Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 02, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | RETRACTABLE TECHNOLOGIES INC | |
Entity Central Index Key | 946,563 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
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 | 27,891,874 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 19,703,945 | $ 22,128,977 |
Restricted cash | 600,897 | |
Accounts receivable, net | 5,027,043 | 5,642,091 |
Inventories, net | 6,111,034 | 4,663,548 |
Other current assets | 774,817 | 1,194,055 |
Total current assets | 31,616,839 | 34,229,568 |
Property, plant, and equipment, net | 11,478,045 | 10,852,853 |
Intangible and other assets, net | 263,760 | 270,693 |
Total assets | 43,358,644 | 45,353,114 |
Current liabilities: | ||
Accounts payable | 5,105,807 | 5,142,796 |
Litigation proceeds subject to stipulation | 7,724,826 | |
Current portion of long-term debt | 246,110 | 149,744 |
Accrued compensation | 630,050 | 504,188 |
Dividends payable | 56,363 | |
Accrued royalties to shareholders | 770,197 | 787,434 |
Other accrued liabilities | 994,821 | 782,322 |
Income taxes payable | 5,405 | 8,290 |
Total current liabilities | 7,808,753 | 15,099,600 |
Long-term debt, net of current maturities | 3,481,555 | 3,425,028 |
Total liabilities | $ 11,290,308 | $ 18,524,628 |
Commitments and contingencies - see Note 6 | ||
Preferred stock $1 par value: | ||
Common Stock, no par value | ||
Additional paid-in capital | $ 58,178,551 | $ 59,273,769 |
Retained deficit | (27,096,660) | (32,336,119) |
Common stock in treasury - at cost | (1,096,609) | |
Total stockholders' equity | 32,068,336 | 26,828,486 |
Total liabilities and stockholders' equity | 43,358,644 | 45,353,114 |
Series I, Class B | ||
Preferred stock $1 par value: | ||
Preferred stock | 98,500 | 98,500 |
Series II, Class B | ||
Preferred stock $1 par value: | ||
Preferred stock | 176,200 | 176,200 |
Series III, Class B | ||
Preferred stock $1 par value: | ||
Preferred stock | 129,245 | 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) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
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 OPERATI
CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
CONDENSED STATEMENTS OF OPERATIONS | ||||
Sales, net | $ 9,482,866 | $ 10,886,680 | $ 22,376,912 | $ 23,803,420 |
Cost of sales: | ||||
Cost of manufactured product | 5,489,151 | 6,191,232 | 12,307,440 | 14,109,159 |
Royalty expense to shareholders | 770,197 | 843,730 | 1,846,438 | 1,941,267 |
Total cost of sales | 6,259,348 | 7,034,962 | 14,153,878 | 16,050,426 |
Gross profit | 3,223,518 | 3,851,718 | 8,223,034 | 7,752,994 |
Operating expenses: | ||||
Sales and marketing | 954,955 | 919,842 | 2,826,224 | 3,079,361 |
Research and development | 125,780 | 129,189 | 409,764 | 506,150 |
General and administrative | 2,342,165 | 2,381,799 | 7,321,847 | 7,076,688 |
Total operating expenses | 3,422,900 | 3,430,830 | 10,557,835 | 10,662,199 |
Income (loss) from operations | (199,382) | 420,888 | (2,334,801) | (2,909,205) |
Litigation proceeds | 7,724,826 | |||
Interest and other income | 4,916 | 7,598 | 20,836 | 26,430 |
Interest expense, net | (58,316) | (55,185) | (165,269) | (168,388) |
Income (loss) before income taxes | (252,782) | 373,301 | 5,245,592 | (3,051,163) |
Provision for income taxes | 2,044 | 1,876 | 6,133 | 5,627 |
Net income (loss) | (254,826) | 371,425 | 5,239,459 | (3,056,790) |
Preferred stock dividend requirements | (227,499) | (228,999) | (682,802) | (686,997) |
Income (loss) applicable to common shareholders | $ (482,325) | $ 142,426 | $ 4,556,657 | $ (3,743,787) |
Basic earnings (loss) per share (in dollars per share) | $ (0.02) | $ 0.01 | $ 0.16 | $ (0.14) |
Diluted earnings (loss) per share (in dollars per share) | $ (0.02) | $ 0 | $ 0.15 | $ (0.14) |
Weighted average common shares outstanding: | ||||
Basic (in shares) | 27,873,447 | 27,394,061 | 27,759,333 | 27,326,966 |
Diluted (in shares) | 27,873,447 | 29,173,359 | 29,436,008 | 27,326,966 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash flows from operating activities | ||
Net income (loss) | $ 5,239,459 | $ (3,056,790) |
Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||
Provision for doubtful accounts | 141,000 | |
Depreciation and amortization | 645,038 | 835,163 |
(Increase) decrease in assets: | ||
Inventories | (1,447,486) | 868,864 |
Accounts receivable | 474,048 | (2,672,064) |
Other current assets | 419,238 | 460,769 |
Increase (decrease) in liabilities: | ||
Accounts payable | (36,989) | 912,974 |
Litigation proceeds subject to stipulation | (7,724,826) | |
Other accrued liabilities | 321,124 | (1,099,026) |
Income taxes payable | (2,885) | (85,233) |
Net cash used by operating activities | (1,972,279) | (3,835,343) |
Cash flows from investing activities | ||
Purchase of property, plant, and equipment | (1,263,296) | (970,170) |
Changes in restricted cash | 600,897 | (600,594) |
Net cash used by investing activities | (662,399) | (1,570,764) |
Cash flows from financing activities | ||
