**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x****     ****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

 

**For the quarterly period ended         September30, 2007**

 

**or**

 

**o****        ****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934**

 

**For the transition period from                                     to                                    **

 

**Commission file number   000-30885**

 

**Retractable Technologies, Inc.**

(Exactname of registrant as specified in its charter)

 

| **Texas**                                                      | ** ** | **75-2599762**                       |
|----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |       | (I.R.S. Employer Identification No.) |
|                                                           |       |                                 |
| **511 Lobo Lane**                                              | ** ** | ** **                           |
| **Little Elm, Texas**                                          | ** ** | **75068-0009**                       |
| (Address of principal executive offices)                       |       | (zip code)                           |

 

**(972)294-1010**

(Registrant’stelephone number, including area code)

 

 

(Formername, former address, and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant  (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes x    No o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer andlarge accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

 

| Large  accelerated filer o |   | Accelerated  filer o |   | Non-accelerated  filer x |
|----------------------------|--------|----------------------|--------|--------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes o  No x

 

APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGSDURING THE PRECEDING FIVE YEARS:

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13, or 15(d) of the Securities ExchangeAct of 1934 subsequent to the distribution of securities under a plan confirmedby a court. Yes o  No o

 

APPLICABLEONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date: 23,755,414 sharesof Common Stock, no par value, issued and outstanding on November 1, 2007.

 

 

----

 

**RETRACTABLETECHNOLOGIES, INC.**

**FORM 10-Q**

**For thequarterly period ended September 30, 2007**

 

**TABLE OFCONTENTS**

 
| ** **                                   | **Page**                                                                                        |
|----------------------------------------------|-------------------------------------------------------------------------------------------------|
| **PART I - FINANCIAL INFORMATION**           | ** **                                                                                      |
|                                         |                                                                                            |   |
| **Item 1.**                                  | **Financial Statements**                                                                        | **3** |
| ** **                                   | ** **                                                                                      | ** ** |
| **CONDENSED BALANCE SHEETS**                 | **3**                                                                                           |
| **CONDENSED STATEMENTS  OF OPERATIONS**      | **4**                                                                                           |
| **CONDENSED STATEMENTS  OF CASH FLOWS**      | **5**                                                                                           |
| **NOTES TO CONDENSED FINANCIAL  STATEMENTS** | **6**                                                                                           |
|                                         |                                                                                            |   |
| **Item 2.**                                  | **Management’s Discussion and  Analysis of Financial Condition and Results of Operations** | **10** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item 3.**                                  | **Quantitative and Qualitative  Disclosures About Market Risk**                                 | **15** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item 4.**                                  | **Controls and Procedures**                                                                     | **15** |
|                                         |                                                                                            |   |
| **PART II - OTHER INFORMATION**              | ** **                                                                                      |
|                                         |                                                                                            |   |
| **Item 1.**                                  | **Legal Proceedings**                                                                           | **15** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item 1A.**                                 | **Risk Factors**                                                                                | **15** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item 2.**                                  | **Unregistered Sales of Equity  Securities and Use of Proceeds**                                | **15** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item 3.**                                  | **Defaults Upon Senior  Securities**                                                            | **16** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item 4.**                                  | **Submission of Matters to a  Vote of Security Holders**                                        | **16** |
| ** **                                   | ** **                                                                                      | ** ** |
| **Item  6.**                                 | **Exhibits**                                                                                    | **17** |
| ** **                                   | ** **                                                                                      | ** ** |
| **SIGNATURES**                               | **17**                                                                                          |

 

 

2

----

 

 

**PARTI-FINANCIAL INFORMATION**

 

**Item 1.        FinancialStatements.**

 

**RETRACTABLE TECHNOLOGIES, INC.**

**CONDENSED BALANCE SHEETS**

 
| ** **                                      | ** ** | **September  30, 2007**

**(unaudited)** | ** ** | **December 31, 2006** | ** ** |
|-------------------------------------------------|------------|------------------------------------------|------------|-----------------------|------------|
|                                            |       |                                     |       |                  |       |
| **ASSETS**                                      | ** ** | ** **                               | ** ** | ** **            | ** ** |
| Current assets:                                 |       |                                     |       |                  |       |
| Cash and cash equivalents                       |       | $38,592,760                              |       | $46,814,689           |       |
| Accounts receivable, net                        |       | 3,238,764                                |       | 1,956,756             |       |
| Inventories, net                                |       | 7,170,482                                |       | 6,385,780             |       |
| Income taxes receivable                         |       | 3,850,144                                |       | 2,355,732             |       |
| Other current assets                            |       | 761,934                                  |       | 267,707               |       |
| Total current assets                            |       | 53,614,084                               |       | 57,780,664            |       |
|                                            |       |                                     |       |                  |       |
| Property, plant, and equipment, net             |       | 11,637,647                               |       | 12,212,140            |       |
| Intangible assets, net                          |       | 378,656                                  |       | 279,846               |       |
| Other assets                                    |       | 506,897                                  |       | 522,294               |       |
| Total assets                                    |       | $66,137,284                              |       | $70,794,944           |       |
|                                            |       |                                     |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**   | ** ** | ** **                               | ** ** | ** **            | ** ** |
| Current liabilities:                            |       |                                     |       |                  |       |
| Accounts payable                                |       | $4,522,151                               |       | $4,247,630            |       |
| Current portion of long-term debt               |       | 347,303                                  |       | 261,905               |       |
| Accrued compensation                            |       | 616,786                                  |       | 472,573               |       |
| Marketing fees payable                          |       | 1,419,760                                |       | 1,419,760             |       |
| Accrued royalties to shareholders               |       | 624,967                                  |       | 2,755                 |       |
| Other accrued liabilities                       |       | 443,331                                  |       | 440,253               |       |
| Current deferred tax liability                  |       | 26,619                                   |       | 45,697                |       |
| Total current liabilities                       |       | 8,000,917                                |       | 6,890,573             |       |
|                                            |       |                                     |       |                  |       |
| Long-term debt, net of current maturities       |       | 3,865,245                                |       | 4,137,231             |       |
| Long-term deferred tax liability                |       | 40,972                                   |       | 56,828                |       |
| Total liabilities                               |       | 11,907,134                               |       | 11,084,632            |       |
|                                            |       |                                     |       |                  |       |
| Stockholders’ equity:                      |       |                                     |       |                  |       |
| Preferred stock $1 par value:                   |       |                                     |       |                  |       |
| Series I, Class B                               |       | 144,000                                  |       | 164,000               |       |
| Series II, Class B                              |       | 224,700                                  |       | 224,700               |       |
| Series III, Class B                             |       | 130,245                                  |       | 135,245               |       |
| Series IV, Class B                              |       | 553,500                                  |       | 553,500               |       |
| Series V, Class B                               |       | 1,282,471                                |       | 1,363,721             |       |
| Common stock, no par value                      |       | —                                   |       | —                |       |
| Additional paid-in capital                      |       | 53,803,223                               |       | 54,709,108            |       |
| Retained earnings (deficit)                     |       | (1,907,989                               | )          | 2,560,038             |       |
| Total stockholders’ equity                 |       | 54,230,150                               |       | 59,710,312            |       |
| Total liabilities and stockholders’ equity |       | $66,137,284                              |       | $70,794,944           |       |

