Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENT WARNING

Certain statements included by reference in this filing containing the words "could," "may," "believes," "anticipates," "intends," "expects," and similar such words constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Any forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others: tariffs; material changes in demand; our ability to maintain liquidity; our maintenance of patent protection; our ability to maintain favorable third party manufacturing and supplier arrangements and relationships; foreign trade risk; our ability to access the market; production costs; the impact of larger market players in providing devices to the safety market; and any other factors referenced in Item 1A. Risk Factors in Part II. Given these uncertainties, undue reliance should not be placed on forward-looking statements.

MATERIAL CHANGES IN FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We have been manufacturing and marketing our products since 1997. Syringes comprised 65.0% of our sales in the first nine months of 2025. EasyPoint^® products accounted for 31.3% and other products, including our IV safety catheter and blood collection products, were 3.7% of our sales in the first nine months of 2025. For the first nine months of 2025, the sales mix included a higher proportion of international product sales compared to the first nine months of 2024. Traditionally, international sales carry lower average selling prices compared to domestic sales.

Our products have been and continue to be distributed nationally and internationally through numerous distributors. Some of our popular syringe products provide low dead-space. Low dead-space syringes reduce residual medication remaining in the syringe after the dose has been administered. In some instances, the low dead-space allows for additional doses of medication to be obtained from the vials.

On September 13, 2024, the Office of the U.S. Trade Representative ("USTR") revealed final adjustments to increase tariffs on certain goods imported from China under Section 301 of the Trade Act of 1974. Among those products included were syringes and needles, at a rate of 100%. During 2025, the on-going development and negotiation of U.S. foreign trade policy with China and other nations has caused the prevailing tariff rates on products imported into the U.S. to fluctuate. These fluctuations have impacted certain goods or groups of goods, and have varied based on country of origin. As of September 30, 2025, the prevailing tariff rate on most syringe and needle products imported from China was 130%. Other products we import from China, which do not fall under the category of needles and syringes, are subject to a 30% tariff rate. As foreign trade policy continues to evolve and as new trade deals are being negotiated, uncertainty as to future tariff rates and affected products remains. Tariffs are expected to have a continuing material impact to our results of operations and financial position. We are working to lessen the financial impact of the tariffs through strategic ordering of products from our Chinese suppliers and shifting a larger portion of manufacturing of 1mL, 3mL, and EasyPoint^® needles to our domestic manufacturing facility.

While we have manufacturing capabilities to manufacture most of the products we currently sell domestically, some of our products are sourced exclusively from China. 61.7% and 90% of the products we obtained in the first nine months of 2025 and 2024, respectively, were purchased from our manufacturers in China, most of which are now impacted by the tariffs. Tariffs are expected to have a material impact to our results of operations and financial position. Approximately $2.3 million was spent on tariff expenses in the first nine months of 2025. We are working to lessen the financial impact of the tariffs, including shifting a larger portion of manufacturing of 1mL, 3mL, and EasyPoint^® needles to our domestic manufacturing facility. This shift would decrease tariff expenses but would lead to an increase in our manufacturing workforce costs as we hire new employees. We implemented reductions in force in the second and third quarters of 2025 primarily within non-manufacturing functions, each expected to save approximately $1.6 million, however, overall workforce levels increased due to higher domestic manufacturing. As such, we expect that manufacturing workforce increases instituted in 2025 will raise payroll costs by approximately $825 thousand on an annualized basis.

We have recently adapted some equipment to increase our domestic manufacturing capabilities. The adaptations to existing equipment will allow us to produce 0.5 mL syringes domestically. Once operational, we will no longer rely on imports for these products. We currently anticipate that commercial quantities will become available, as market demand necessitates, in the first half of 2026.

Certain products must be purchased from third party suppliers as we do not currently have the machinery to manufacture our entire product line in our U.S. facility. When equipment was added to our U.S. facility pursuant to the TIA, it was strictly for product lines typically used in the administration of vaccines, as required by the TIA.

In 2020 and 2021, we were awarded significant orders and contracts by the U.S. government for safety syringes for COVID-19 vaccination efforts. From 2020 through the first quarter of 2022, the U.S. government was a significant customer. We cannot predict whether any future U.S. government orders may occur.

Recent additions of manufacturing equipment and facilities under the 2020 TIA have increased our production capacity and our overhead costs. Under the TIA and its successor agreement, until June 30, 2030 we must continue to abide by ongoing terms which include maintenance of equipment, availability of capacity, and U.S. government preference in the event of a public health emergency.