Repayments of long-term debt and notes payable | (123,602) | (200,236) |
Proceeds from the exercise of stock options | 283,933 | 223,680 |
Proceeds from long-term debt | 276,495 | |
Payment of Preferred Stock dividends | (227,180) | (172,839) |
Net cash provided (used) by financing activities | 209,646 | (149,395) |
Net decrease in cash and cash equivalents | (2,425,032) | (5,555,502) |
Cash and cash equivalents at: | ||
Beginning of period | 22,128,977 | 27,629,359 |
End of period | 19,703,945 | 22,073,857 |
Supplemental schedule of cash flow information: | ||
Interest paid | 165,269 | 168,388 |
Income taxes paid | 9,017 | $ 94,029 |
Supplemental schedule of noncash investing and financing activities: | ||
Preferred dividends declared, not paid | $ 56,363 |
BUSINESS OF THE COMPANY AND BAS
BUSINESS OF THE COMPANY AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2015 | |
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 commercially available products are the VanishPoint ® 0.5mL insulin syringe; 1mL tuberculin, insulin, and allergy antigen syringes; 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; and the VanishPoint ® Blood Collection Set. The Company also sells VanishPoint ® autodisable syringes in the international market in addition to other products. Basis of presentation The accompanying condensed financial statements are unaudited and, in the opinion of Management, reflect all adjustments that are necessary for a fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal and recurring nature. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the entire year. The 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, 2015 for the year ended December 31, 2014. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2015 | |
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, money market accounts, and investments with original maturities of three months or less. Restricted cash Amounts pledged as collateral for an underlying letter of credit for equipment is classified as restricted cash. Changes in restricted cash have been presented as investing activities in the Condensed Statements of Cash Flows. 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 three and nine months of 2015 and 2014: Three Months ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months ended September 30, 2015 Nine Months ended September 30, 2014 Number of significant customers Aggregate dollar amount of net sales to significant customers $5.1 million $6.0 million $10.3 million $9.0 million Percentage of net sales to significant customers 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 78.2% and 70.8% of its VanishPoint ® finished products in the first nine months of 2015 and 2014, respectively, from its primary Chinese manufacturer. Purchases from this Chinese manufacturer aggregated 82.4% and 78.3% of VanishPoint ® finished products in the three month periods ended September 30, 2015 and 2014, respectively. 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 for which the Company has not received tracking reports. Rebates are recorded when issued and are applied against the customer’s receivable balance. D istributor s receive a rebate for the difference between the Wholesale Acquisition Cost and the appropriate contract price as reflected on a tracking report provided by the distributor to the Company . If product is sold by a distributor to an entity that has no contract, there is a standard rebate (lower than a contracted rebate) given to the distributor. One of the purposes of the rebate is to encourage distributors to submit tracking reports to the Company. The provision for contractual pricing allowances is reviewed at the end of each quarter and adjusted for changes in levels of products for which there is no tracking report. Additionally, if it becomes clear that tracking reports will not be provided by individual distributors, the provision is further adjusted. The estimated contractual allowance is included in Accounts payable in the Balance Sheets and deducted from revenues in the Statements of Operations. Accounts payable included estimated contractual allowances for $3,923,870 and $4,160,099 as of September 30, 2015 and December 31, 2014, 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 for 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 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. Litigation proceeds Proceeds from litigation are recognized when realizable. Generally, realization is not reasonably assured and expected until proceeds are collected. On September 30, 2013, the Company received payment of $7,724,826 (the “Judgment Amount”) 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. The Judgment Amount was included as income in the second quarter of 2015 due to the conclusion of the case and related appeals. Prior to the second quarter of 2015, the Judgment Amount had been shown as a liability on the balance sheet. 