Company has completed evaluating the timing and impact of adopting ASU 2016-02, as amended, and anticipates recording lease assets and liabilities currently comprising less than $250,000 on its Balance Sheets, with no material impact to its Statements of Operations or to its accumulated deficit. 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. F-16 Table of Contents 3. INVENTORIES Inventories consist of the following: Raw materials Finished goods Inventory reserve Year Ended December 31, 2018 2017 1,399,543 6,442,759 7,842,302 (297,208) 7,545,094 $ $ 1,511,339 5,289,761 6,801,100 (594,939) 6,206,161 $ $ 4. HELD-TO-MATURITY DEBT SECURITIES The Company’s investment securities classified as held-to maturity consist of high-grade debt securities and certificates of deposit. These investments are carried at amortized cost. Gross unrecognized gains and losses and fair value of these securities at December 31, 2018 are as follows: Current Long-Term Total Amortized Cost $ $ 996,233 1,989,923 2,986,156 $ $ December 31, 2018 Gross Unrecognized Gains Losses — — — $ $ (964) (389) (1,353) $ $ Aggregate Fair Value 995,269 1,989,534 2,984,803 The fair value of investments in held-to maturity securities is valued under the market approach through the use of quoted prices. 5. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment consist of the following: Land Buildings and building improvements Production equipment Office furniture and equipment Construction in progress Accumulated depreciation December 31, 2018 2017 $ $ 261,893 11,566,115 19,948,303 3,540,846 202,109 35,519,266 (24,667,519) 10,851,747 $ $ 261,893 11,566,115 19,742,577 3,500,834 65,693 35,137,112 (23,783,910) 11,353,202 Depreciation expense for the years ended December 31, 2018, 2017, and 2016 was $883,610; $830,715; and $867,080, respectively. 6. LICENSE AGREEMENT In 1995, the Company entered into a license agreement with the Chief Executive Officer of the Company for the exclusive right to manufacture, market, and distribute products utilizing automated retraction technology, which agreement has been amended twice. This technology is the subject of various patents and patent applications owned by such officer of the Company. The initial licensing fee of $500,000 was amortized over 17 years. The license agreement also provides for quarterly payments of a 5% royalty fee on gross sales. The royalty fee expense is recognized in the period in which it is earned. Royalty fees of $2,944,102; $2,864,188; F-17 Table of Contents and $2,527,508 are included in Cost of sales for the years ended December 31, 2018, 2017, and 2016, respectively. Royalties payable under this agreement aggregated $769,324 and $793,489 at December 31, 2018, and 2017, respectively. Gross sales upon which royalties are based were $58,882,042; $57,283,780; and $50,550,165 for 2018, 2017, and 2016, respectively. 7. OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: Prepayments from customers Accrued property taxes Accrued professional fees Other accrued expenses 8. LONG-TERM DEBT Long-term debt consists of the following: December 31, 2018 2017 $ $ 860,926 170,568 294,903 60,890 1,387,287 $ $ 355,742 14,681 231,826 55,674 657,923 Loan from American First National Bank. Maturity date is April 10, 2028. The loan, in the original amount of $4,209,608, provided funding for the expansion of the warehouse, additional office space, and a new Controlled Environment. The loan is secured by the Company’s land and buildings. The interest rate is equal to prime rate plus 0.25%. The interest rate was 5.75% at December 31, 2018. Note payable to Deutsche Leasing USA, Inc. The interest rate was 3.69%. The original amount of the note was $276,495 with a 36 month maturity which ended in July 2018. Beginning August 2015, the loan became payable in equal installments of principal and interest of approximately $8,100. Collateralized by molding machines and ancillary equipment. Note payable to Deutsche Leasing USA, Inc. The interest rate is 4.25%. The original amount of the note was $525,017 with a 36 month maturity ending in November 2019. Beginning December 2016, the loan became payable in equal installments of principal and interest of approximately $15,500. Collateralized by molding machines and ancillary equipment. Less: current portion The fair value of long-term liabilities, based on Management’s estimates, approximates their reported values. The aggregate maturities of long-term debt as of December 31, 2018, are as follows: December 31, 2018 2017 $ 2,878,980 $ 3,094,301 — 56,180 167,028 3,046,008 341,877 3,492,358 (406,361) 2,639,647 $ (410,949) 3,081,409 $ 2019 2020 2021 2022 2023 Thereafter $ $ 406,361 253,280 268,886 284,988 302,053 1,530,440 3,046,008 F-18 Table of Contents 9. 