The U.S. government orders as well as the TIA are material events particular to the COVID-19 pandemic and are not indicative of future operations.

Over the past several years, we have experienced certain cost increases in raw materials. Those costs primarily affected our domestic manufacturing because the finished goods we purchased from China were subject to a long-term fixed price contract. Sensitivity to cost fluctuations are likely to become more pronounced as we transition away from production under such a fixed price contract. Other factors that could affect our unit costs include tariffs, supplier cost increases, increases in workforce costs associated with increased domestic production, and changing production volumes. Increases in costs may not be recoverable through price increases of our products.

​

We believe domestic customers retained products provided for vaccination purposes in inventory. Customers have reported that demand was diminished due to their remaining syringe inventory. It is difficult to estimate how much, if any, of the remaining inventory might still remain in the market.

As detailed in Note 4 to the financial statements, we held $30.5 million in debt and equity securities as of September 30, 2025, which represented 20.8% of our total assets.

Historically, unit sales have increased during the flu season. From 2020-2022, seasonal effects of the flu season on our revenues were less impactful due to the dramatic increase in sales attributable to COVID-19 vaccinations. Seasonal trends for syringe sales may now be following pre-pandemic patterns. Additionally, there may be more demand for EasyPoint^® products during the flu season, particularly in the retail pharmacy market. Purchases from our retail pharmacy customers may differ from purchasing patterns of general line distributors. Second and third quarter EasyPoint^® sales volumes increased primarily for this reason.

Overall demand may be affected by public sentiment and acceptance of the safety and efficacy of vaccinations. While some products in our catalog of products are unrelated to the administration of vaccines, changes in the acceptance of vaccinations could have a material impact on our business.

A material portion of our net loss for the nine months ended September 30, 2025 is comprised of approximately $3.2 million in unrealized loss in debt and equity securities on the Condensed Statements of Operations. A material portion of our net income for the three months ended September 30, 2025 is comprised of approximately $2.4 million in unrealized gain in debt and equity securities on the Condensed Statements of Operations.

In May 2025, we received a settlement payment of $1.9 million related to the resolution of litigation with former legal counsel. The amount was recorded in Litigation proceeds during the second quarter ended June 30, 2025.

In 1995, we entered into a license agreement with Thomas J. Shaw for the exclusive right to manufacture, market, and distribute products utilizing his patented automated retraction technology and other patented technology. This technology is the subject of various patents and patent applications owned by Mr. Shaw. The license agreement generally provides for quarterly payments of a 5% royalty fee on gross sales of products subject to the license and he receives fifty percent (50)% of the royalties paid to us by certain sublicensees of the technology subject to the license.

RESULTS OF OPERATIONS

​

The following discussion may contain trend information and other forward-looking statements that involve a number of risks and uncertainties. Our actual future results could differ materially from our historical results of operations and those discussed in any forward-looking statements. All period references are to periods ended September 30, 2025 or 2024, as applicable. Dollar amounts have been rounded for ease of reading.

​

Comparison of Three Months Ended September 30, 2025 and September 30, 2024

Domestic sales accounted for 91.1% and 93.1% of total revenues for the three months ended September 30, 2025 and 2024, respectively. Domestic revenues decreased 4.6%, while domestic unit sales decreased 20.4%. Domestic unit sales represented 83.9% of total unit sales for the three months ended September 30, 2025 compared to 92.4% for the same period last year. The decrease in unit sales did not translate into a proportional decrease in domestic revenues, primarily due to an increase in average domestic selling price. The average selling price was impacted by change in product mix. The average domestic selling price increased due to decreased EasyPoint^® needle sales in relation to all products sold.

​

International revenues for the three months ended September 30, 2025 increased 25% compared to the same period in 2024. However, the average international selling price per unit declined relative to the third quarter of 2024, primarily due to a shift in product mix. International sales for the three months ended September 30, 2025 included EasyPoint^® needles sold at a discount to certain international customers which reduced the overall average selling price. There remains uncertainty regarding the timing of future international orders.

​

Overall, units sales decreased 12.4%.

​

Cost of manufactured product decreased 20.1% compared to the same period last year primarily due to lower unit sales. The decrease also reflects a favorable shift in product mix, with a higher proportion of VanishPoint^® syringe sales relative to EasyPoint^® needles during the three months ended September 30, 2025, contributing to higher overall gross margins. Royalty expense decreased 6.5% primarily due to the decrease in gross sales.