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 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. The calculation of diluted EPS excluded 1,853,154 shares of Common Stock underlying issued and outstanding stock options for the nine months ended September 30, 2014 as the effect was antidilutive. The calculation of diluted EPS excluded 1,648,401 shares of Common Stock underlying issued and outstanding stock options for the three months ended September 30, 2015 as the effect was antidilutive. The potential dilution, if any, is shown on the following schedule: Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Net income (loss) $ ) $ $ $ ) Preferred dividend requirements ) ) ) ) Earnings (loss) applicable to common shareholders after assumed conversions $ ) $ $ $ ) Average common shares outstanding Average common and common equivalent shares outstanding – assuming dilution Basic earnings (loss) per share $ ) $ $ $ ) Diluted earnings (loss) per share $ ) $ $ $ ) 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 Pronouncements In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic 330) Simplifying the Measurement of Inventory,” which is part of the FASB’s Simplification Initiative. Inventory, including inventory measured at average cost, would be valued at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for the Company’s annual periods and interim periods within those annual periods beginning January 1, 2017. Amendments in this ASU should be applied prospectively with earlier application permitted at the beginning of an interim or annual reporting period. The Company is currently assessing the potential impact of this ASU on its financial statements. In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, 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. This ASU 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. In July 2015, the FASB voted to delay the effective date of this ASU by one year. The ASU will now be effective commencing with the Company’s quarter ending March 31, 2018. Early adoption of this ASU is allowed no sooner than the original effective date. The Company is currently assessing the potential impact of this ASU on its financial statements. In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about and Entity’s Ability to Continue as a Going Concern”. Currently there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern. This ASU requires management to assess the entity’s ability to continue as a going concern. This guidance is effective for the Company’s annual reporting period ending December 31, 2016 and for subsequent interim periods. Early adoption is permitted. The Company expects to adopt this guidance when effective, and upon adoption, will evaluate going concern based on this guidance. In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Shared Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”. ASU 2014-12 is effective for the Company’s annual periods and interim periods within those annual periods beginning January 1, 2016. The Company is assessing the impact, if any, to its financial statements. In January 2015, the FASB issued ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” The amendments in ASU 2015-01 eliminate from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. ASU 2015-01 is effective for the Company’s annual periods and interim periods within those annual periods beginning January 1, 2016. Early adoption is permitted. The Company is not currently reporting any extraordinary or unusual items in its financial statements. In April 2015, the FASB issued ASU 2015-03, “Interest—Imputation of Interest”. To simplify presentation of debt issuance costs, the amendments in this ASU would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this ASU. This ASU is the final version of Proposed Accounting Standards Update 2014-250—“Interest—Imputation of Interest” (Subtopic 835-30), which has been deleted. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on its financial statements. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2015 | |
INVENTORIES | |
INVENTORIES | 3. INVENTORIES Inventories consist of the following: September 30, 2015 December 31, 2014 Raw materials $ $ Finished goods Inventory reserve ) ) $ $ |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2015 | |
INCOME TAXES | |
INCOME TAXES | 4. INCOME TAXES The Company’s effective tax rate on the net earnings (loss) before income taxes was 0.1% and (0.2)% for the nine months ended September 30, 2015 and September 30, 2014, respectively. For the three months ended September 30, 2015 and September 30, 2014, the Company’s effective tax rate on the net earnings (loss) before income taxes was (0.8)% and 0.5%, respectively. |
OTHER ACCRUED LIABILITIES
OTHER ACCRUED LIABILITIES | 9 Months Ended |
Sep. 30, 2015 | |
OTHER ACCRUED LIABILITIES | |