 

See accompanying notes tocondensed financial statements

 

3

 

**RETRACTABLE TECHNOLOGIES, INC.**

**CONDENSED STATEMENTS OF OPERATIONS**

**(unaudited)**

 
| ** **                                 | ** ** | **Three Months  Ended  September 30, 2007** | ** ** | **Three Months  Ended  September 30, 2006** | ** ** | **Nine Months  Ended  September 30, 2007** | ** ** | **Nine Months  Ended  September 30, 2006** | ** ** |
|--------------------------------------------|------------|---------------------------------------------|------------|---------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------|------------|
|                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Sales, net                                 |       | $8,040,127                                  |       | $5,331,748                                  |       | $19,088,932                                |       | $14,514,997                                |       |
| Reimbursed discounts                       |       | —                                      |       | 651,225                                     |       | —                                     |       | 4,427,312                                  |       |
| Total sales                                |       | 8,040,127                                   |       | 5,982,973                                   |       | 19,088,932                                 |       | 18,942,309                                 |       |
| Cost of sales                              |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Cost of manufactured product               |       | 5,228,549                                   |       | 3,989,549                                   |       | 12,031,550                                 |       | 11,471,875                                 |       |
| Royalty expense to shareholders            |       | 624,967                                     |       | 660,076                                     |       | 1,468,292                                  |       | 1,501,742                                  |       |
| Total cost of sales                        |       | 5,853,516                                   |       | 4,649,625                                   |       | 13,499,842                                 |       | 12,973,617                                 |       |
| Gross profit                               |       | 2,186,611                                   |       | 1,333,348                                   |       | 5,589,090                                  |       | 5,968,692                                  |       |
|                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Operating expenses:                        |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Sales and marketing                        |       | 1,334,680                                   |       | 1,379,260                                   |       | 4,025,682                                  |       | 3,957,205                                  |       |
| Research and development                   |       | 375,264                                     |       | 249,204                                     |       | 796,979                                    |       | 745,607                                    |       |
| General and administrative                 |       | 2,906,156                                   |       | 1,843,059                                   |       | 7,894,510                                  |       | 5,409,883                                  |       |
| Total operating expenses                   |       | 4,616,100                                   |       | 3,471,523                                   |       | 12,717,171                                 |       | 10,112,695                                 |       |
|                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Loss from operations                       |       | (2,429,489                                  | )          | (2,138,175                                  | )          | (7,128,081                                 | )          | (4,144,003                                 | )          |
|                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Interest and other income                  |       | 521,226                                     |       | 512,828                                     |       | 1,511,121                                  |       | 1,463,904                                  |       |
| Interest expense, net                      |       | (86,235                                     | )          | (127,950                                    | )          | (257,427                                   | )          | (366,642                                   | )          |
| Net loss before income taxes               |       | (1,994,498                                  | )          | (1,753,297                                  | )          | (5,874,387                                 | )          | (3,046,741                                 | )          |
| Benefit for income taxes                   |       | (1,406,360                                  | )          | (530,587                                    | )          | (1,406,360                                 | )          | (1,020,786                                 | )          |
| Net loss                                   |       | (588,138                                    | )          | (1,222,710                                  | )          | (4,468,027                                 | )          | (2,025,955                                 | )          |
| Preferred stock dividend requirements      |       | (348,147                                    | )          | (361,381                                    | )          | (1,052,398                                 | )          | (1,092,563                                 | )          |
| Loss applicable to common shareholders     |       | $(936,285                                   | )          | $(1,584,091                                 | )          | $(5,520,425                                | )          | $(3,118,518                                | )          |
|                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Loss per share – basic and diluted    |       | $(0.04                                      | )          | $(0.07                                      | )          | $(0.23                                     | )          | $(0.13                                     | )          |
|                                       |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Weighted average common shares outstanding |       | 23,745,206                                  |       | 23,618,164                                  |       | 23,717,845                                 |       | 23,577,944                                 |       |

 

See accompanying notes tocondensed financial statements

 

4

 