​

Tariffs are expected to continue to materially impact our costs in future periods. Approximately $172 thousand was spent on tariff expenses in the third quarter of 2025. These costs are included in Cost of manufactured product.

Operating expenses increased 4.3% primarily due to product donations of inventory nearing expiration and higher bad debt expense.

​

The loss from operations was $3.7 million compared to a loss of approximately $5.1 million for the same period last year. The improvement was primarily driven by higher gross margin in the current period, reflecting lower tariff costs compared to the prior year, partially offset by higher domestic manufacturing costs associated with our shift to greater U.S.-based production.

​

The unrealized gain on debt and equity securities was $2.4 million due to the increased market values of those securities.

The provision for income taxes was $1.7 thousand as compared to a benefit for income taxes of $31 thousand for the same period in 2024. The change is primarily due to reporting income for the three months ended September 30, 2025, compared with a net loss for the three months ended September 30, 2024.

Comparison of Nine Months Ended September 30, 2025 and September 30, 2024

Domestic sales accounted for 87.1% and 88.8% of total revenues for the nine months ended September 30, 2025 and 2024, respectively. Domestic revenues increased 18.0%, while domestic unit sales increased 11.8%. Domestic unit sales represented 78.0% of total unit sales for the nine months ended September 30, 2025 compared to 87.6% for the same period last year. The average domestic selling price was positively impacted by a shift in product mix to more VanishPoint^® unit sales in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

​

International revenues for the nine months ended September 30, 2025 increased 38.1% compared to the same period in 2024. However, average international selling price per unit declined relative to the first nine months of 2024, primarily due to a shift in product mix. International sales for the nine months ended September 30, 2025 included EasyPoint^® needles sold at a discount to certain international customers which reduced the overall average selling price. There remains uncertainty regarding the timing of future international orders.

​

Overall, units sales increased 25.5%.

​

Cost of manufactured product increased 22.1% principally due to increased unit sales and higher inventory write-off expense relating to products nearing expiration. Royalty expense increased 11.0% primarily due to the increase in gross sales.

Tariffs are expected to continue to materially impact our costs in future periods. Approximately $2.3 million was spent on tariff expenses in the first nine months of 2025. These costs are included in Cost of manufactured product.

Operating expenses remained consistent.

​

The loss from operations was $13.5 million compared to a loss of approximately $13.9 million for the same period last year. This was primarily due to a decrease in legal and litigation fees.

​

The unrealized loss on debt and equity securities was $3.2 million due to the decreased market values of those securities.

In May 2025, we received a settlement payment of $1.9 million related to the resolution of litigation with former legal counsel. The amount was recorded in Litigation proceeds during the second quarter ended June 30, 2025.

The provision for income taxes was $289 thousand as compared to a provision for income taxes of $8.4 million for the same period in 2024. The difference is primarily related to fully reserving our deferred tax asset in the second quarter of 2024.

Discussion of Balance Sheet and Cash Flow Items

​

Cash flow used by operations was $6.5 million for the nine months ended September 30, 2025 due to a number of factors. Aside from the various reconciling items used in determining the overall use of cash, our net loss for the period was the predominant factor. We recognized approximately $4.5 million in other income from the TIA, offset by $3.2 million in unrealized loss in debt and equity securities which is material to the adjustments to total cash flow from operations. Changes in working capital also impacted cash flows from operating activities. Accounts receivable increased by $904 thousand, inventories increased by $2.4 million, and accounts payable increased by $284 thousand.

Cash flow from investing activities was $6.1 million for the nine months ended September 30, 2025, primarily reflecting $7 million in proceeds from the sale of debt and equity securities, partially offset by purchases of property, plant, and equipment and additional investments in debt and equity securities. The $7 million obtained as a result of the sale of securities was used to fund operating activities during the first nine months of 2025.

Cash used by financing activities was $423 thousand for the nine months ended September 30, 2025. This was primarily due to repayments of long-term debt and payment of preferred stock dividends.

LIQUIDITY AND CAPITAL RESOURCES

​

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

​

The imposition of tariffs on our products will continue to have a material effect on our operating results and liquidity. Additional capital improvements and increases to our manufacturing workforce will also increase expenses in the near-term as a result of the tariffs and our expected increase in domestic manufacturing. The conversion of existing equipment plus the purchase of additional molds to produce 0.5 mL syringes which have never been produced domestically is expected to cost approximately $1 million, most of which has already been expended. Those products accounted for roughly 9.1% of our overall domestic unit sales and 15.2% of our domestic syringe unit sales for the three months ended September 30, 2025. The products accounted for roughly and 10.9% of our overall domestic unit sales and 16.6% of our domestic syringe unit sales for the nine months ended September 30, 2025. We expect that workforce increases, primarily in manufacturing, instituted in 2025 to support higher domestic production will raise payroll costs by approximately $825 thousand on an annualized basis.