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, the 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. On March 26, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the District Court’s take nothing judgment. 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. Operating Leases In 2010, the Company entered into a non-cancellable operating lease for additional office space. Rent expense under this lease for the years ended December 31, 2018, 2017, and 2016 was $79,331; $77,015; and $74,772, respectively. Future annual minimum rental payments as of December 31, 2018, are presented below: 2019 2020 Total $ $ 81,694 84,155 165,849 10. INCOME TAXES The provision (benefit) for income taxes consists of the following: Current tax provision (benefit) Federal State Total current provision (benefit) Deferred tax provision (benefit) Federal State Total deferred tax provision (benefit) Total income tax provision (benefit) 2018 For the Years Ended December 31, 2017 2016 (13,318) — (13,318) — — — (13,318) $ $ — 848 848 (188,456) — (188,456) (187,608) $ $ — 1,132 1,132 — — — 1,132 $ $ F-19 Table of Contents The Company has $27.2 million in tax benefits attributable to net operating losses for federal tax purposes. The loss carry forwards will begin to expire in 2028 for federal tax purposes and will begin to expire for state tax purposes in 2021. The Company also has credits for alternative minimum taxes (“AMT”) paid of $202 thousand. The alternative minimum tax was repealed with the enactment of the Act. AMT credits carried over may be used to offset regular tax liability for any tax year. Any unused credits are 50% refundable for tax years 2018-2020, and 100% refundable for tax years beginning 2021. The Company has recorded the AMT credit as a tax receivable on its financial statements rather than as a deferred tax asset, as this amount is a refundable credit. Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below: Deferred tax assets Net operating loss carry forwards Accrued expenses and reserves Employee stock option expense Nonemployee stock option expense Inventory Impairment Deferred tax assets Deferred tax liabilities Property and equipment Deferred tax liabilities Net deferred assets Valuation allowance Net deferred tax assets December 31, 2018 2017 6,668,238 436,627 76,150 8,268 132,114 112,000 7,433,397 (1,281,999) (1,281,999) 6,151,398 (6,151,398) — $ $ 6,127,210 509,666 76,150 8,268 224,353 112,000 7,057,647 (1,231,693) (1,231,693) 5,825,954 (5,825,954) — $ $ Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Deferred income tax calculations reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss carry forwards, and are stated at the U.S. tax rate of 21% beginning in 2018. Net operating losses incurred after December 31, 2017 can only offset 80% of taxable income. However, these net operating losses may be carried forward indefinitely instead of limited to twenty years under previous tax law. Carrybacks of these losses are no longer permitted. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. The Company has fully reserved these future tax deductions. The valuation allowance increased $325,444 for 2018. The valuation allowance decreased $3,371,379 for 2017. F-20 Table of Contents A reconciliation of income taxes based on the federal statutory rate and the effective income tax rate is summarized as follows: Income tax at the federal statutory rate State tax, net of federal tax Change in valuation allowance Permanent differences Return-to-provision and other Tax Reform and Jobs Act tax rate change Incentive stock options Effective tax rate 2018 December 31, 2017 2016 21.0% 3.5 (24.3) (0.3) — 0.1 — —% 35.0% 2.9 85.9 5.7 (37.6) (81.1) (6.0) 4.8% 35.0% 2.9 (39.1) 4.7 (3.5) — — —% The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions. The Company’s federal income tax returns for all tax years ended on or after December 31, 2015, remain subject to examination by the Internal Revenue Service. The Company’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing. 11. STOCK OPTION GRANTS AND EXERCISES On September 9, 2016, the Compensation and Benefits Committee approved grants of incentive stock options to the Company’s employees under the First Amended 2008 Stock Option Plan with exercise prices at fair market value ($2.75 per share), a ten-year term, and one-year vesting period, except to the extent that such vesting period would violate the First Amended 2008 Stock Option Plan. In total, the stock options are exercisable into 500,400 shares of Common Stock. The value of an option for the purchase of one underlying common share was valued at $1.783, using the Black Scholes Option Pricing Model using a risk-free rate of 1.51%, a volatility factor of 67.1%, and a 7.1 year expected life. On December 27, 2016, the Compensation and Benefits Committee approved grants of stock options to the Company’s chief