Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 1-May-14 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'RETRACTABLE TECHNOLOGIES INC | ' |
Entity Central Index Key | '0000946563 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 27,326,472 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
CONDENSED_BALANCE_SHEETS
CONDENSED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $24,198,456 | $27,629,359 |
Accounts receivable, net | 3,174,724 | 3,476,718 |
Inventories, net | 5,404,275 | 5,735,589 |
Other current assets | 604,082 | 1,065,641 |
Total current assets | 33,381,537 | 37,907,307 |
Property, plant, and equipment, net | 11,324,601 | 10,910,172 |
Intangible and other assets, net | 277,647 | 279,965 |
Total assets | 44,983,785 | 49,097,444 |
Current liabilities: | ' | ' |
Accounts payable | 3,845,655 | 5,107,778 |
Litigation proceeds subject to stipulation | 7,724,826 | 7,724,826 |
Current portion of long-term debt | 201,982 | 247,064 |
Accrued compensation | 643,453 | 815,044 |
Dividends payable | 57,613 | 57,613 |
Accrued royalties to shareholders | 496,242 | 602,209 |
Other accrued liabilities | 1,559,139 | 1,975,018 |
Income taxes payable | 4,807 | 90,972 |
Total current liabilities | 14,533,717 | 16,620,524 |
Long-term debt, net of current maturities | 3,539,796 | 3,576,932 |
Total liabilities | 18,073,513 | 20,197,456 |
Commitments and contingencies - see Note 6 | ' | ' |
Preferred stock $1 par value: | ' | ' |
Common stock, no par value | ' | ' |
Additional paid-in capital | 59,031,842 | 58,983,166 |
Retained deficit | -32,019,906 | -29,981,514 |
Common stock in treasury - at cost | -1,096,609 | -1,096,609 |
Total stockholders' equity | 26,910,272 | 28,899,988 |
Total liabilities and stockholders' equity | 44,983,785 | 49,097,444 |
Series I, Class B | ' | ' |
Preferred stock $1 par value: | ' | ' |
Preferred stock | 103,500 | 103,500 |
Series II, Class B | ' | ' |
Preferred stock $1 par value: | ' | ' |
Preferred stock | 178,700 | 178,700 |
Series III, Class B | ' | ' |
Preferred stock $1 par value: | ' | ' |
Preferred stock | 130,245 | 130,245 |
Series IV, Class B | ' | ' |
Preferred stock $1 par value: | ' | ' |
Preferred stock | 542,500 | 542,500 |
Series V, Class B | ' | ' |
Preferred stock $1 par value: | ' | ' |
Preferred stock | $40,000 | $40,000 |
CONDENSED_BALANCE_SHEETS_Paren
CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
CONDENSED BALANCE SHEETS | ' | ' |
Preferred stock, par value (in dollars per share) | $1 | $1 |
Common stock, no par value (in dollars per share) | $0 | $0 |
CONDENSED_STATEMENTS_OF_OPERAT
CONDENSED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
CONDENSED STATEMENTS OF OPERATIONS | ' | ' |
Sales, net | $6,040,378 | $7,173,112 |
Cost of sales | ' | ' |
Cost of manufactured product | 3,820,784 | 3,840,094 |
Royalty expense to shareholders | 496,242 | 556,965 |
Total cost of sales | 4,317,026 | 4,397,059 |
Gross profit | 1,723,352 | 2,776,053 |
Operating expenses: | ' | ' |
Sales and marketing | 1,096,694 | 1,063,287 |
Research and development | 184,724 | 180,848 |
General and administrative | 2,431,678 | 2,898,952 |
Total operating expenses | 3,713,096 | 4,143,087 |
Loss from operations | -1,989,744 | -1,367,034 |
Interest and other income | 10,396 | 11,440 |
Interest expense, net | -57,168 | -52,063 |
Loss before income taxes | -2,036,516 | -1,407,657 |
Provision for income taxes | 1,876 | 1,876 |
Net loss | -2,038,392 | -1,409,533 |
Preferred stock dividend requirements | -228,999 | -229,068 |
Loss applicable to common shareholders | ($2,267,391) | ($1,638,601) |
Basic loss per share (in dollars per share) | ($0.08) | ($0.06) |
Diluted loss per share (in dollars per share) | ($0.08) | ($0.06) |
Weighted average common shares outstanding: | ' | ' |
Basic (in shares) | 27,258,689 | 27,238,495 |
Diluted (in shares) | 27,258,689 | 27,238,495 |
CONDENSED_STATEMENTS_OF_CASH_F
CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities | ' | ' |
Net loss | ($2,038,392) | ($1,409,533) |
Adjustments to reconcile net loss to net cash provided by (used by) operating activities: | ' | ' |
Depreciation and amortization | 326,482 | 314,179 |
loss on disposal of assets | ' | -1,000 |
(Increase) decrease in assets: | ' | ' |
Inventories | 331,314 | -201,770 |
Accounts receivable | 301,994 | 536,846 |
Other current assets | 461,559 | 483,634 |
Increase (decrease) in liabilities: | ' | ' |
Accounts payable | -1,262,123 | -1,836,871 |
Other accrued liabilities | -693,437 | -17,770 |
Income taxes payable | -86,165 | 1,876 |
Net cash used by operating activities | -2,658,768 | -2,130,409 |
Cash flows from investing activities | ' | ' |
Purchase of property, plant, and equipment | -738,597 | -63,890 |
Proceeds from sale of assets | ' | 1,000 |
Net cash used by investing activities | -738,597 | -62,890 |
Cash flows from financing activities | ' | ' |
Repayments of long-term debt and notes payable | -82,214 | -77,657 |
Repurchase of Common Stock | ' | -101,672 |
Proceeds from the exercise of stock options | 106,289 | ' |
Payment of Preferred Stock dividends | -57,613 | -57,613 |
Net cash used by financing activities | -33,538 | -236,942 |
Net decrease in cash and cash equivalents | -3,430,903 | -2,430,241 |
Cash and cash equivalents at: | ' | ' |
Beginning of period | 27,629,359 | 25,963,313 |
End of period | 24,198,456 | 23,533,072 |
Supplemental schedule of cash flow information: | ' | ' |
Interest paid | 57,168 | 62,537 |
Income taxes paid | 87,995 | ' |
Supplemental schedule of noncash investing and financing activities: | ' | ' |
Preferred dividends declared, not paid | $57,613 | $57,613 |
BUSINESS_OF_THE_COMPANY_AND_BA
BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2014 | |
BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION | ' |
BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION | ' |
1. BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION | |
Business of the Company | |