Margins

The mix of domestic and international sales, along with product mix, affects the average sales price of our products. Generally, the higher the ratio of domestic sales to international sales, the higher the average sales price will be. Additionally, product mix plays a role, with syringe sales typically having higher average selling prices and gross profit margins than our other product lines. Some international sales of our products are shipped directly from China to the customer. The number of units produced by us versus manufactured in China can have a significant effect on the carrying costs of Inventory as well as Cost of sales. Generally, an overall increase in units sold can positively affect our margins. The cost of raw materials used in manufacturing, transportation costs, and the impact of tariffs can also significantly affect our margins.

Our margins have experienced significant fluctuations over the past two years. Most recently, our margins have faced negative pressure from numerous factors. The tariffs enacted in 2024-2025 have had a direct negative impact on products we import from China to date. In reaction to the tariffs, we have acted to increase our domestic production and reduce, to the extent possible, our reliance on imports. While we believe these efforts will enable us to avoid some of the impact of the tariffs, we will be forced to import the products we are unable to produce in the U.S. As we work to increase our domestic production and achieve manufacturing efficiencies, we expect to incur higher manufacturing costs in the near term, but will continue to work to minimize our reliance on imported products.

Cash Requirements

We believe we will have adequate means to meet our short-term needs to fund operations for at least 12 months from the date of issuance of the financial statements. Besides cash reserves and expected income from operations, we also have access to our investments which may be liquidated in the event that we need to access the funds for operations. Expected short-term uses of cash include payroll and benefits, royalty expense, inventory purchases, tariffs, contractual obligations, payment of income taxes, quarterly preferred stock dividends, and other operational priorities. Our liabilities are our bank debt as set forth as Long-term debt on our Condensed Balance Sheets and other liabilities detailed herein in Note 6 to the financial statements. We believe we will have adequate means to meet our currently foreseeable long-term liquidity needs although the new tariffs and our costs related to an increase in domestic manufacturing will increase our expenses materially. For the next 1-3 years, we believe our liquidity will decline materially, but we expect that we may be able to satisfy our long-term cash requirements using a combination of cash and liquidation of our equity investments. If cash needs cannot be met using existing cash and investments, management would further reduce operational costs. In the event that the foregoing is insufficient, we may liquidate certain assets.

Capital Resources

To produce more units at our U.S. facility, we expected to spend approximately $1 million to purchase molds and convert domestic equipment, most of was expended in the second quarter of 2025. Additional equipment expenditures may be necessary in the future.

CRITICAL ACCOUNTING ESTIMATES

We are responsible for developing estimates for amounts reported as assets and liabilities, and revenues and expenses in conformity with U.S. generally accepted accounting principles ("GAAP"). Those estimates require that we develop assumptions of future events based on past experience and expectations of economic factors. Among the more critical estimates management makes is the estimate for customer rebates. The amount reported as a contractual allowance for rebates involves examination of past historical trends related to our sales to distributors and the related credits issued once our distributors have satisfied their contractual obligations. The estimate includes consideration of historical redemption rates, discount rates, a combination of estimated distributor inventories based on tracking information provided by the distributors or if known, inventory turnover rates. The establishment of a liability for future claims of rebates against sales in the current period requires that we have an understanding of the relevant sales with respect to product categories, sales distribution channels, and the likelihood of contractual obligations being satisfied. We examine the results of estimates against actual results historically and use the determination to further develop our basis for assumptions in future periods, as well as the accuracy of past estimates. Based on distributors' purchasing and claiming rebates practices, we do not expect significant changes to the current inputs and assumption used in the estimate calculations. While we believe that we have sufficient historical data, and a firm basis for establishing reserves for contractual obligations, there is an inherent risk that our estimates and the underlying assumptions may not reflect actual future results. In the event that these estimates and/or assumptions are incorrect, adjustments to our reserves may have a material impact on future results. As of September 30, 2025, we estimate that the total potential future credits to be issued as a result of prior purchases which have not yet been claimed is $2.2 million. These credits are recognized as a liability and included in Accounts payable on the Condensed Balance Sheets.

​