financial officer, general counsel, and all three independent directors for 50,000 shares each with ten-year terms under the First Amended 2008 Stock Option Plan with exercise prices at fair market value ($1.05 per share). The executive officers’ options vested on December 27, 2017 and the independent directors’ options vested immediately. The value of an option for the purchase of one underlying common share was valued at $0.728, using the Black Scholes Option Pricing Model using a risk-free rate of 2.37%, a volatility factor of 72.5%, and a 7.1 year expected life. No stock options were exercised in 2017 or 2018. Stock options were exercised at various dates in 2016 and, consequently, a total of 1,046,580 shares of Common Stock were issued in 2016 for an aggregate payment of $855,021. These options were granted in 2008 and 2009 at exercise prices of $0.81 and $1.30. 12. DIVIDENDS The Board declared and the Company paid dividends to Series I and Series II Class B Preferred Shareholders in the following amounts: $12,313 and $42,800, respectively, on April 21, 2016, July 28, 2016, October 20, 2016, January 6, 2017, April 24, 2017, July 20, 2017, October 20, 2017, January 19, 2018, April 24, 2018, July 20, 2018, October 23, 2018, and January 18, 2019. 13. STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue 5,000,000 shares of Preferred Stock Class A with a par value of One Dollar ($1.00) per share; 5,000,000 shares of Preferred Stock Class B with a par value of One Dollar ($1.00) per share; and 5,000,000 shares of Preferred Stock Class C with a par value of One Dollar ($1.00) per share. F-21 Table of Contents The Company has one class of Preferred Stock outstanding: Class B Convertible Preferred Stock (“Class B Stock”). The Class B Stock has five series: Series I, Series II, Series III, Series IV, and Series V. The Class B Stock has been allocated among Series I, II, III, IV, and V in the amounts of 98,500; 171,200; 129,245; 342,500; and 40,000 shares, respectively as of December 31, 2018 and 2017. The remaining 4,218,555 authorized shares have not been assigned a series. Series I Class B Stock There were 98,500 shares of $1 par value Series I Class B Stock outstanding at December 31, 2018 and 2017. Holders of Series I Class B Stock are entitled to receive a cumulative annual dividend of $0.50 per share, payable quarterly if declared by the Board of Directors. The Company paid dividends of $49,250 in each of 2018, 2017, and 2016. At December 31, 2018, no dividends were in arrears. Series I Class B Stock is redeemable after three years from the date of issuance at the option of the Company at a price of $7.50 per share, plus all unpaid dividends. Each share of Series I Class B Stock may, at the option of the stockholder, be converted to one share of Common Stock after three years from the date of issuance or in the event the Company files an initial registration statement under the Securities Act of 1933. No shares of Series I Class B Stock were converted into Common Stock in 2018 or 2017. In the event of voluntary or involuntary dissolution, liquidation, or winding up of the Company, holders of Series I Class B Stock then outstanding are entitled to $6.25 per share, plus all unpaid dividends prior to any distributions to holders of Series II Class B Stock, Series III Class B Stock, Series IV Class B Stock, Series V Class B Stock, or Common Stock. Series II Class B Stock There were 171,200 shares of $1 par value Series II Class B Stock outstanding at December 31, 2018 and 2017. Holders of Series II Class B Stock are entitled to receive a cumulative annual dividend of $1.00 per share, payable quarterly if declared by the Board of Directors. Holders of Series II Class B Stock generally have no voting rights until dividends are in arrears and unpaid for twelve consecutive quarters. In such case, the holders of Series II Class B Stock have the right to elect one-third of the Board of Directors of the Company. The Company paid dividends of $171,200 in each of 2018, 2017, and 2016. At December 31, 2018, no dividends were in arrears. Series II Class B Stock is redeemable after three years from the date of issuance at the option of the Company at a price of $15.00 per share plus all unpaid dividends. Each share of Series II Class B Stock may, at the option of the stockholder, be converted to one share of Common Stock after three years from the date of issuance or in the event the Company files an initial registration statement under the Securities Act of 1933. No shares were converted in 2018 or 2017. In the event of voluntary or involuntary dissolution, liquidation, or winding up of the Company, holders of Series II Class B Stock then outstanding are entitled to $12.50 per share, plus all unpaid dividends, after distribution obligations to holders of Series I Class B