Retractable Technologies, Inc. (the “Company”) was incorporated in Texas on May 9, 1994, and designs, develops, manufactures, and markets safety syringes and other safety medical products for the healthcare profession. The Company began to develop its manufacturing operations in 1995. The Company’s manufacturing and administrative facilities are located in Little Elm, Texas. The Company’s primary products with Notice of Substantial Equivalence to the FDA are the VanishPoint® 0.5mL insulin syringe; 1mL tuberculin, insulin, and allergy antigen syringes; the 3mL, 5mL, and 10mL syringes; the blood collection tube holder; the small diameter tube adapter; the allergy tray; the IV safety catheter; the Patient Safe® syringe; the Patient Safe® Luer Cap; and the VanishPoint® Blood Collection Set. | |
Basis of presentation | |
The accompanying condensed financial statements are unaudited and, in the opinion of Management, reflect all adjustments that are necessary for a fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The condensed financial statements should be read in conjunction with the financial statement disclosures contained in the Company’s audited financial statements incorporated into its Form 10-K filed on March 31, 2014 for the year ended December 31, 2013. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||
Accounting estimates | |||||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. | |||||||
Cash and cash equivalents | |||||||
For purposes of reporting cash flows, cash and cash equivalents include unrestricted cash, the proceeds subject to a stipulation (discussed elsewhere herein), 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 Condensed Balance Sheets and are shown in Note 5, Other Accrued Liabilities. | |||||||
The Company records an allowance for estimated returns as a reduction to Accounts receivable and Gross sales. Historically, returns have been immaterial. | |||||||
Inventories | |||||||
Inventories are valued at the lower of cost or market, with cost being determined using actual average cost. The Company compares the average cost to the market price and records the lower value. Management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time to sell such inventory, the shelf life of inventory, and current market conditions when determining excess or obsolete inventories. A reserve is established for any excess or obsolete inventories or they may be written off. | |||||||
Property, plant, and equipment | |||||||
Property, plant, and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Cost includes major expenditures for improvements and replacements which extend useful lives or increase capacity and interest cost associated with significant capital additions. Gains or losses from property disposals are included in income. | |||||||
Depreciation and amortization are calculated using the straight-line method over the following useful lives: | |||||||
Production equipment | 3 to 13 years | ||||||
Office furniture and equipment | 3 to 10 years | ||||||
Buildings | 39 years | ||||||
Building improvements | 15 years | ||||||
Automobiles | 7 years | ||||||
Long-lived assets | |||||||
The Company assesses the recoverability of long-lived assets using an assessment of the estimated undiscounted future cash flows related to such assets. In the event that assets are found to be carried at amounts which are in excess of estimated gross future cash flows, the assets will be adjusted for impairment to a level commensurate with fair value determined using a discounted cash flow analysis of the underlying assets. | |||||||
The Company’s property, plant, and equipment primarily consist of buildings, land, assembly equipment for syringes, molding machines, molds, office equipment, furniture, and fixtures. | |||||||
Intangible assets | |||||||
Intangible assets are stated at cost and consist primarily of intellectual property which is amortized using the straight-line method over 17 years. | |||||||
Financial instruments | |||||||
The Company estimates the fair market value of financial instruments through the use of public market prices, quotes from financial institutions, and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that could be realized in a current market exchange. Short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on Management’s estimates, equals their recorded values. The fair value of long-term liabilities, based on Management’s estimates, approximates their reported values. | |||||||
Concentration risks | |||||||
The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. Cash balances, some of which exceed federally insured limits, are maintained in financial institutions; however, Management believes the institutions are of high credit quality. The majority of accounts receivable are due from companies which are well-established entities. As a consequence, Management considers any exposure from concentrations of credit risks to be limited. | |||||||
The following table reflects our significant customers for the first quarters of 2014 and 2013: | |||||||
Three Months ended | Three Months ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Number of significant customers | 3 | 1 | |||||
Aggregate dollar amount of net sales to significant customers | $3.0 million | $1.4 million | |||||
Percentage of net sales to significant customers | 49.10% | 19.20% | |||||
The Company manufactures syringes in Little Elm, Texas as well as utilizing manufacturers in China. The Company purchases most of its product components from single suppliers, including needle adhesives and packaging materials. There are multiple sources of these materials. The Company obtained roughly 53.3% and 70.8% of its finished products in the first three months of 2014 and 2013, respectively, from the Company’s primary Chinese manufacturer. Other Chinese manufacturers produced 11.1% of the units produced, which units consisted of Patient Safe® syringes and catheters. In the event that the Company becomes unable to purchase products from its primary Chinese manufacturer, the Company would need to find an alternate manufacturer for its 0.5mL insulin syringe, its 2mL, 5mL, and 10mL syringes and its autodisable syringe, and increase domestic production for 1mL and 3mL syringes. | |||||||
Revenue recognition | |||||||
Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment. 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 that the Company has not received tracking reports. Rebates are recorded when issued and are applied against the customer’s receivable balance. Distributors receive a rebate for the difference between the Wholesale Acquisition Cost and the appropriate contract price as reflected on a tracking report provided by the distributor to the Company. If product is sold by a distributor to an entity that has no contract, there is a standard rebate (lower than a contracted rebate) given to the distributor. One of the purposes of the rebate is to encourage distributors to submit tracking reports to the Company. The provision for contractual pricing allowances is reviewed at the end of each quarter and adjusted for changes in levels of products for which there is no tracking report. Additionally, if it becomes clear that tracking reports will not be provided by individual distributors, the provision is further adjusted. The estimated contractual allowance is included in Accounts payable and deducted from revenues in the Statements of Operations. Accounts payable included estimated contractual allowances for $3,167,259 and $3,611,692 as of March 31, 2014 and December 31, 2013, 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. Any product shipped or distributed for evaluation purposes is expensed. | |||||||
Certain distributors have taken rebates to which they are not entitled, such as utilizing a rebate for products not purchased directly from the Company. Major customers said they have ceased the practices resulting in claiming non-contractual rebates. Rebates can only be claimed on purchases made directly from the Company. The Company has established a reserve for the collectability of these non-contractual rebate amounts. The expense for the reserve is recorded in Operating expense, General and administrative. The reserve for such non-contractual deductions is included in the allowance for doubtful accounts. There has been no change to the reserve contractual rebates in the periods currently presented. | |||||||
The Company’s domestic return policy is set forth in its standard Distribution Agreement. This 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 will not accept returned goods without a returned goods authorization number. The Company may refund the customer’s money or replace the product. | |||||||
The Company’s domestic return policy also 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 do not provide for any returns. | |||||||
Litigation proceeds and settlements | |||||||
Proceeds from litigation are recognized when realizable. Generally, realization is not reasonably assured and expected until proceeds are collected; however, see Note 6, COMMITMENTS AND CONTINGENCIES, for a discussion of proceeds received from Becton Dickinson and Company (“BD”) pursuant to a stipulation in the patent infringement case Retractable Technologies, Inc. and Thomas Shaw v. Becton Dickinson and Company, Civil Action No. 2:07-cv-250, in the U.S. District Court for the Eastern District of Texas, Marshall Division. | |||||||
Income taxes | |||||||
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 utilized some of its net operating loss carry forwards in 2013 and paid Alternative Minimum Tax on its taxable income. The Company has established a valuation allowance for its net deferred tax asset as future taxable income cannot be reasonably assured. Penalties and interest related to income tax are classified as General and administrative expense and Interest expense, respectively, in the Condensed Statements of Operations. | |||||||
Earnings per share | |||||||
The Company computes basic earnings per share (“EPS”) by dividing net earnings for the period (adjusted for any cumulative dividends for the period) by the weighted average number of common shares outstanding during the period. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the dilutive effect, if any, of the common stock deliverable pursuant to stock options or common stock issuable upon the conversion of convertible preferred stock and convertible debt. The calculation of diluted EPS excluded 2.0 million and 0.5 million shares of Common Stock underlying issued and outstanding stock options at March 31, 2014 and March 31, 2013, respectively, as their effect was antidilutive. The potential dilution, if any, is shown on the following schedule: | |||||||
Three Months | Three Months | ||||||
Ended | Ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Net loss | $ | (2,038,392 | ) | $ | (1,409,533 | ) | |
Preferred dividend requirements | (228,999 | ) | (229,068 | ) | |||
Loss available to common shareholders after assumed conversions | $ | (2,267,391 | ) | $ | (1,638,601 | ) | |
Average common shares outstanding | 27,258,689 | 27,238,495 | |||||
Average common and common equivalent shares outstanding - assuming dilution | 27,258,689 | 27,238,495 | |||||
Basic loss per share | $ | (0.08 | ) | $ | (0.06 | ) | |
Diluted loss per share | $ | (0.08 | ) | $ | (0.06 | ) | |
Shipping and handling costs | |||||||
The Company classifies shipping and handling costs as part of Cost of sales in the Condensed Statements of Operations. | |||||||
Research and development costs | |||||||
Research and development costs are expensed as incurred. | |||||||
Share-based compensation | |||||||
The Company’s share-based payments are accounted for using the fair value method. The Company records share-based compensation expense on a straight-line basis over the requisite service period. | |||||||
Recent Pronouncement | |||||||
In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires, unless certain conditions exists, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. ASU 2013-11 is effective prospectively for reporting periods beginning after December 15, 2013, with early adoption permitted. Retrospective application is also permitted. The adoption of ASU 2013-11, effective with the reporting period beginning January 1, 2014 did not have an impact on the Company’s financial statements. |
INVENTORIES
INVENTORIES | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
INVENTORIES | ' | |||||
INVENTORIES | ' | |||||
3. INVENTORIES | ||||||
Inventories consist of the following: | ||||||
March 31, 2014 | December 31, 2013 | |||||
Raw materials | $ | 1,696,519 | $ | 1,666,525 | ||
Finished goods | 4,389,151 | 4,750,459 | ||||
6,085,670 | 6,416,984 | |||||
Inventory reserve | (681,395 | ) | (681,395 | ) | ||