**RETRACTABLETECHNOLOGIES, INC.**

**CONDENSED STATEMENTS OF CASH FLOWS**

**(unaudited)**

 
| ** **                                                                                 | ** ** | **Nine Months  Ended  September 30, 2007** | ** ** | **Nine Months  Ended  September 30, 2006** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------|------------|
| **Cash flows from operating activities**                                                   | ** ** | ** **                                 | ** ** | ** **                                 | ** ** |
| Net loss                                                                                   |       | $(4,468,027                                | )          | $(2,025,955                                | )          |
| Adjustments to reconcile net loss to net  cash provided by (used by) operating activities: |       |                                       |       |                                       |       |
| Depreciation and amortization                                                              |       | 1,077,370                                  |       | 1,089,654                                  |       |
| Capitalized interest                                                                       |       | (132,930                                   | )          | (40,382                                    | )          |
| Stock option compensation                                                                  |       | 6,478                                      |       | 349,103                                    |       |
| Provision for doubtful accounts                                                            |       | 2,242                                      |       | 54,969                                     |       |
| Accreted interest                                                                          |       | 92,103                                     |       | 105,214                                    |       |
| Deferred income taxes                                                                      |       | —                                     |       | (221,525                                   | )          |
| (Increase) decrease in assets:                                                             |       |                                       |       |                                       |       |
| Inventories                                                                                |       | (784,702                                   | )          | (1,699,952                                 | )          |
| Accounts receivable                                                                        |       | (1,284,247                                 | )          | 1,772,357                                  |       |
| Income taxes receivable                                                                    |       | (1,494,412                                 | )          | (834,377                                   | )          |
| Other current assets                                                                       |       | (494,227                                   | )          | (91,923                                    | )          |
| Increase in liabilities:                                                                   |       |                                       |       |                                       |       |
| Accounts payable                                                                           |       | 274,521                                    |       | 1,073,422                                  |       |
| Other accrued liabilities                                                                  |       | 769,501                                    |       | 276,845                                    |       |
|                                                                                       |       |                                       |       |                                       |       |
| Net cash used by operating activities                                                      |       | (6,436,330                                 | )          | (192,550                                   | )          |
| ** **                                                                                 | ** ** | ** **                                 | ** ** | ** **                                 | ** ** |
| **Cash flows from investing activities**                                                   | ** ** | ** **                                 | ** ** | ** **                                 | ** ** |
| Purchase of property, plant, and equipment                                                 |       | (321,961                                   | )          | (1,329,179                                 | )          |
| Acquisitions of patents, trademarks,  licenses, and intangibles                            |       | (131,400                                   | )          | (4,576                                     | )          |
|                                                                                       |       |                                       |       |                                       |       |
| Net cash used by investing activities                                                      |       | (453,361                                   | )          | (1,333,755                                 | )          |
| ** **                                                                                 | ** ** | ** **                                 | ** ** | ** **                                 | ** ** |
| **Cash flows from financing activities**                                                   | ** ** | ** **                                 | ** ** | ** **                                 | ** ** |
| Repayments of long-term debt and notes  payable                                            |       | (278,694                                   | )          | (302,624                                   | )          |
| Proceeds from the exercise of stock options                                                |       | —                                     |       | 74,780                                     |       |
| Payment of dividends on Series I and II  Class B Convertible Preferred Stock               |       | (1,053,544                                 | )          | —                                     |       |
|                                                                                       |       |                                       |       |                                       |       |
| Net cash used by financing activities                                                      |       | (1,332,238                                 | )          | (227,844                                   | )          |
|                                                                                       |       |                                       |       |                                       |       |
| Net decrease in cash                                                                       |       | (8,221,929                                 | )          | (1,754,149                                 | )          |
|                                                                                       |       |                                       |       |                                       |       |
| Cash and cash equivalents at:                                                              |       |                                       |       |                                       |       |
| Beginning of period                                                                        |       | 46,814,689                                 |       | 52,513,935                                 |       |
|                                                                                       |       |                                       |       |                                       |       |
| End of period                                                                              |       | $38,592,760                                |       | $50,759,786                                |       |
|                                                                                       |       |                                       |       |                                       |       |
| Supplemental disclosures of cash flow  information:                                        |       |                                       |       |                                       |       |
| Interest paid                                                                              |       | $298,250                                   |       | $318,381                                   |       |
|                                                                                       |       |                                       |       |                                       |       |
| Income taxes paid                                                                          |       | $-                                         |       | $83,194                                    |       |

 

See accompanying notes tocondensed financial statements

 

5

 

**RETRACTABLE TECHNOLOGIES, INC.**

**NOTES TOCONDENSED FINANCIAL STATEMENTS**

**(unaudited)**

 
| **1.** | **BUSINESS OF THE COMPANY AND BASIS OF  PRESENTATION** |
|--------|--------------------------------------------------------|

 

**Business of the Company**

 

Retractable Technologies,Inc. (the “Company”) was incorporated in Texas on May 9, 1994, to design,develop, manufacture and market safety syringes and other safety medicalproducts for the healthcare profession. The Company began to develop itsmanufacturing operations in 1995. The Company’s manufacturing andadministrative facilities are located in Little Elm, Texas. The Company’sprimary products are the VanishPoint® syringe in the1cc, 3cc, 5cc and 10cc sizes, blood collection tube holders, allergy trays, andIV catheters.  The Company has conductedpreliminary clinical evaluations and worked with national distributors toencourage healthcare facilities to transition from the use of standard syringesto the VanishPoint® syringe.