OTHER ACCRUED LIABILITIES | 5. OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: September 30, 2015 December 31, 2014 Prepayments from customers $ $ Accrued property taxes Accrued professional fees Other accrued expenses $ $ |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2015 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 6. COMMITMENTS AND CONTINGENCIES 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 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. In doing so, the Court found that BD’s business practices limited innovation, including false advertisements that suppressed sales of the VanishPoint ® . The specific injunctive relief includes: (1) enjoining BD’s use of “World’s Sharpest Needle” or any similar assertion of superior sharpness; (2) requiring notification to all customers who purchased BD syringe products from July 2, 2004 to date that BD wrongfully claimed that its syringe needles were sharper and that its statement that it had “data on file” was false and misleading; (3) requiring notification to employees, customers, distributors, GPOs, and government agencies that the deadspace of the VanishPoint ® has been within ISO standards since 2004 and that BD overstated the deadspace of the VanishPoint ® to represent that it was higher than some of BD’s syringes when it was actually less, and that BD’s statement that it had “data on file” was false and misleading, and, in addition, posting this notice on its website for a period of three years; (4) enjoining BD from advertising that its syringe products save medication as compared to VanishPoint ® products for a period of three years; (5) requiring notification to all employees, customers, distributors, GPOs, and government agencies that BD’s website, cost calculator, printed materials, and oral representations alleging BD’s syringes save medication as compared to the VanishPoint ® were based on false and inaccurate measurement of the VanishPoint ® , and, in addition, posting this notice on its website for a period of three years; and (6) requiring the implementation of a comprehensive training program for BD employees and distributors that specifically instructs them not to use old marketing materials and not to make false representations regarding VanishPoint ® syringes. Final judgment was entered on January 15, 2015, awarding the Company $340,524,042 in damages and $11,722,823 in attorneys’ fees, as well as granting injunctive relief consistent with the orders as indicated above. The parties stipulated that the amount of litigation costs recoverable by the Company is $295,000. On January 14, 2015, the District Court stayed the portion of the injunctive relief that requires BD to notify end-user customers but also ordered BD to comply with internal correction activities as well as mandatory disclosures as set out above to its employees, customers, distributors and Group Purchasing Organizations. BD filed an appeal of that ruling with the 5 th Circuit Court of Appeals and that appeal was denied on February 3, 2015. On February 12, 2015, BD filed a motion to amend the judgment directed most specifically to the issue of award of prejudgment interest. On April 23, 2015, the Court entered an Amended Final Judgment that removed prejudgment interest but kept all other monetary and injunctive relief the same as was granted in the original Final Judgment. BD filed its brief in the appeal on July 20, 2015. The Company filed its responsive brief on September 18, 2015 and BD filed its brief in reply on October 19, 2015 to complete the briefing. Based on current information, oral argument is expected during the first quarter of 2016. In many cases, the 5th Circuit Court of Appeals issues its decision several months after oral argument, but there is no set time limit. 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 first paragraph of this Note 6. |
BUSINESS SEGMENTS
BUSINESS SEGMENTS | 9 Months Ended |
Sep. 30, 2015 | |
BUSINESS SEGMENTS | |
BUSINESS SEGMENTS | 7. BUSINESS SEGMENTS Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 U.S. sales $ $ $ $ North and South America sales (excluding U.S.) Other international sales Total sales $ $ $ $ September 30, 2015 December 31, 2014 Long-lived assets U.S. $ $ International $ $ 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. |
DIVIDENDS
DIVIDENDS | 9 Months Ended |
Sep. 30, 2015 | |
DIVIDENDS | |
DIVIDENDS | 8. DIVIDENDS On March 24, 2015, the Board of Directors declared dividends on the Series I Class B Preferred Stock in the amount of $37,891 which were paid on April 30, 2015. The Company also declared and paid dividends to Series II Class B Preferred Stockholders in the amount of $132,926 on the same dates. As of June 25, 2015, the Board of Directors declared dividends on the Series I Class B Preferred Stock in the amount of $12,313 which were paid on July 20, 2015. The Company also declared and paid dividends to the Series II Class B Preferred Stockholders in the amount of $44,050 on the same dates. As of September 25, 2015, the Board of Directors declared dividends on the Series I Class B Preferred Stock in the amount of $12,313 which were paid on October 22, 2015. The Company also declared and paid dividends to the Series II Class B Preferred Stockholders in the amount of $44,050 on the same dates. |
TREASURY SHARES
TREASURY SHARES | 9 Months Ended |
Sep. 30, 2015 | |
TREASURY SHARES | |