$ | 5,404,275 | $ | 5,735,589 |
INCOME_TAXES
INCOME TAXES | 3 Months Ended | |
Mar. 31, 2014 | ||
INCOME TAXES | ' | |
INCOME TAXES | ' | |
4 | INCOME TAXES | |
The Company’s effective tax rate on the net loss before income taxes was (0.1)% and (0.1)% for the three months ended March 31, 2014 and March 31, 2013, respectively. |
OTHER_ACCRUED_LIABILITIES
OTHER ACCRUED LIABILITIES | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
OTHER ACCRUED LIABILITIES | ' | |||||
OTHER ACCRUED LIABILITIES | ' | |||||
5. OTHER ACCRUED LIABILITIES | ||||||
Other accrued liabilities consist of the following: | ||||||
March 31, 2014 | December 31, 2013 | |||||
Prepayments from customers | $ | 1,152,115 | $ | 1,720,896 | ||
Accrued property taxes | 107,570 | — | ||||
Accrued professional fees | 187,023 | 169,125 | ||||
Other accrued expenses | 112,431 | 84,997 | ||||
$ | 1,559,139 | $ | 1,975,018 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
6. COMMITMENTS AND CONTINGENCIES | |
On May 19, 2010, final judgment was entered in the U.S. District Court for the Eastern District of Texas, Marshall Division for the Company which ordered that the Company recover $5,000,000 plus prejudgment and post-judgment interest, and ordered a permanent injunction for BD’s 1mL and 3mL Integra syringes until the expiration of certain patents. The permanent injunction was stayed for the longer of the exhaustion of the appeal of the district court’s case or twelve months from May 19, 2010. In June 2010, BD filed an appeal in the U.S. Court of Appeals for the Federal Circuit appealing the final judgment entered on May 19, 2010. In July 2011, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit reversed the district court’s judgment that BD’s 3mL Integra infringed the Company’s ‘224 patent and ‘077 patent. The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s judgment that the 1mL Integra infringes the Company’s ‘244 and ‘733 patents. The U.S. Court of Appeals for the Federal Circuit also affirmed the district court’s judgment that the ‘077 patent is not invalid for anticipation or obviousness. The Company had petitioned for a rehearing by all the judges of the Federal Circuit as to whether the three-judge panel properly construed the Company’s patent claim language in finding that the 3mL Integra did not infringe. The Company’s petition for rehearing by all of the judges of the Federal Circuit was denied with two dissents being issued. The Company filed a petition for certiorari asking the Supreme Court to review the matter. That petition was denied in January of 2013. On August 7, 2013, the U.S. District Court for the Eastern District of Texas issued an order adopting the Magistrate Judge’s Report and Recommendation and denying BD’s Rule 60 motion seeking a reduction in damages. On October 29, 2013, BD filed its Notice of Appeal of the August 7, 2013 order to the Federal Circuit. Oral argument for this appeal occurred on May 9, 2014. On September 30, 2013, the Company received payment of $7,724,826 (the “Judgment Amount”) from BD pursuant to a stipulation in this case. The stipulation provides that if, as a result of BD’s appeal of the District Court’s denial of BD’s Rule 60 motion, it is judicially determined that BD owes an amount less than the Judgment Amount, BD shall be entitled to restitution by the Company of any excess payment, with interest. Otherwise, the payment of the Judgment Amount shall constitute satisfaction of the patent infringement judgment and BD shall owe no further money damages to the Company in this case. The Judgment Amount has been reflected as a current liability in the Balance Sheets since the proceeds are not yet realizable. | |
In May 2010, the Company and an officer’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 Company and an officer filed a Second Amended Complaint on July 23, 2010 setting forth additional detail regarding the allegations of BD’s illegal conduct. BD filed a motion to dismiss and the U.S. District Court for the Eastern District of Texas, Marshall Division denied that motion in part and granted it in part, granting the Company the right to re-plead certain allegations by May 13, 2011. The Company and an officer filed a Third Amended Complaint in May 2011, setting forth additional detail regarding the alleged illegal conduct by BD. Trial was initially set for February 2012. However, in January 2012 the parties agreed to a continuance to allow the petition for certiorari to be considered. As stated above, the petition was denied in January of 2013. A hearing to re-set a trial date in light of BD’s motion for continuance was held May 3, 2013. The trial commenced on September 9, 2013 in Tyler, Texas, and the jury returned its verdict on September 19, 2013, finding 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 for the antitrust claim, which is subject to being trebled pursuant to statute. The Court conducted a hearing for post-trial motions in early 2014. Orders have not yet issued. BD has stated that it plans to appeal the verdict. | |
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. The United States District Court for the Eastern District of Texas, Texarkana Division conducted a claims construction hearing on September 25, 2008 and issued its claims construction order on November 14, 2008. The case has been stayed pending resolution of the Company’s first filed case against BD described above. There has been no activity in this case since the stay. |
BUSINESS_SEGMENTS
BUSINESS SEGMENTS | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
BUSINESS SEGMENTS | ' | |||||||
BUSINESS SEGMENTS | ' | |||||||
7. BUSINESS SEGMENTS | ||||||||
Three Months Ended | Three Months Ended | |||||||
March 31, 2014 | March 31, 2013 | |||||||
U.S. sales | $ | 4,950,177 | $ | 5,736,230 | ||||
North and South America sales (excluding U.S.) | 836,552 | 592,289 | ||||||
Other international sales | 253,649 | 844,593 | ||||||
Total sales, net | $ | 6,040,378 | $ | 7,173,112 | ||||
March 31, 2014 | December 31, 2013 | |||||||
Long-lived assets | ||||||||
U.S. | $ | 11,096,803 | $ | 10,676,053 | ||||
International | $ | 227,798 | $ | 234,119 | ||||
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. |
STOCK_REPURCHASE_PROGRAM
STOCK REPURCHASE PROGRAM | 3 Months Ended |