 

**Basis of presentation**

 

The accompanying condensedfinancial statements are unaudited and, in the opinion of management, reflectall adjustments that are necessary for a fair presentation of the financialposition and results of operations for the periods presented. All suchadjustments are of a normal and recurring nature. The results of operations forthe periods presented are not necessarily indicative of the results to beexpected for the entire year. The condensed financial statements should be readin conjunction with the financial statement disclosures contained in theCompany’s audited financial statements filed in its Form 10-K on April 2, 2007,for the year ended December 31, 2006.

 
| **2.** | **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** |
|--------|------------------------------------------------|

 

**Accounting estimates**

 

The preparation of financialstatements in conformity with United States generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ significantly from those estimates.

 

**Cash and cash equivalents**

 

For purposes of reportingcash flows, cash and cash equivalents include unrestricted cash and investmentswith original maturities of three months or less.

 

**Accounts receivable**

 

The Company records tradereceivables when revenue is recognized. No product has been consigned tocustomers. The Company’s allowance for doubtful accounts is primarilydetermined by review of specific trade receivables. Those accounts that aredoubtful of collection are included in the allowance. An additional allowancehas been established based on a percentage of receivables outstanding. Theseprovisions are reviewed to determine the adequacy of the allowance for doubtfulaccounts. Trade receivables are charged off when there is certainty as to theirbeing uncollectible. Trade receivables are considered delinquent when paymenthas not been made within contract terms.

 

6

 

**Inventories**

 

Inventories are valued atthe lower of cost or market, with cost being determined using a standard costmethod, which approximates average cost. A reserve is established for anyexcess or obsolete inventories.

 

**Property, plant and equipment**

 

Property, plant andequipment are stated at cost. Expenditures for maintenance and repairs arecharged to operations as incurred. Cost includes major expenditures forimprovements and replacements which extend useful lives or increase capacityand interest cost associated with significant capital additions.  Gains or losses from property disposals areincluded in income.

 

Depreciation andamortization are calculated using the straight-line method over the followinguseful 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 therecoverability of long-lived assets using an assessment of the estimatedundiscounted future cash flows related to such assets. In the event that assetsare found to be carried at amounts which are in excess of estimated grossfuture cash flows, the assets will be adjusted for impairment to a levelcommensurate with a discounted cash flow analysis of the underlying assets.

 

**Intangible assets**

 

Intangible assets are statedat cost and consist primarily of patents, a license agreement grantingexclusive rights to use patented technology, and trademarks which are amortizedusing the straight-line method over 17 years.

 

**Financial instruments**

 

The fair value of financialinstruments is determined by reference to various market data and othervaluation techniques as appropriate. The Company believes that the fair valueof financial instruments approximates their recorded values.

 

**Concentration risks**

 

The Company’s financialinstruments exposed to concentrations of credit risk consist primarily of cash,cash equivalents and accounts receivable. Cash balances, some of which exceedfederally insured limits, are maintained in financial institutions; however,management believes the institutions are of high credit quality. The majorityof accounts receivable are due from companies which are well-established entities.As a consequence, management considers any exposure from concentrations ofcredit risks to be limited.

 

The Company manufacturessyringes in Little Elm, Texas as well as utilizing a manufacturer inChina.  During the first nine months of2007, approximately 73.8% of the total syringes produced by or for the Companywere produced in China.

 

7

 

**Revenue recognition**

 

Revenue is recognized forsales to distributors when title and risk of ownership passes to thedistributor, generally upon shipment. Revenue is recorded on the basis of salesprice to distributors, less contractual pricing allowances. Contractual pricingallowances consist of (i) rebates granted to distributors who providetracking reports which show, among other things, the facility that purchasedthe products, and (ii) a provision for estimated contractual pricingallowances for products that the Company has not received tracking reports.Rebates are recorded when issued and are applied against the customer’sreceivable balance. The provision for contractual pricing allowances isreviewed at the end of each quarter and adjusted for changes in levels ofproducts for which there is no tracking report. Additionally, if it becomesclear that tracking reports will not be provided by individual distributors,the provision is further adjusted. The estimated contractual allowance isnetted against individual distributors’ accounts receivable balances forfinancial reporting purposes. The resulting net balance is reflected inaccounts receivable or accounts payable, as appropriate. The terms andconditions of contractual pricing allowances are governed by contracts betweenthe Company and its distributors. Revenue for shipments directly to end-usersis recognized when title and risk of ownership passes from the Company. Anyproduct shipped or distributed for evaluation purposes is expensed.

 

**Marketing fees**

 

The Company paid AbbottLaboratories, Inc.  (“Abbott”) marketing fees for services they provided.The contracted services were to include participation in promotionalactivities, development of educational and promotional materials,representation at trade shows, clinical demonstrations, inservicing andtraining, and tracking reports detailing the placement of the Company’sproducts to end-users. Marketing fees were accrued at the time of the sale ofproduct to Abbott. These fees were paid after Abbott provided the Company atracking report of product sales to end-users. These costs were included inSales and marketing expense in the Condensed Statements of Operations. Nomarketing fees have been accrued since October 15, 2003, the date the NationalMarketing and Distribution Agreement with Abbott was terminated.  The amount of the marketing fees owed will bedetermined by the final results of our litigation.  

 

**Reimbursed discounts**

 

The Company receivedreimbursed discounts from one of the settlement agreements reached in itsfederal antitrust lawsuit, Retractable Technologies, Inc. v. Becton Dickinson& Co. (“BD”) et al.  Payments under the discount reimbursement programwere recognized upon invoicing of amounts due under the agreement providedcollection was reasonably assured.  Such amounts are presented in theCondensed Statements of Operations as a separate component of revenues. All funds available under the discount reimbursement program were recognized bythe third quarter of 2006.