TREASURY SHARES | 9. TREASURY SHARES The Board of Directors of the Company cancelled all treasury shares effective August 11, 2015. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2015 | |
SUBSEQUENT EVENTS. | |
SUBSEQUENT EVENTS | 10. SUBSEQUENT EVENTS The Company caused a restatement of the Form 10-Q for the period ended June 30, 2015 to be filed with the U.S. Securities and Exchange Commission on November 13, 2015 due to a misstatement in inventories and Costs of goods sold. |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
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, money market accounts, and investments with original maturities of three months or less. |
Restricted cash | Restricted cash Amounts pledged as collateral for an underlying letter of credit for equipment is classified as restricted cash. Changes in restricted cash have been presented as investing activities in the Condensed Statements of Cash Flows. |
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 three and nine months of 2015 and 2014: Three Months ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months ended September 30, 2015 Nine Months ended September 30, 2014 Number of significant customers Aggregate dollar amount of net sales to significant customers $5.1 million $6.0 million $10.3 million $9.0 million Percentage of net sales to significant customers 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 78.2% and 70.8% of its VanishPoint ® finished products in the first nine months of 2015 and 2014, respectively, from its primary Chinese manufacturer. Purchases from this Chinese manufacturer aggregated 82.4% and 78.3% of VanishPoint ® finished products in the three month periods ended September 30, 2015 and 2014, respectively. 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 for which the Company has not received tracking reports. Rebates are recorded when issued and are applied against the customer’s receivable balance. D istributor s receive a rebate for the difference between the Wholesale Acquisition Cost and the appropriate contract price as reflected on a tracking report provided by the distributor to the Company . If product is sold by a distributor to an entity that has no contract, there is a standard rebate (lower than a contracted rebate) given to the distributor. One of the purposes of the rebate is to encourage distributors to submit tracking reports to the Company. The provision for contractual pricing allowances is reviewed at the end of each quarter and adjusted for changes in levels of products for which there is no tracking report. Additionally, if it becomes clear that tracking reports will not be provided by individual distributors, the provision is further adjusted. The estimated contractual allowance is included in Accounts payable in the Balance Sheets and deducted from revenues in the Statements of Operations. Accounts payable included estimated contractual allowances for $3,923,870 and $4,160,099 as of September 30, 2015 and December 31, 2014, 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 for 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 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. |
Litigation proceeds | Litigation proceeds Proceeds from litigation are recognized when realizable. Generally, realization is not reasonably assured and expected until proceeds are collected. On September 30, 2013, the Company received payment of $7,724,826 (the “Judgment Amount”) 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. The Judgment Amount was included as income in the second quarter of 2015 due to the conclusion of the case and related appeals. Prior to the second quarter of 2015, the Judgment Amount had been shown as a liability on the balance sheet. |
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 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. The calculation of diluted EPS excluded 1,853,154 shares of Common Stock underlying issued and outstanding stock options for the nine months ended September 30, 2014 as the effect was antidilutive. The calculation of diluted EPS excluded 1,648,401 shares of Common Stock underlying issued and outstanding stock options for the three months ended September 30, 2015 as the effect was antidilutive. The potential dilution, if any, is shown on the following schedule: Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Net income (loss) $ ) $ $ $ ) Preferred dividend requirements ) ) ) ) Earnings (loss) applicable to common shareholders after assumed conversions $ ) $ $ $ ) Average common shares outstanding Average common and common equivalent shares outstanding – assuming dilution Basic earnings (loss) per share $ ) $ $ $ ) Diluted earnings (loss) per share $ ) $ $ $ ) |