Stock have been satisfied and prior to any distributions to holders of Series III Class B Stock, Series IV Class B Stock, Series V Class B Stock, or Common Stock. Series III Class B Stock There were 129,245 shares of $1 par value Series III Class B Stock outstanding at December 31, 2018 and 2017. Holders of Series III Class B Stock are entitled to receive a cumulative annual dividend of $1.00 per share, payable quarterly if declared by the Board of Directors. At December 31, 2018, approximately $4,275,000 of dividends which have not been declared were in arrears. Series III Class B Stock is redeemable after three years from the date of issuance at the option of the Company at a price of $15.00 per share, plus all unpaid dividends. Each share of Series III Class B Stock may, at the option of the stockholder, be converted to one share of Common Stock after three years from the date of issuance or in the event the Company files an initial registration statement under the Securities Act of 1933. F-22 Table of Contents No shares were converted in 2018 or 2017. In the event of voluntary or involuntary dissolution, liquidation, or winding up of the Company, holders of Series III Class B Stock then outstanding are entitled to $12.50 per share, plus all unpaid dividends, after distribution obligations to Series I Class B Stock and Series II Class B Stock have been satisfied and prior to any distributions to holders of Series IV Class B Stock, Series V Class B Stock, or Common Stock. Series IV Class B Stock There were 342,500 shares of $1 par value Series IV Class B Stock outstanding at December 31, 2018 and 2017. Holders of Series IV Class B Stock are entitled to receive a cumulative annual dividend of $1.00 per share, payable quarterly, if declared by the Board of Directors. At December 31, 2018, approximately $6,484,000 of dividends which have not been declared were in arrears. Series IV Class B Stock is redeemable after three years from the date of issuance at the option of the Company at a price of $11.00 per share plus all unpaid dividends. Each share of Series IV Class B Stock may, at the option of the stockholder any time subsequent to three years from date of issuance, be converted into one share of Common Stock, or in the event the Company files an initial registration statement under the Securities Act of 1933. No shares of Series IV Class B Stock were converted into Common Stock in 2018 or 2017. In the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company, holders of Series IV Class B Stock then outstanding are entitled to receive liquidating distributions of $11.00 per share, plus all unpaid dividends after distribution obligations to Series I Class B Stock, Series II Class B Stock, and Series III Class B Stock have been satisfied and prior to any distribution to holders of Series V Class B Stock or Common Stock. Series V Class B Stock There were 40,000 shares of $1 par value Series V Class B Stock outstanding at December 31, 2018 and 2017. Holders of Series V Class B Stock are entitled to receive a cumulative annual dividend of $0.32 per share, payable quarterly, if declared by the Board of Directors. At December 31, 2018, approximately $1,009,000 of dividends which have not been declared were in arrears. Series V Class B Stock is redeemable after two years from the date of issuance at the option of the Company at a price of $4.40 per share plus all unpaid dividends. Each share of Series V Class B Stock may, at the option of the stockholder any time subsequent to the date of issuance, be converted into Common Stock. No shares of Series V Class B Stock were converted into Common Stock in 2018 or 2017. In the event of voluntary or involuntary liquidation, dissolution, or winding up of the Company, holders of Series V Class B Stock then outstanding are entitled to receive liquidating distributions of $4.40 per share, plus all unpaid dividends after distribution obligations to Series I Class B Stock, Series II Class B Stock, Series III Class B Stock, and Series IV Class B Stock have been satisfied and prior to any distribution to the holders of the Common Stock. Common stock The Company is authorized to issue 100,000,000 shares of no par value Common Stock, of which 32,666,454 shares were outstanding at December 31, 2018 and 2017. Additionally, as of December 31, 2018, a total of 2,139,248 shares of Common Stock were issuable upon the conversion of Preferred Stock and the exercise of stock options. 14. RELATED PARTY TRANSACTIONS The Company has a license agreement with the Chief Executive Officer of the Company. See Note 6. In 2016, the Company granted a right to three of its executive officers to purchase shares of Common Stock directly from the Company at market prices. Two such officers allowed their purchase rights to expire in 2018. 