Mar. 31, 2014 | |
STOCK REPURCHASE PROGRAM | ' |
STOCK REPURCHASE PROGRAM | ' |
8. STOCK REPURCHASE PROGRAM | |
On July 10, 2012, the Company authorized a Common Stock repurchase plan structured to comply with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934. Under the plan, the Company purchased 83,097 shares in the first quarter of 2013. The plan was terminated effective August 30, 2013. | |
Pursuant to the Certificates of Designation, Preferences, Rights And Limitations of the Series I Class B and Series II Class B Convertible Preferred Stock, the Company would have been prohibited from purchasing its Common Stock while dividends were in arrears. Therefore, to facilitate the Common Stock repurchase plan, the Company paid dividends on the Series I Class B Preferred Stock in the amount of $12,938 at each date on January 21, 2013 and April 22, 2013. The Company paid dividends to Series II Class B Preferred Stockholders in the amount of $44,675 on each of the same dates listed in the preceding sentence. |
DIVIDENDS
DIVIDENDS | 3 Months Ended |
Mar. 31, 2014 | |
DIVIDENDS | ' |
DIVIDENDS | ' |
9. DIVIDENDS | |
On December 20, 2013 and April 1, 2014, the Board of Directors announced dividends on the Series I Class B Preferred Stock in the amount of $12,938 on each date which were paid on January 20, 2014 and April 21, 2014. The Company also announced and paid dividends to Series II Class B Preferred Stockholders in the amount of $44,675 on the same dates. See Note 8 for information about dividends paid during the term of the Stock Repurchase Program. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
10. SUBSEQUENT EVENTS | |
Effective May 9, 2014, the Company reduced its workforce by 13.7% in an effort to cut costs. The Company expects its compensation costs will be reduced in an amount exceeding $1 million annually. The Company expects to pay approximately $300 thousand in severance costs in the second quarter of 2014. | |
On April 11, 2014, the Company issued a letter of credit in the amount of $535,224 to fund the purchase of manufacturing equipment. Such letter of credit is secured by funds held in a Company bank account. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
Accounting estimates | ' | ||||||
Accounting estimates | |||||||
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. | |||||||
Cash and cash equivalents | ' | ||||||
Cash and cash equivalents | |||||||
For purposes of reporting cash flows, cash and cash equivalents include unrestricted cash, the proceeds subject to a stipulation (discussed elsewhere herein), money market accounts, and investments with original maturities of three months or less. | |||||||
Accounts receivable | ' | ||||||
Accounts receivable | |||||||
The Company records trade receivables when revenue is recognized. No product has been consigned to customers. The Company’s allowance for doubtful accounts is primarily determined by review of specific trade receivables. Those accounts that are doubtful of collection are included in the allowance. This provision is reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. | |||||||
The Company requires certain customers to make a prepayment prior to beginning production or shipment of their order. Customers may apply such prepayments to their outstanding invoices or pay the invoice and continue to carry forward the deposit for future orders. Such amounts are included in Other accrued liabilities on the Condensed Balance Sheets and are shown in Note 5, Other Accrued Liabilities. | |||||||
The Company records an allowance for estimated returns as a reduction to Accounts receivable and Gross sales. Historically, returns have been immaterial. | |||||||
Inventories | ' | ||||||
Inventories | |||||||
Inventories are valued at the lower of cost or market, with cost being determined using actual average cost. The Company compares the average cost to the market price and records the lower value. Management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time to sell such inventory, the shelf life of inventory, and current market conditions when determining excess or obsolete inventories. A reserve is established for any excess or obsolete inventories or they may be written off. | |||||||
Property, plant, and equipment | ' | ||||||
Property, plant, and equipment | |||||||
Property, plant, and equipment are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. Cost includes major expenditures for improvements and replacements which extend useful lives or increase capacity and interest cost associated with significant capital additions. Gains or losses from property disposals are included in income. | |||||||
Depreciation and amortization are calculated using the straight-line method over the following useful lives: | |||||||
Production equipment | 3 to 13 years | ||||||
Office furniture and equipment | 3 to 10 years | ||||||
Buildings | 39 years | ||||||
Building improvements | 15 years | ||||||
Automobiles | 7 years | ||||||
Long-lived assets | ' | ||||||
Long-lived assets | |||||||
The Company assesses the recoverability of long-lived assets using an assessment of the estimated undiscounted future cash flows related to such assets. In the event that assets are found to be carried at amounts which are in excess of estimated gross future cash flows, the assets will be adjusted for impairment to a level commensurate with fair value determined using a discounted cash flow analysis of the underlying assets. | |||||||
The Company’s property, plant, and equipment primarily consist of buildings, land, assembly equipment for syringes, molding machines, molds, office equipment, furniture, and fixtures. | |||||||
Intangible assets | ' | ||||||
Intangible assets | |||||||
Intangible assets are stated at cost and consist primarily of intellectual property which is amortized using the straight-line method over 17 years. | |||||||
Financial instruments | ' | ||||||
Financial instruments | |||||||
The Company estimates the fair market value of financial instruments through the use of public market prices, quotes from financial institutions, and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that could be realized in a current market exchange. Short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on Management’s estimates, equals their recorded values. The fair value of long-term liabilities, based on Management’s estimates, approximates their reported values. | |||||||