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 Pronouncements | Recent Pronouncements In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic 330) Simplifying the Measurement of Inventory,” which is part of the FASB’s Simplification Initiative. Inventory, including inventory measured at average cost, would be valued at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for the Company’s annual periods and interim periods within those annual periods beginning January 1, 2017. Amendments in this ASU should be applied prospectively with earlier application permitted at the beginning of an interim or annual reporting period. The Company is currently assessing the potential impact of this ASU on its financial statements. In May 2014, FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers”, 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. This ASU 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. In July 2015, the FASB voted to delay the effective date of this ASU by one year. The ASU will now be effective commencing with the Company’s quarter ending March 31, 2018. Early adoption of this ASU is allowed no sooner than the original effective date. The Company is currently assessing the potential impact of this ASU on its financial statements. In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about and Entity’s Ability to Continue as a Going Concern”. Currently there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern. This ASU requires management to assess the entity’s ability to continue as a going concern. This guidance is effective for the Company’s annual reporting period ending December 31, 2016 and for subsequent interim periods. Early adoption is permitted. The Company expects to adopt this guidance when effective, and upon adoption, will evaluate going concern based on this guidance. In June 2014, the FASB issued ASU 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Shared Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)”. ASU 2014-12 is effective for the Company’s annual periods and interim periods within those annual periods beginning January 1, 2016. The Company is assessing the impact, if any, to its financial statements. In January 2015, the FASB issued ASU 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” The amendments in ASU 2015-01 eliminate from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement - Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. ASU 2015-01 is effective for the Company’s annual periods and interim periods within those annual periods beginning January 1, 2016. Early adoption is permitted. The Company is not currently reporting any extraordinary or unusual items in its financial statements. In April 2015, the FASB issued ASU 2015-03, “Interest—Imputation of Interest”. To simplify presentation of debt issuance costs, the amendments in this ASU would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this ASU. This ASU is the final version of Proposed Accounting Standards Update 2014-250—“Interest—Imputation of Interest” (Subtopic 835-30), which has been deleted. The amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on its financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN17
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
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 September 30, 2015 Three Months Ended September 30, 2014 Nine Months ended September 30, 2015 Nine Months ended September 30, 2014 Number of significant customers Aggregate dollar amount of net sales to significant customers $5.1 million $6.0 million $10.3 million $9.0 million Percentage of net sales to significant customers |
Schedule of earnings per share | Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 Net income (loss) $ ) $ $ $ ) Preferred dividend requirements ) ) ) ) Earnings (loss) applicable to common shareholders after assumed conversions $ ) $ $ $ ) Average common shares outstanding Average common and common equivalent shares outstanding – assuming dilution Basic earnings (loss) per share $ ) $ $ $ ) Diluted earnings (loss) per share $ ) $ $ $ ) |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
INVENTORIES | |
Schedule of inventories | September 30, 2015 December 31, 2014 Raw materials $ $ Finished goods Inventory reserve ) ) $ $ |
OTHER ACCRUED LIABILITIES (Tabl
OTHER ACCRUED LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
OTHER ACCRUED LIABILITIES | |
Schedule of other accrued liabilities | September 30, 2015 December 31, 2014 Prepayments from customers $ $ Accrued property taxes Accrued professional fees Other accrued expenses $ $ |
BUSINESS SEGMENTS (Tables)
BUSINESS SEGMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
BUSINESS SEGMENTS | |
Schedule of sales and long-lived assets by geographical areas | Three Months Ended September 30, 2015 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014 U.S. sales $ $ $ $ North and South America sales (excluding U.S.) Other international sales Total sales $ $ $ $ September 30, 2015 December 31, 2014 Long-lived assets U.S. $ $ International $ $ |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 9 Months Ended |
Sep. 30, 2015item | |
Accounts receivable | |
Number of products consigned to customers | 0 |
Maximum | |
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 |
Building | |