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. F-23 Table of Contents In November 2016, the Company granted a stock option to its Chief Executive Officer for the purchase of three million shares of Common Stock. Such stock option terminated by its terms before becoming exercisable following a December 27, 2016 shareholder vote against such option. 15. STOCK OPTIONS Stock options Options for the purchase of 3,649,508 shares of Common Stock have been issued under the 2008 Stock Option Plan. Options for the purchase of 1,357,803 shares under the 2008 Stock Option Plan were outstanding as of December 31, 2018. No shares are available for future issuance under the 2008 Stock Option Plan which expired July 25, 2018. A stock option for 3,000,000 shares granted to Thomas J. Shaw on November 2, 2016 terminated by its terms prior to becoming exercisable following a December 27, 2016 shareholder vote against such option. The Compensation and Benefits Committee administered the Company’s stock option plan prior to its termination. Employee options A summary of Director, officer, and employee options granted and outstanding under the 2008 Stock Option Plan is presented below: 2018 Years Ended December 31, 2017 2016 Outstanding at beginning of period Granted Exercised Forfeited Shares $ 1,805,519 $ — — $ (505,216) $ Outstanding at end of period 1,300,303 Exercisable at end of period 1,300,303 $ $ Weighted Average Exercise Price 1.51 — — (1.36) 1.57 Weighted Average Exercise Price 1.52 — — (2.75) 1.51 Shares $ 1,817,919 $ — $ — (12,400) $ 1,805,519 $ $ Shares $ 2,125,069 750,400 $ (1,046,580) $ (10,970) $ 1,817,919 Weighted Average Exercise Price 0.94 2.18 (0.82) (1.08) 1.52 1.06 $ $ 1.57 1,803,119 1.51 1,218,519 No options were issued in 2018 or 2017 to employees. 600,400 employee stock options were issued in 2016. A grant of three million options to the Company’s chief executive officer terminated by its terms prior to becoming exercisable. The fair value of the September 2016 grants exercisable into 500,400 shares was $1.783 per share of underlying Common Stock and was estimated on the date of the grant using the Black Scholes pricing model with the following assumptions: expected volatility of 67.1%, risk free interest rate of 1.51%, and an expected life of 7.1 years. These options were issued under the First Amended 2008 Stock Option Plan. The fair value of the December 2016 grants exercisable into 100,000 shares was $0.728 per share of underlying Common Stock and was estimated on the date of the grant using the Black Scholes pricing model with the following assumptions: expected volatility of 72.5%, risk free interest rate of 2.37%, and an expected life of 7.1 years. These options were issued under the First Amended 2008 Stock Option Plan. No options were issued to non-employee directors in 2018 or 2017. 150,000 stock options were issued to non-employee directors in 2016. The fair value of the 2016 grants was $0.728 per share of underlying Common Stock and was estimated on the date of the grant using the Black Scholes pricing model with the following F-24 Table of Contents assumptions: expected volatility of 72.5%, risk free interest rate of 2.37%, and an expected life of 7.1 years. These options were issued under the First Amended 2008 Stock Option Plan. The following table summarizes information about Director, officer, and employee options outstanding under the stock option plan at December 31, 2018: Exercise Prices Shares Outstanding Weighted Average Remaining Contractual Life Shares Exercisable $ $ $ $ 1.46 0.81 1.05 2.75 50,000 535,303 250,000 465,000 Non-employee options A summary of options outstanding and held by non-employees is as follows: 4.37 0.54 7.99 7.70 50,000 535,303 250,000 465,000 2018 Weighted Average Exercise Price Shares Years Ended December 31, 2017 Weighted Average Exercise Price Shares 2016 Weighted Average Exercise Price Shares 57,500 — — — 57,500 57,500 $ $ $ $ $ $ 0.81 — — — 0.81 0.81 57,500 — — — 57,500 57,500 $ $ $ $ $ $ 0.81 — — — 0.81 0.81 57,500 — — — 57,500 57,500 $ $ $ $ $ $ 0.81 — — — 0.81 0.81 Outstanding at beginning of period Granted Exercised Forfeited Outstanding at end of period Exercisable at end of period The following table summarizes information about non-employee options outstanding under the stock option plan at December 31, 2018: Exercise Price Shares Outstanding Weighted Average Remaining Contractual Life Shares Exercisable $ 0.81 57,500 0.54 57,500 The Company recorded $388 thousand of stock-based compensation expense in 2016. In 2017, the Company recognized stock-based compensation expense of $672 thousand. The Company recorded no stock-based compensation expense in 2018. The total intrinsic value of options exercised was $0; $0; and $1,414,892 in 2018, 2017, and 2016, respectively. There were no options outstanding and exercisable with exercise prices lower than market price at December 31, 2018. F-25 Table of Contents Options Pricing Models — Assumptions The expected life is based on the Company’s historical experience with option exercise trends. The assumptions for expected volatility is based on a calculation of volatility over the five-years preceding the grant date. Risk-free interest rates are set using grant-date U.S. Treasury yield curves. In its calculations, the Company assumed no dividends. 