Concentration risks | ' | ||||||
Concentration risks | |||||||
The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash, cash equivalents, and accounts receivable. Cash balances, some of which exceed federally insured limits, are maintained in financial institutions; however, Management believes the institutions are of high credit quality. The majority of accounts receivable are due from companies which are well-established entities. As a consequence, Management considers any exposure from concentrations of credit risks to be limited. | |||||||
The following table reflects our significant customers for the first quarters of 2014 and 2013: | |||||||
Three Months ended | Three Months ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Number of significant customers | 3 | 1 | |||||
Aggregate dollar amount of net sales to significant customers | $3.0 million | $1.4 million | |||||
Percentage of net sales to significant customers | 49.10% | 19.20% | |||||
The Company manufactures syringes in Little Elm, Texas as well as utilizing manufacturers in China. The Company purchases most of its product components from single suppliers, including needle adhesives and packaging materials. There are multiple sources of these materials. The Company obtained roughly 53.3% and 70.8% of its finished products in the first three months of 2014 and 2013, respectively, from the Company’s primary Chinese manufacturer. Other Chinese manufacturers produced 11.1% of the units produced, which units consisted of Patient Safe® syringes and catheters. In the event that the Company becomes unable to purchase products from its primary Chinese manufacturer, the Company would need to find an alternate manufacturer for its 0.5mL insulin syringe, its 2mL, 5mL, and 10mL syringes and its autodisable syringe, and increase domestic production for 1mL and 3mL syringes. | |||||||
Revenue recognition | ' | ||||||
Revenue recognition | |||||||
Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment. 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 that the Company has not received tracking reports. Rebates are recorded when issued and are applied against the customer’s receivable balance. Distributors receive a rebate for the difference between the Wholesale Acquisition Cost and the appropriate contract price as reflected on a tracking report provided by the distributor to the Company. If product is sold by a distributor to an entity that has no contract, there is a standard rebate (lower than a contracted rebate) given to the distributor. One of the purposes of the rebate is to encourage distributors to submit tracking reports to the Company. The provision for contractual pricing allowances is reviewed at the end of each quarter and adjusted for changes in levels of products for which there is no tracking report. Additionally, if it becomes clear that tracking reports will not be provided by individual distributors, the provision is further adjusted. The estimated contractual allowance is included in Accounts payable and deducted from revenues in the Statements of Operations. Accounts payable included estimated contractual allowances for $3,167,259 and $3,611,692 as of March 31, 2014 and December 31, 2013, 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. Any product shipped or distributed for evaluation purposes is expensed. | |||||||
Certain distributors have taken rebates to which they are not entitled, such as utilizing a rebate for products not purchased directly from the Company. Major customers said they have ceased the practices resulting in claiming non-contractual rebates. Rebates can only be claimed on purchases made directly from the Company. The Company has established a reserve for the collectability of these non-contractual rebate amounts. The expense for the reserve is recorded in Operating expense, General and administrative. The reserve for such non-contractual deductions is included in the allowance for doubtful accounts. There has been no change to the reserve contractual rebates in the periods currently presented. | |||||||
The Company’s domestic return policy is set forth in its standard Distribution Agreement. This 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 will not accept returned goods without a returned goods authorization number. The Company may refund the customer’s money or replace the product. | |||||||
The Company’s domestic return policy also 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 do not provide for any returns. | |||||||
Litigation proceeds and settlements | ' | ||||||
Litigation proceeds and settlements | |||||||
Proceeds from litigation are recognized when realizable. Generally, realization is not reasonably assured and expected until proceeds are collected; however, see Note 6, COMMITMENTS AND CONTINGENCIES, for a discussion of proceeds received from Becton Dickinson and Company (“BD”) pursuant to a stipulation in the patent infringement case Retractable Technologies, Inc. and Thomas Shaw v. Becton Dickinson and Company, Civil Action No. 2:07-cv-250, in the U.S. District Court for the Eastern District of Texas, Marshall Division. | |||||||
Income taxes | ' | ||||||
Income taxes | |||||||
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 utilized some of its net operating loss carry forwards in 2013 and paid Alternative Minimum Tax on its taxable income. The Company has established a valuation allowance for its net deferred tax asset as future taxable income cannot be reasonably assured. Penalties and interest related to income tax are classified as General and administrative expense and Interest expense, respectively, in the Condensed Statements of Operations. | |||||||
Earnings per share | ' | ||||||
Earnings per share | |||||||