 

**Incometaxes**

 

The Company provides fordeferred income taxes in accordance with Statement of Financial AccountingStandard No. 109, *Accounting for IncomeTaxes* (“SFAS 109”). SFAS 109 requires an asset and liabilityapproach for financial accounting and reporting for income taxes based on thetax effects of differences between the financial statement and tax bases ofassets and liabilities, based on enacted rates expected to be in effect whensuch basis differences reverse in future periods. Deferred tax assets areperiodically reviewed for realizability. The Company has established avaluation allowance for its net deferred tax assets as future taxable incomecannot be reasonably assured.

 

**Earningsper share**

 

TheCompany has adopted Statement of Financial Accounting Standards No. 128, *Earnings Per Share*, which establishes standards forcomputing and presenting earnings per share. Basic earnings per share is computed by dividing net earnings for theperiod (adjusted for any cumulative dividends for the period) by the weightedaverage number of common shares outstanding during the period.  The Company’s potentially dilutive CommonStock equivalents consist of options, convertible debt and convertiblePreferred Stock and are all antidilutive for the three and nine months endedSeptember 30, 2007 and 2006. Accordingly, basic loss per share is equal to diluted loss per share.

 

8

 

 

 

**Researchand development costs**

 

Research and developmentcosts are expensed as incurred.

 

**Share-basedcompensation**

 

The Company has issuedoptions under three stock-based director, officer and employee compensationplans as well as several individual option agreements.  The two 1996 plans have terminated; however,the options continue until their expected maturity dates.  The Company adopted the fair valuerecognition provisions of Statement of Financial Accounting Standards No. 123, *Accounting for Stock-Based Compensation*, to all awardsgranted, modified, or settled after December 31, 2001.  Awards generally vest over periods up tothree years.

 

The Company adopted theprovisions of Statement of Financial Accounting Standards No. 123 (Revised2004) (“SFAS No. 123 R”), *Share-Based Payment*,effective January 1, 2006.  It did nothave a material impact on the financial statements of the Company.  In accordance with the disclosurerequirements of SFAS No. 123 R, the Company incurred the following share-basedcompensation costs:

 
| ** **                  | ** ** | **Three Months  Ended  September 30, 2007** | ** ** | **Three Months  Ended  September 30, 2006** | ** ** | **Nine Months  Ended  September 30, 2007** | ** ** | **Nine Months  Ended  September 30, 2006** | ** ** |
|-----------------------------|------------|---------------------------------------------|------------|---------------------------------------------|------------|--------------------------------------------|------------|--------------------------------------------|------------|
|                        |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Cost of  sales              |       | $  —                         |       | $894                                        |       | $6,648                                     |       | $55,510                                    |       |
|                        |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Sales and  marketing        |       | —                                      |       | 4,486                                       |       | 3,086                                      |       | 97,122                                     |       |
|                        |       |                                        |       |                                        |       |                                       |       |                                       |       |
| Research and  development   |       | —                                      |       | 1,584                                       |       | (7,863                                     | )          | 10,834                                     |       |
|                        |       |                                        |       |                                        |       |                                       |       |                                       |       |
| General and  administrative |       | —                                      |       | 5,073                                       |       | 4,607                                      |       | 185,637                                    |       |
|                        |       | $  —                         |       | $12,037                                     |       | $6,478                                     |       | $349,103                                   |       |

 
| **3.** | **INVENTORIES** |
|--------|-----------------|

 

Inventories consist of thefollowing:

 
| ** **         | ** ** | **September 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------|------------|-------------------------|------------|------------------------|------------|
| Raw  materials     |       | $1,442,457              |       | $1,546,288             |       |
|               |       |                    |       |                   |       |
| Finished  goods    |       | 5,778,025               |       | 4,889,492              |       |
|               |       | 7,220,482               |       | 6,435,780              |       |
| Inventory  reserve |       | (50,000                 | )          | (50,000                | )          |
|               |       | $7,170,482              |       | $6,385,780             |       |

 

9

 
| **4.** | **INCOME TAXES** |
|--------|------------------|

 

The Company’s effective taxrates (a benefit) for the three and nine months ended September 30, 2007 were 70.5%and 23.9%, respectively.  The Company’seffective tax rates for the comparable periods last year were 30.3% and33.5%.  The tax benefit for 2007 is thenet effect of a state tax refund for prior years that had not been previously recognized.  The effective rates in 2006 differed from theexpected rates due to a reduction in the 2006 valuation allowance for adeferred tax liability attributable to stock options and accreted interest. Allother tax benefits for 2007 are fully reserved.

 

In June 2006, the FinancialAccounting Standards Board (“FASB”) issued Financial Interpretation No. 48, *Accounting for Income Tax Uncertainties* (“FIN 48”).  FIN 48 is effective for years beginning afterDecember 15, 2006.  FIN 48 prescribes arecognition threshold and measurement attribute for financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return.  FIN 48 requires that acompany evaluate whether it is “more-likely-than-not” that a tax position willbe sustained based upon the technical merits of the position.  Measurement of the tax position is based uponthe largest amount of benefit that is greater than 50% likely of being realizedupon ultimate settlement.  The Companyadopted FIN 48 on January 1, 2007.  FIN48 had no material effect on the financial statements upon adoption.

 
| **5.** | **COMMITMENTS AND CONTINGENCIES** |
|--------|-----------------------------------|

 

BD and MDC InvestmentHoldings, Inc. filed a complaint against the Company on September 6, 2007, inthe United States District Court for the Eastern District of Texas, TexarkanaDivision.  Plaintiffs allege that the Company’s VanishPoint® product lineinfringes U.S. patent nos. 6,179,812 and 7,090,656.  Plaintiffs seek adeclaration of infringement, an injunction against further infringement,compensatory damages (with interest), the costs of the litigation, and suchother relief as the Court deems just and proper.  The Company believesthat it has meritorious defenses to such allegations and intends to defend thislawsuit vigorously.

 
| **6.** | **SUBSEQUENT EVENT** |
|--------|----------------------|

 

The Board of Directors has approved a $4.5 million capital project toexpand the warehouse and build a Clean Room. The Board also approved theCompany’s obtaining a loan for the project. The Company is in theprocess of finalizing the financing.