16. 401(k) PLAN The Company implemented an employee savings and retirement plan (the “401(k) Plan”) in 2005 that is intended to be a tax-qualified plan covering substantially all employees. The 401(k) Plan is available to all employees on the first day of the month after 90 days of service. Under the terms of the 401(k) Plan, employees may elect to contribute up to 88% of their compensation, or the statutory prescribed limit, if less. The Company may, at its discretion, match employee contributions. In the first quarter of 2016, the Company reinstituted a policy of matching. For 2016, 2017, and 2018, the Company matched each participant’s elective deferrals up to 2% of the participant’s compensation for the pay period. The total match was $122,369 in 2016 and $145,474 in 2017 and $145,146 in 2018. 17. BUSINESS SEGMENT The following is a summary of the Company’s sales and long-lived assets by geography: U.S. sales North and South America sales (excluding U.S.) Other international sales Total sales Long-lived assets U.S. International 2018 28,646,574 3,597,444 1,030,684 33,274,702 10,738,253 113,494 $ $ $ $ 2017 27,015,712 6,380,745 1,097,381 34,493,838 11,215,583 137,619 $ $ $ $ 2016 26,308,246 2,741,518 776,872 29,826,636 11,930,293 161,744 $ $ $ $ The Company does not operate in separate reportable segments. The Company has minimal long-lived assets in foreign countries. 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. 18. BONUSES In February 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. 19. 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. All repairs were completed in the fourth quarter of 2018. F-26 Table of Contents During 2017, the Company incurred and recognized $538,667 in repairs due to the storm damage. Repair expense during 2018 was $203,289. This repair expense was offset by the insurance proceeds, resulting in no impact to the Statements of Operations. The remaining insurance proceeds of $261 thousand were recognized as income in the fourth quarter of 2018. 20. SUBSEQUENT EVENTS On March 26, 2019, the U.S. Court of Appeals for the Fifth Circuit issued an opinion affirming the take nothing judgment of the District Court in the Company and an officer’s suit against BD. The Company is evaluating this ruling and conferring with legal counsel regarding possible future action. SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED The selected quarterly financial data for the periods ended December 31, 2018, and 2017, have been derived from the Company’s unaudited financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods. Certain quarterly amounts may differ from full year totals due to rounding. Sales, net Cost of sales Gross profit Total operating expenses Income from insurance proceeds Loss from continuing operations Interest and other income Interest expense Provision (benefit) for income taxes Net loss Preferred stock dividend requirements Loss applicable to common shareholders Basic loss per share Diluted loss per share Loss per share from continuing operations Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted Gross profit margin (In thousands, except for per share and outstanding stock amounts) 2018 Quarter 1 Quarter 2 Quarter 3 Quarter 4 $ $ $ $ $ $ 7,673 4,813 2,860 3,017 — (157) 28 (50) — (179) (176) (355) $ (0.01) $ (0.01) $ (0.01) $ $ 7,475 5,407 2,068 3,007 — (939) 35 (44) — (948) (176) (1,124) $ (0.03) $ (0.03) $ (0.03) $ $ 9,863 7,067 2,796 2,856 — (60) 39 (42) — (63) (176) (239) $ (0.01) $ (0.01) $ (0.01) $ 32,666,454 32,666,454 37.3% 32,666,454 32,666,454 27.7% 32,666,454 32,666,454 28.3% F-27 8,264 5,766 2,498 2,923 261 (164) 42 (41) (13) (150) (177) (327) (0.01) (0.01) (0.01) 32,666,454 32,666,454 30.2% Table of Contents Sales, net Cost of sales Gross profit Total operating expenses Loss from continuing operations Interest and other income Interest expense Provision (benefit) for income taxes Net loss Preferred stock dividend requirements Loss applicable to common shareholders Basic loss per share Diluted loss per share Loss per share from continuing operations Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted Gross profit margin (In thousands, except for per share and outstanding stock amounts) 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 $ $ $ $ $ $ 6,924 4,599 2,325 3,477 (1,152) 10 (48) — (1,190) (176) (1,366) $ (0.04) $ (0.04) $ (0.04) $ $ 7,646 5,437 2,209 3,514 (1,305) 14 (58) — (1,349) (176) (1,525) $ (0.05) $ (0.05) $ (0.05) $ $ 10,412 7,152 3,260 3,293 (33) 19 (53) — (67) (176) (243) $ (0.01) $ (0.01) $ (0.01) $ 31,333,121 31,333,121 33.6% 31,666,454 31,666,454 28.9% 32,166,454 32,166,454 31.3% 9,512 7,335 2,177 3,466 (1,289) 22 (52) (188) (1,131) (176) (1,307) (0.04) (0.04) (0.04) 32,666,454 32,666,454 22.9% Major variances for 2018 as compared to 2017 are due to increased domestic sales, offset by a decline in international sales. Costs of manufacture declined due to lower volumes and lower unit costs. In 2018, there were lower legal expenses, no bonuses, and no stock option expense. These reductions were reduced somewhat by severance costs. We recognized Insurance proceeds in 2018. We had tax credits due to AMT of $188,000 in 2017 and $13,000 in 2018. F-28 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. There were no reportable disagreements with accountants on accounting and financial disclosures. Item 9A. Controls and Procedures. Disclosure Controls and Procedures Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), 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 financial officers, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. 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 (the “SEC”) 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 December 31, 2018, our disclosure controls and procedures were effective. Management’s Annual Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The term internal control over financial reporting means a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, Management and other personnel, 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 and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; (ii) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of Management and Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. Management used the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting as required by paragraph (c) of Rule 13a-15 under the Exchange Act. Management, with the participation of our CEO and CFO, concluded that our internal control over financial reporting as of December 31, 2018, was effective. No material weaknesses in our internal control over financial reporting were identified by Management. Our Management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting during the fourth quarter of 2018 or subsequent to December 31, 2018, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 16 Table of Contents Item 10. Directors, Executive Officers and Corporate Governance. PART III The information in the sections “Proposal 1 — The Election of Three Class 1 Directors” and “Corporate Governance” in the 2019 proxy statement are incorporated herein by reference. Item 11. Executive Compensation. The information in the section “Compensation” in the 2019 proxy statement is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information in the section “Security Ownership” in the 2019 proxy statement is incorporated herein by reference. See also Item 5 of Part II of this Annual Report for Equity Compensation Plan Information. Item 13. Certain Relationships and Related Transactions, and Director Independence The information in the section “Corporate Governance” in the 2019 proxy statement is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information in the section “Accounting Matters” in the 2019 proxy statement is incorporated herein by reference. Item 15. Exhibits, Financial Statement Schedules. (a) (1) All financial statements: See Retractable Technologies, Inc. Index to Financial Statements on Page F-2. PART IV (2) Those financial statement schedules required to be filed by Item 8 of this form, and by paragraph (b) below. Schedule II-Schedule of Valuation and Qualifying Accounts for the years ended December 31, 2018, 2017, and 2016: Provision for Inventories Fiscal year ended 2016 Fiscal year ended 2017 Fiscal year ended 2018 Provision for Accounts Receivable Fiscal year ended 2016 Fiscal year ended 2017 Fiscal year ended 2018 Deferred Tax Valuation Fiscal year ended 2016 Fiscal year ended 2017 Fiscal year ended 2018 Balance at beginning of period Additions Deductions Balance at end of period $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 681,395 595,523 594,939 1,795,481 1,731,985 101,872 7,751,972 9,197,333 5,825,954 17 176,424 — — 92,000 24,272 47,793 1,445,361 — 325,444 $ $ $ $ $ $ $ $ $ 262,296 584 297,731 155,496 1,654,385 — — 3,371,379 — $ $ $ $ $ $ $ $ $ 595,523 594,939 297,208 1,731,985 101,872 149,665 9,197,333 5,825,954 6,151,398 Table of Contents Provision for Rebates Fiscal year ended 2016 Fiscal year ended 2017 Fiscal year ended 2018 Balance at beginning of period Additions Deductions Balance at end of period $ $ $ 41,171,880 38,983,285 