The Company computes basic earnings per share (“EPS”) by dividing net earnings for the period (adjusted for any cumulative dividends for the period) by the weighted average number of common shares outstanding during the period. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the dilutive effect, if any, of the common stock deliverable pursuant to stock options or common stock issuable upon the conversion of convertible preferred stock and convertible debt. The calculation of diluted EPS excluded 2.0 million and 0.5 million shares of Common Stock underlying issued and outstanding stock options at March 31, 2014 and March 31, 2013, respectively, as their effect was antidilutive. The potential dilution, if any, is shown on the following schedule: | |||||||
Three Months | Three Months | ||||||
Ended | Ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Net loss | $ | (2,038,392 | ) | $ | (1,409,533 | ) | |
Preferred dividend requirements | (228,999 | ) | (229,068 | ) | |||
Loss available to common shareholders after assumed conversions | $ | (2,267,391 | ) | $ | (1,638,601 | ) | |
Average common shares outstanding | 27,258,689 | 27,238,495 | |||||
Average common and common equivalent shares outstanding - assuming dilution | 27,258,689 | 27,238,495 | |||||
Basic loss per share | $ | (0.08 | ) | $ | (0.06 | ) | |
Diluted loss per share | $ | (0.08 | ) | $ | (0.06 | ) | |
Shipping and handling costs | ' | ||||||
Shipping and handling costs | |||||||
The Company classifies shipping and handling costs as part of Cost of sales in the Condensed Statements of Operations. | |||||||
Research and development costs | ' | ||||||
Research and development costs | |||||||
Research and development costs are expensed as incurred. | |||||||
Share-based compensation | ' | ||||||
Share-based compensation | |||||||
The Company’s share-based payments are accounted for using the fair value method. The Company records share-based compensation expense on a straight-line basis over the requisite service period. | |||||||
Recent Pronouncement | ' | ||||||
Recent Pronouncement | |||||||
In July 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires, unless certain conditions exists, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. ASU 2013-11 is effective prospectively for reporting periods beginning after December 15, 2013, with early adoption permitted. Retrospective application is also permitted. The adoption of ASU 2013-11, effective with the reporting period beginning January 1, 2014 did not have an impact on the Company’s financial statements. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
Schedule of estimated useful lives of property, plant and equipment | ' | ||||||
Production equipment | 3 to 13 years | ||||||
Office furniture and equipment | 3 to 10 years | ||||||
Buildings | 39 years | ||||||
Building improvements | 15 years | ||||||
Automobiles | 7 years | ||||||
Schedule of significant customers | ' | ||||||
Three Months ended | Three Months ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Number of significant customers | 3 | 1 | |||||
Aggregate dollar amount of net sales to significant customers | $3.0 million | $1.4 million | |||||
Percentage of net sales to significant customers | 49.10% | 19.20% | |||||
Schedule of earnings per share | ' | ||||||
Three Months | Three Months | ||||||
Ended | Ended | ||||||
March 31, 2014 | March 31, 2013 | ||||||
Net loss | $ | (2,038,392 | ) | $ | (1,409,533 | ) | |
Preferred dividend requirements | (228,999 | ) | (229,068 | ) | |||
Loss available to common shareholders after assumed conversions | $ | (2,267,391 | ) | $ | (1,638,601 | ) | |
Average common shares outstanding | 27,258,689 | 27,238,495 | |||||
Average common and common equivalent shares outstanding - assuming dilution | 27,258,689 | 27,238,495 | |||||
Basic loss per share | $ | (0.08 | ) | $ | (0.06 | ) | |
Diluted loss per share | $ | (0.08 | ) | $ | (0.06 | ) |
INVENTORIES_Tables
INVENTORIES (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
INVENTORIES | ' | |||||
Schedule of inventories | ' | |||||
March 31, 2014 | December 31, 2013 | |||||
Raw materials | $ | 1,696,519 | $ | 1,666,525 | ||
Finished goods | 4,389,151 | 4,750,459 | ||||
6,085,670 | 6,416,984 | |||||
Inventory reserve | (681,395 | ) | (681,395 | ) | ||
$ | 5,404,275 | $ | 5,735,589 |
OTHER_ACCRUED_LIABILITIES_Tabl
OTHER ACCRUED LIABILITIES (Tables) | 3 Months Ended | |||||
Mar. 31, 2014 | ||||||
OTHER ACCRUED LIABILITIES | ' | |||||
Schedule of other accrued liabilities | ' | |||||
March 31, 2014 | December 31, 2013 | |||||
Prepayments from customers | $ | 1,152,115 | $ | 1,720,896 | ||
Accrued property taxes | 107,570 | — | ||||
Accrued professional fees | 187,023 | 169,125 | ||||
Other accrued expenses | 112,431 | 84,997 | ||||
$ | 1,559,139 | $ | 1,975,018 |
BUSINESS_SEGMENTS_Tables
BUSINESS SEGMENTS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
BUSINESS SEGMENTS | ' | |||||||
Schedule of sales and long-lived assets by geographical areas | ' | |||||||
Three Months Ended | Three Months Ended | |||||||
March 31, 2014 | March 31, 2013 | |||||||
U.S. sales | $ | 4,950,177 | $ | 5,736,230 | ||||
North and South America sales (excluding U.S.) | 836,552 | 592,289 | ||||||
Other international sales | 253,649 | 844,593 | ||||||
Total sales, net | $ | 6,040,378 | $ | 7,173,112 | ||||
March 31, 2014 | December 31, 2013 | |||||||
Long-lived assets | ||||||||
U.S. | $ | 11,096,803 | $ | 10,676,053 | ||||
International | $ | 227,798 | $ | 234,119 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 3 Months Ended |
Mar. 31, 2014 | |
item | |
Accounts receivable | ' |
Number of products consigned to customers | 0 |
Intangible assets | ' |
Useful lives of intellectual property | '17 years |
Production equipment | Minimum | ' |
Property, plant, and equipment | ' |
Useful lives | '3 years |
Production equipment | Maximum | ' |
Property, plant, and equipment | ' |
Useful lives | '13 years |
Office furniture and equipment | Minimum | ' |
Property, plant, and equipment | ' |
Useful lives | '3 years |
Office furniture and equipment | Maximum | ' |
Property, plant, and equipment | ' |
Useful lives | '10 years |
Buildings | ' |
Property, plant, and equipment | ' |
Useful lives | '39 years |
Building improvements | ' |
Property, plant, and equipment | ' |
Useful lives | '15 years |
Automobiles | ' |
Property, plant, and equipment | ' |
Useful lives | '7 years |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
item | item | ||
Concentration risks | ' | ' | ' |
Number of significant customers | 3 | 1 | ' |