 

**Item 2.    Management’s Discussion and Analysis of Financial Condition andResults of Operations.**

 

FORWARD-LOOKING STATEMENT WARNING

 

Certain statements included by reference in this filing containing thewords “could,” “may,” “believes,” “anticipates,” “intends,” “expects,” andsimilar such words constitute forward-looking statements within the meaning ofthe Private Securities Litigation Reform Act. Any forward-looking statementsinvolve known and unknown risks, uncertainties, and other factors that maycause our actual results, performance, or achievements to be materiallydifferent from any future results, performance, or achievements expressed orimplied by such forward-looking statements. Such factors include, among others,our ability to maintain liquidity, our maintenance of patent protection, theimpact of current litigation, the impact of dramatic increases in demand, ourability to quickly increase capacity in the event of a dramatic increase indemand, our ability to access the market, our ability to maintain or lowerproduction costs, our ability to continue to finance research and developmentas well as operations and expansion of production, the increased interest oflarger market players, specifically Becton Dickinson & Co. (“BD”), inproviding safety needle devices, and other factors listed in **Item 1A Risk Factors**. Given theseuncertainties, undue reliance should not be placed on forward-lookingstatements.

 

The following discussion contains trend information and otherforward-looking statements that involve a number of risks and uncertainties.Our actual future results could differ materially from our historical resultsof operations and those discussed in the forward-looking statements. Varianceshave been rounded for ease of reading. All period references are to the periodsended September 30, 2007 or 2006.

 

10

 

OVERVIEW

 

We have been manufacturing and marketing our products since 1997. Ourproducts have been and continue to be distributed nationally through numerousdistributors. However, we have been blocked from access to the market byexclusive marketing practices engaged in by BD, who dominates the market. Webelieve that its monopolistic business practices continue despite its paying$100 million to settle a prior lawsuit with us for anticompetitive practices,business disparagement, and tortious interference. Although we have madelimited progress in some areas, such as the alternate care and internationalmarkets, our volumes are not as high as they should be given the nature andquality of our product, the federal and state legislation requiring use of safeneedle devices, and various Senate Subcommittee hearings on Group PurchasingOrganizations (“GPOs”). We continue to pursue various strategies to have betteraccess to the hospital market, as well as other markets, including attemptingto gain access to the market through our sales efforts and innovativetechnology. In the event we continue to have only limited market access and thecash provided by the litigation settlements and generated from operationsbecomes insufficient, we would take cost cutting measures to reduce cashrequirements including, but not limited to, a reduction of units beingproduced, reduction of workforce, reduction of salaries of officers and othernonhourly employees, and deferral of royalty payments.

 

We have several products under development.  We anticipate that such development may becompleted by year end.

 

We are marketing more product internationally. In 2004, 2005 and 2006,we were awarded a federal contract to supply syringes to various Africancountries. The first award from PATH was for 1,530,000 units. The second awardwas for 11,700,000 units. For the third year, we were awarded a contract for16,400,000 units.  Shipments of theproducts are generally filled over multiple quarters due principally tologistical requirements for the orders. We are hopeful that these awards willcontinue to increase under this program.

 

Product purchases from Double Dove, a Chinese manufacturer, have enabledus to increase manufacturing capacity with little capital outlay and provided acompetitive manufactured cost. Double Dove manufactured, in the first ninemonths of 2007, approximately 73.8%****of the total syringesproduced by or for us.  The cost of productionper unit has generally declined as volumes increased.

 

We also have a license agreement with BTMD, a Chinese company. Thefactory, assembly equipment, and the related infrastructure are substantiallycomplete for some products.  However, there are still manufacturingprocesses being addressed, and, therefore, we do not believe the requiredgovernment approvals will be obtained before the end of the year. Accordingly, we now do not expect the payment of royalties to begin any earlierthan 2008.

 

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

 

RESULTS OF OPERATIONS

 

*Comparison of Three Months Ended*

*September 30, 2007, and September 30, 2006*

 

Domestic sales accounted for 89.7% and 87.8% of the revenues for thethree months ended September 30, 2007 and 2006, respectively. Internationalsales accounted for the remaining revenues. Domestic revenues increased 37.3%,principally due to higher average selling prices, mitigated slightly by lowervolumes.  The average selling price inthe third quarter of 2006 was lower due to the discount program in effect atthe time.  International revenues increased13.4% due primarily to higher volumes. The average selling price of international products decreased17.2%.  Overall, unit sales decreased3.5% due to the timing of PATH orders. Domestic unit sales decreased 9.4% andinternational unit sales increased 37.0% primarily due to the timing of thePATH shipments, which fluctuates from period to period. Domestic unit saleswere 81.8% of total unit sales for the three months ended September 30, 2007.

 

11

 

Gross profit increased 64.0% primarily due to higher average sellingprices in domestic markets.  The averagecost of manufactured product sold per unit increased by 39.0% due principallyto lower production in the third quarter of 2007.  Profit margins can fluctuate depending upon,among other things, the cost of product manufactured and the capitalized costof product recorded in inventory, as well as product sales mix.  The unit cost in ending inventory atSeptember 30, 2007, should have a continuing positive effect on profit marginsfor the fourth quarter.  Royalty expensedecreased due to lower gross sales.