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 ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015USD ($)customer | Sep. 30, 2014USD ($)customer | Sep. 30, 2015USD ($)customeritem | Sep. 30, 2014USD ($)customer | Dec. 31, 2014USD ($) | |
Concentration risks | |||||
Number of significant customers | customer | 2 | 3 | 2 | 2 | |
Aggregate dollar amount of net sales to significant customers | $ 9,482,866 | $ 10,886,680 | $ 22,376,912 | $ 23,803,420 | |
Revenue recognition | |||||
Estimated contractual allowance | 3,923,870 | 3,923,870 | $ 4,160,099 | ||
Change to reserve regarding non-contractual rebates | $ 0 | ||||
Period for return of incorrect shipments | 10 days | ||||
Number of times overstocking returns are limited | item | 2 | ||||
Period for return of product due to overstock | 12 months | ||||
Maximum percentage of distributor's total purchase for the prior 12-month period | 1.00% | ||||
Sales | Customer Concentration Risk | |||||
Concentration risks | |||||
Aggregate dollar amount of net sales to significant customers | $ 5,100,000 | $ 6,000,000 | $ 10,300,000 | $ 9,000,000 | |
Percentage of net sales to significant customers (as a percent) | 53.50% | 55.00% | 46.00% | 37.60% | |
Product components | Supplier Concentration Risk | |||||
Concentration risks | |||||
Percentage of net sales to significant customers (as a percent) | 82.40% | 78.30% | 78.20% | 70.80% |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) | Sep. 30, 2013 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 |
Earnings per share | |||||
Stock options excluded from calculation of diluted EPS | 1,853,154 | ||||
Net income (loss) | $ (254,826) | $ 371,425 | $ 5,239,459 | $ (3,056,790) | |
Preferred dividend requirements | (227,499) | (228,999) | (682,802) | (686,997) | |
Income (loss) applicable to common shareholders | $ (482,325) | $ 142,426 | $ 4,556,657 | $ (3,743,787) | |
Average common shares outstanding | 27,873,447 | 27,394,061 | 27,759,333 | 27,326,966 | |
Average common and common equivalent shares outstanding - assuming dilution | 27,873,447 | 29,173,359 | 29,436,008 | 27,326,966 | |
Basic earnings (loss) per share (in dollars per share) | $ (0.02) | $ 0.01 | $ 0.16 | $ (0.14) | |
Diluted earnings (loss) per share (in dollars per share) | $ (0.02) | $ 0 | $ 0.15 | $ (0.14) | |
Dilutive stock equivalents from stock options (in shares) | 1,648,401 | ||||
Becton Dickinson and Company Case | |||||
Litigation Proceeds | |||||
Judgement amount received | $ 7,724,826 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
INVENTORIES | ||
Raw materials | $ 1,749,335 | $ 1,510,225 |
Finished goods | 5,043,093 | 3,834,717 |
Inventory, gross | 6,792,428 | 5,344,942 |
Inventory reserve | (681,394) | (681,394) |
Inventory, net | $ 6,111,034 | $ 4,663,548 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
INCOME TAXES | ||||
Effective tax rate (as a percent) | (0.80%) | 0.50% | 0.10% | (0.20%) |
OTHER ACCRUED LIABILITIES (Deta
OTHER ACCRUED LIABILITIES (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
OTHER ACCRUED LIABILITIES | ||
Prepayments from customers | $ 366,085 | $ 435,821 |
Accrued property taxes | 299,076 | 7,554 |
Accrued professional fees | 188,127 | 201,866 |
Other accrued expenses | 141,533 | 137,081 |
Other accrued liabilities | $ 994,821 | $ 782,322 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | Jan. 15, 2015USD ($) | Nov. 10, 2014 | Sep. 19, 2013USD ($) | Sep. 30, 2007item |
Becton Dickinson and Company Case | ||||
COMMITMENTS AND CONTINGENCIES | ||||
Value of damages awarded | $ 340,524,042 | $ 113,508,014 | ||
Attorney fees | 11,722,823 | |||
Length of time required to post corrected product information on its website | 3 years | |||
Length of time required to modify its advertising messages | 3 years | |||
Litigation costs receivable | $ 295,000 | |||
BD and MDC Investment Holdings Inc Case | ||||
COMMITMENTS AND CONTINGENCIES | ||||
Number of U.S. patents infringed upon | item | 2 |
BUSINESS SEGMENTS (Details)
BUSINESS SEGMENTS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Sales by geographical areas | |||||
Total sales | $ 9,482,866 | $ 10,886,680 | $ 22,376,912 | $ 23,803,420 | |
U.S. | |||||
Sales by geographical areas | |||||
Total sales | 6,152,873 | 8,264,437 | 17,423,389 | 18,372,109 | |
Long-lived assets | |||||
Long-Lived assets | 11,286,141 | 11,286,141 | $ 10,642,859 | ||
North and South America sales (excluding U.S.) | |||||
Sales by geographical areas | |||||
Total sales | 3,065,507 | 2,479,666 | 4,345,044 | 4,477,311 | |
Other international sales | |||||
Sales by geographical areas | |||||
Total sales | 264,486 | $ 142,577 | 608,479 | $ 954,000 | |
International | |||||
Long-lived assets | |||||
Long-Lived assets | $ 191,904 | $ 191,904 | $ 209,994 |
DIVIDENDS (Details)
DIVIDENDS (Details) - USD ($) | Sep. 25, 2015 | Jun. 25, 2015 | Mar. 24, 2015 | Sep. 30, 2015 |
Dividends | ||||
Preferred dividends declared | $ 56,363 | |||
Series I, Class B | ||||
Dividends | ||||
Preferred dividends declared | $ 12,313 | $ 12,313 | $ 37,891 | |
Series II, Class B | ||||
Dividends | ||||
Preferred dividends declared | $ 44,050 | $ 44,050 | $ 132,926 |