Aggregate dollar amount of net sales to significant customers | $6,040,378 | $7,173,112 | ' |
Revenue recognition | ' | ' | ' |
Estimated contractual allowance | 3,167,259 | ' | 3,611,692 |
Change to reserve regarding non-contractual rebates | 0 | ' | ' |
Period for return of incorrect shipments | '10 days | ' | ' |
Number of times overstocking returns are limited | 2 | ' | ' |
Period for return of product due to overstock | '12 months | ' | ' |
Maximum percentage of distributor's total purchase for the prior 12-month period | 1.00% | ' | ' |
Sales | Customer concentration risk | ' | ' | ' |
Concentration risks | ' | ' | ' |
Aggregate dollar amount of net sales to significant customers | $3,000,000 | $1,400,000 | ' |
Concentration risk (as a percent) | 49.10% | 19.20% | ' |
Product components | Supplier concentration risk | ' | ' | ' |
Concentration risks | ' | ' | ' |
Concentration risk (as a percent) | 53.30% | 70.80% | ' |
Product components | Supplier concentration risk | Other Chinese manufacturers | ' | ' | ' |
Concentration risks | ' | ' | ' |
Concentration risk (as a percent) | 11.10% | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Earnings per share | ' | ' |
Shares of common stock underlying issued and outstanding stock options excluded from calculation of diluted EPS | 2,000,000 | 500,000 |
Net loss | ($2,038,392) | ($1,409,533) |
Preferred dividend requirements | -228,999 | -229,068 |
Loss applicable to common shareholders | ($2,267,391) | ($1,638,601) |
Average common shares outstanding | 27,258,689 | 27,238,495 |
Average common and common equivalent shares outstanding - assuming dilution | 27,258,689 | 27,238,495 |
Basic loss per share (in dollars per share) | ($0.08) | ($0.06) |
Diluted loss per share (in dollars per share) | ($0.08) | ($0.06) |
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
INVENTORIES | ' | ' |
Raw materials | $1,696,519 | $1,666,525 |
Finished goods | 4,389,151 | 4,750,459 |
Inventory, gross | 6,085,670 | 6,416,984 |
Inventory reserve | -681,395 | -681,395 |
Inventory, net | $5,404,275 | $5,735,589 |
INCOME_TAXES_Details
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
INCOME TAXES | ' | ' |
Effective tax rate (as a percent) | -0.10% | -0.10% |
OTHER_ACCRUED_LIABILITIES_Deta
OTHER ACCRUED LIABILITIES (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
OTHER ACCRUED LIABILITIES | ' | ' |
Prepayments from customers | $1,152,115 | $1,720,896 |
Accrued property taxes | 107,570 | ' |
Accrued professional fees | 187,023 | 169,125 |
Other accrued expenses | 112,431 | 84,997 |
Other accrued liabilities | $1,559,139 | $1,975,018 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 0 Months Ended | 1 Months Ended | |||
Sep. 30, 2013 | Sep. 19, 2013 | Jul. 31, 2011 | 31-May-10 | Sep. 30, 2007 | |
BD | BD | BD | BD | BD and MDC Investment Holdings, Inc. | |
item | item | ||||
COMMITMENTS AND CONTINGENCIES | ' | ' | ' | ' | ' |
Recovery amount | ' | ' | ' | $5,000,000 | ' |
Period from specified date for permanent injunction to stay | ' | ' | ' | '12 months | ' |
Number of judges on panel | ' | ' | 3 | ' | ' |
Number of dissents being issued | ' | ' | 2 | ' | ' |
Judgment amount received pursuant to stipulation | 7,724,826 | ' | ' | ' | ' |
Value of damages awarded | ' | $113,508,014 | ' | ' | ' |
Number of U.S. patents infringed upon | ' | ' | ' | ' | 2 |
BUSINESS_SEGMENTS_Details
BUSINESS SEGMENTS (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Sales by geographical areas | ' | ' | ' |
Total sales | $6,040,378 | $7,173,112 | ' |
U.S. | ' | ' | ' |
Sales by geographical areas | ' | ' | ' |
Total sales | 4,950,177 | 5,736,230 | ' |
Long-lived assets | ' | ' | ' |
Long-lived assets | 11,096,803 | ' | 10,676,053 |
North and South America sales (excluding U.S.) | ' | ' | ' |
Sales by geographical areas | ' | ' | ' |
Total sales | 836,552 | 592,289 | ' |
Other international sales | ' | ' | ' |
Sales by geographical areas | ' | ' | ' |
Total sales | 253,649 | 844,593 | ' |
International | ' | ' | ' |
Long-lived assets | ' | ' | ' |
Long-lived assets | $227,798 | ' | $234,119 |
STOCK_REPURCHASE_PROGRAM_Detai
STOCK REPURCHASE PROGRAM (Details) (USD $) | 3 Months Ended | 0 Months Ended | |||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Apr. 21, 2014 | Jan. 20, 2014 | Dec. 20, 2013 | Apr. 22, 2013 | Jan. 21, 2013 | Apr. 21, 2014 | Jan. 20, 2014 | Apr. 22, 2013 | Jan. 21, 2013 | |
Series I, Class B | Series I, Class B | Series I, Class B | Series I, Class B | Series I, Class B | Series II, Class B | Series II, Class B | Series II, Class B | Series II, Class B | |||
Stock repurchase program | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock repurchased under the Common Stock repurchase plan (in shares) | ' | 83,097 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred stock dividends paid | $57,613 | $57,613 | $12,938 | $12,938 | $12,938 | $12,938 | $12,938 | $44,675 | $44,675 | $44,675 | $44,675 |
DIVIDENDS_Details
DIVIDENDS (Details) (USD $) | 3 Months Ended | 0 Months Ended | |||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Apr. 21, 2014 | Apr. 02, 2014 | Jan. 20, 2014 | Dec. 20, 2013 | Apr. 22, 2013 | Jan. 21, 2013 | Apr. 21, 2014 | Apr. 02, 2014 | Jan. 20, 2014 | Apr. 22, 2013 | Jan. 21, 2013 | |
Series I, Class B | Series I, Class B | Series I, Class B | Series I, Class B | Series I, Class B | Series I, Class B | Series II, Class B | Series II, Class B | Series II, Class B | Series II, Class B | Series II, Class B | |||
Dividends | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Preferred stock dividends paid | $57,613 | $57,613 | $12,938 | ' | $12,938 | $12,938 | $12,938 | $12,938 | $44,675 | ' | $44,675 | $44,675 | $44,675 |
Preferred dividends announced, not paid | $57,613 | $57,613 | ' | $12,938 | ' | ' | ' | ' | ' | $44,675 | ' | ' | ' |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Subsequent events, USD $) | 0 Months Ended | 3 Months Ended | 0 Months Ended | |
9-May-14 | Apr. 11, 2014 | Jun. 30, 2014 | 9-May-14 | |
Letter of credit | Expected | Minimum | ||
Expected | ||||
SUBSEQUENT EVENTS | ' | ' | ' | ' |
Percentage of reduction in workforce | 13.70% | ' | ' | ' |
Annual reduction in compensation costs | ' | ' | ' | $1,000,000 |
Payment for severance costs | ' | ' | 300,000 | ' |
Face amount | ' | $535,224 | ' | ' |