 

We had offered certain discounts to participating facilities throughDecember 31, 2006.  We were reimbursed upto a cumulative amount of $8.0 million under a litigation settlement agreement.Cumulative reimbursements of $8.0 million were recorded through September 30,2006. We continued offering such discounts to participating facilities throughthe end of the year.  The discountprogram ended December 31, 2006. Accordingly, no reimbursements of discounts were received for the threemonths ended September 30, 2007.

 

Operating expenses increased 33.0% principally due to increased legalcosts.  There were other increases inGeneral and administrative costs due to increases in compensation costs andtravel and entertainment expenses, but these were offset by lower franchisetaxes and a decrease in products sent for humanitarian purposes.  Sales and marketing expense was slightlylower due to a reduction in trade show and marketing expense.  The increases in Research and developmentcosts were attributable to costs associated with new product development.

 

Loss from operations increased due principally to higher operatingexpenses mitigated by higher gross profits.

 

Our effective tax rates (a benefit for the three months ended September30, 2007 and 2006) on the net loss before income taxes were 70.5% and 30.3% forthe three months ended September 30, 2007 and 2006, respectively.  The effective tax rate for the three monthsended September 30, 2007, was 70.5% due to the settlement in our favor of astate tax audit.  Loss per share declinedprincipally due to the larger benefit for income taxes in 2007 as compared to2006.

 

*Comparison of Nine Months Ended*

*September 30, 2007, and September 30, 2006*

 

Domestic sales accounted for 83.6% and 86.9% of the revenues for thenine months ended September 30, 2007 and 2006, respectively.  International sales accounted for theremaining revenues.  Domestic revenuesdecreased 3.1%, principally due to lower volumes, and international revenuesincreased 26.7%, due to increased volumes and due to the timing of prior PATHshipments, which fluctuates from period to period.****Overall,unit sales increased 3.9%.  Domestic unitsales decreased 4.8% and international unit sales increased 34.1%.  Domestic unit sales were 71.3% of total unitsales for the nine months ended September 30, 2007.

 

Gross profit decreased 6.4% primarily due to higher cost of goods soldmitigated by slightly higher revenues. The average cost of manufactured product sold per unit increased slightlydue principally to fixed costs being spread over fewer units produced.  Profit margins can fluctuate depending upon,among other things, the cost of product manufactured and the capitalized costof product recorded in inventory, as well as product sales mix.  The lower unit cost in ending inventory atSeptember 30, 2007, should have a continuing positive effect on profit marginsfor the fourth quarter.  Royalty expensedecreased due to lower gross sales.

 

We had offered certain discounts to participating facilities throughDecember 31, 2006.  We were reimbursed upto a cumulative amount of $8.0 million under a litigation settlementagreement.  Cumulative reimbursements of$8.0 million were recorded through September 30, 2006. We continued offeringsuch discounts to participating facilities through the end of the year.  The discount program ended December 31, 2006and no reimbursements of discounts were received for the nine months endedSeptember 30, 2007.

 

Operating expenses increased 25.8% principally due to increased legalcosts.  Increased compensation andbenefit costs in General and administrative expense were negated by reductionsin stock option expense, reduced

 

12

 

franchisetax expense, and a decrease in products sent for humanitarian purposes.  Sales and marketing expense was slightlyhigher due to increased compensation and benefits and consulting costs whichwere reduced by stock option expense and lower trade show and marketingexpense.  The increase in Research anddevelopment costs was principally attributable to higher compensation costs.

 

Loss from operations increased****principallydue to higher operating expenses and lower gross profit.

 

Our effective tax rates (a benefit for the nine months ended September30, 2007 and 2006) on the net loss before income taxes were 23.9% and 33.5% forthe nine months ended September 30, 2007 and 2006, respectively. The effectivetax rate for the nine months ended September 30, 2007, was attributable to thenet effect of a state tax refund for prior years that had not been previously recognized.

 

Our balance sheet remains strong with cash making up 58.4% of totalassets.  Working capital was $45.6million at September 30, 2007, a decrease of $5.3 million from December 31,2006.  The current ratio was 8.4 atDecember 31, 2006, and 6.7 at September 30, 2007.  The quick ratio decreased from 7.5 atDecember 31, 2006, to 5.8 at September 30, 2007.  These indicators continue to demonstrate astrong financial position.  The liabilityfor Accrued royalties paid to a shareholder was lower at the end of the yeardue to the payment of the fourth quarter royalties before the end of the year.This allowed us to include that payment as a loss carryback in 2006.

 

Approximately $6.4 million in cash flow was used by operatingactivities.  $2.8 million of that amountwas due to increases in accounts receivable and income taxes receivable.  The remaining uses of cash were for paymentof dividends and capital costs incurred for the acquisition of plant, propertyand equipment and intangible assets, and the repayment of long-term debt.

 

LIQUIDITY AND FUTURE CAPITAL REQUIREMENTS

 

Historical Sources of Liquidity

 

We have historically funded operations primarily from proceeds fromprivate placements, loans, and litigation efforts. We were capitalized withapproximately $52.6 million raised from six separate private placementofferings. We also funded operations through loans aggregating over $15.0million. We received cash payments of $88.5 million and discount reimbursementsof $8.0 million from litigation settlements.

 

Internal Sources of Liquidity

 

*Margins and Market Access*

 

In early 2004 we began to receive shipment of product from Double Dove.We believe as we receive and produce greater quantities our unit cost of goodssold could decrease.  We believe, if wehave market access, our profit margins, for the long-term, could increase asmargins tend to improve with additional sales and higher production levels. Tobe profitable from operations we would need minimal access to hospital marketswhich has been difficult to obtain due to the monopolistic marketplace whichwas the subject of our prior lawsuit against BD. We will continue to attempt togain access to the market through our sales efforts and innovative technology.