4,794,193 $ $ $ (A) 19,693,872 21,738,072 24,372,111 $ $ $ (B) 21,882,467 55,927,164 24,579,457 $ $ $ (C) 38,983,285 4,794,193 4,586,847 (A) Represents estimated rebates deducted from gross revenues (B) Represents rebates credited to the distributor and charge offs against the allowance (C) Includes $3,896,341; $4,115,628; and $3,591,534 in Accounts payable for 2018, 2017, and 2016, respectively. (3) Exhibits: The following exhibits are filed herewith or incorporated herein by reference to exhibits previously filed with the SEC. (b) Exhibits Exhibit No. Description of Document 3(i) 3(ii) 4 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 14 31.1 Restated Certificate of Formation with Certificates of Designation, Preferences, Rights and Limitations of Class B Preferred Stock (all Series)* Fourth Amended and Restated Bylaws of RTI** Restated Certificate of Formation with Certificates of Designation, Preferences, Rights and Limitations of Class B Preferred Stock (all Series)* Sample United States Distribution Agreement*** Sample Foreign Distribution Agreement*** Employment Agreement between RTI and Thomas J. Shaw dated as of January 1, 2008 (This is a management compensation contract.)**** Technology License Agreement between Thomas J. Shaw and RTI dated the 23 day of June 1995*** rd First Amendment to Technology License Agreement between Thomas J. Shaw and RTI dated the 3rd day of July, 2008***** Second Amendment to Technology License Agreement between Thomas J. Shaw and Retractable Technologies, Inc. dated as of the 7th day of September, 2012† Retractable Technologies, Inc. First Amended 2008 Stock Option Plan†† Voting Agreement Between Thomas J. Shaw and Suzanne August dated November 8, 2006 ◦ Retractable Technologies, Inc. Code of Business Conduct and Ethics ◦◦ Certification of Principal Executive Officer ◦◦◦ 18 Table of Contents Exhibit No. 31.2 32 101 * ** *** **** Certification of Principal Financial Officer ◦◦◦ Section 1350 Certifications ◦◦◦ Description of Document The following materials from this report, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets as of December 31, 2018, and 2017, (ii) the Statements of Operations for the years ended December 31, 2018, 2017, and 2016, (iii) the Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017, and 2016, (iv) the Statements of Cash Flows for the years ended December 31, 2018, 2017, and 2016, and (v) Notes to Financial Statements. ◦◦◦ Incorporated herein by reference to RTI’s Form 10-Q filed on November 15, 2010 Incorporated herein by reference to RTI’s Form 8-K filed on May 13, 2010 Incorporated herein by reference to RTI’s Registration Statement on Form 10-SB filed on June 23, 2000 Incorporated herein by reference to RTI’s Form 10-Q filed on November 14, 2008 ***** Incorporated herein by reference to RTI’s Form 10-K filed on March 31, 2009 † †† ◦ ◦◦ ◦◦◦ (c) Incorporated herein by reference to RTI’s Form 10-Q filed on November 14, 2012 Incorporated herein by reference to RTI’s Form 10-Q filed on November 14, 2014 Incorporated herein by reference to RTI’s Schedule TO filed on October 17, 2008 Incorporated herein by reference to RTI’s Form 8-K filed on February 19, 2010 Filed herewith Excluded Financial Statement Schedules: None Item 16. Form 10-K Summary. None. 19 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. RETRACTABLE TECHNOLOGIES, INC. (Registrant) By: /s/ Thomas J. Shaw THOMAS J. SHAW CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER March 28, 2019 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Douglas W. Cowan DOUGLAS W. COWAN VICE PRESIDENT, CHIEF FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER, TREASURER, AND DIRECTOR March 28, 2019 /s/ Amy Mack AMY MACK DIRECTOR March 28, 2019 /s/ Marco Laterza MARCO LATERZA DIRECTOR March 28, 2019 /s/ Walter O. Bigby, Jr. WALTER O. BIGBY, JR. DIRECTOR March 28, 2019 /s/ Darren E. Findley DARREN E. FINDLEY DIRECTOR March 28, 2019 20 Exhibit 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER I, Thomas J. Shaw, certify that: 1. I have reviewed this annual report on Form 10-K 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: March 28, 2019 /s/ Thomas J. Shaw THOMAS J. SHAW PRESIDENT, CHAIRMAN, AND CHIEF EXECUTIVE OFFICER Exhibit 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER I, Douglas W. Cowan, certify that: 1. I have reviewed this annual report on Form 10-K 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: March 28, 2019 /s/ Douglas W. Cowan DOUGLAS W. COWAN VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32 Solely in connection with the filing of the Annual Report of Retractable Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 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 Company. Date: March 28, 2019 /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 PRINCIPAL ACCOUNTING OFFICER