 

The mix of domestic and international sales affects the average salesprice of our products. Generally, the higher the ratio of domestic sales tointernational sales, the higher the average sales price will be. Typically internationalsales are shipped directly from China. Purchases of product manufactured inChina, if available, usually decrease the average cost of manufacture for allunits as domestic costs, such as indirect labor and overhead, remain relativelyconstant. The number of units produced by us and manufactured in China can havea significant effect on the carrying costs of inventory as well as cost ofsales. We will continue to evaluate the appropriate mix of productsmanufactured domestically and those manufactured in China to achieve economicbenefits as well as to maintain our domestic manufacturing capability.Currently, approximately 26.2%****of oursyringes are produced domestically.

 

13

 

*Seasonality*

 

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

 

*Licensing Agreement*

 

We entered into a License Agreement with BTMD as of May 13, 2005,which was approved by the People’s Republic of China (the “PRC”) onAugust 1, 2005. We have granted to BTMD a limited exclusive license tomanufacture and a limited exclusive right to sell syringes in the PRC havingretractable needles that incorporate our technology for a term of three years.This License Agreement is subject to the Technology License Agreement datedJune 23, 1995, between Mr. Thomas J. Shaw, our founder and CEO,as licensor and us, as licensee. Accordingly, 5% of the licensing proceeds wereceive from BTMD will be paid under the Technology License Agreement. BTMD hasagreed to manufacture and sell these products in the PRC and to pay us aquarterly royalty of two and one-half cents per unit on 1/2 cc, 3 cc, and 5 ccsyringes and a royalty of three and one-half cents per unit on 1 cc and 10 ccsyringes.  The factory, assemblyequipment, and the related infrastructure are substantially complete for someproducts.  However, there are still manufacturing processes beingaddressed. The facility should be operational by the end of the year. However, we do not expect the required governmental approvals to be obtainedthis year.  Accordingly, we now do not expect the payment of royalties tobegin any earlier than 2008.

 

The obligation to pay the royalties continues even if any and all of ourpatent rights in the PRC are found to be invalid or unenforceable for anyreason. We have the right, but not the obligation, to terminate the agreementif we have not received certain royalty payments.  We had the right to terminate the agreementin 2006 because we did not receive royalty payments for at least 25,000,000units.  We have the right to terminatethe agreement if we do not receive royalty payments for at least 50,000,000units in 2007 or 100,000,000 units per year for each year thereafter.  We have not received royalties under thisagreement; however, we do not plan to terminate the agreement at this time andwill continue to work with BTMD to facilitate production.

 

*Cash Requirements*

 

Due to prior litigation settlements, we have sufficient cash reservesand intend to rely on operations, cash reserves, and debt financing as theprimary ongoing sources of cash. In the event we continue to have only limitedmarket access and cash generated from operations becomes insufficient tosupport operations, we would take cost cutting measures to reduce cashrequirements. Such measures could result in reduction of units being produced,reduction of workforce, reduction of salaries of officers and other nonhourlyemployees, and deferral of royalty payments.

 

External Sources of Liquidity

 

We have obtained several loans from the inception of the Company, whichhave, together with the proceeds from sales of equities and litigation efforts,enabled us to pursue development and production of our products. Currently webelieve we could obtain additional funds through loans if needed. Furthermore,the shareholders previously authorized an additional 5,000,000 shares of aClass C Preferred Stock that could, if necessary, be designated and used toraise funds through the sale of equity.

 

CAPITAL RESOURCES

 

The Board of Directors has approved a $4.5 million capital project toexpand the warehouse and build a Clean Room. The Board also approved our obtainingfinancing for the project. We are in the process of finalizing the financing.

 

14

 

**Item 3.        Quantitativeand Qualitative Disclosures about Market Risk.**

 

None.

 

**Item 4.        Controlsand Procedures.**

 

Pursuant to paragraph (b) of Rule 13a-15 or Rule 15d-15 of theSecurities Exchange Act of 1934 (the “Exchange Act”) and on November 12, 2007,our President, Chairman, and Chief Executive Officer, Thomas J. Shaw (the “CEO”),and our Vice President and Chief Financial Officer, Douglas W. Cowan (the “CFO”),acting in their capacities as our principal executive and financial officers,evaluated the effectiveness of our disclosure controls and procedures, asdefined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act, andconcluded that, as of September 30, 2007, and based on the evaluation of thesecontrols and procedures as required by paragraph (b) of Rule 13a-15 or Rule15d-15 under the Exchange Act, there were no significant deficiencies in theseprocedures. The CEO and CFO concluded that our disclosure controls andprocedures are effective.

 

There have been no changes in our internal controls over financialreporting identified in connection with the evaluation required by paragraph(d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred duringthe third fiscal quarter that has materially affected, or is reasonably likelyto materially affect, our internal controls over financial reporting.

 

**PARTII-OTHER INFORMATION**

 

**Item 1.    Legal Proceedings.**

 

We filed a lawsuitagainst BD on June 15, 2007.  Please seeExhibit No. 99 to our Form 8-K filed on June 19, 2007.

 

BD and MDC Investment Holdings, Inc. filed a complaint against us onSeptember 6, 2007, in the United States District Court for the Eastern Districtof Texas, Texarkana Division.  Plaintiffs allege that our VanishPoint®product line infringes U.S. patent nos. 6,179,812 and 7,090,656. Plaintiffs seek a declaration of infringement, an injunction against furtherinfringement, compensatory damages (with interest), the costs of thelitigation, and such other relief as the Court deems just and proper.  Webelieve that we have meritorious defenses to such allegations and we intend todefend this lawsuit vigorously.

 

**Item 1A.     RiskFactors.**

 

There were no materialchanges in risk factors applicable to the Company as set forth in our Form 10-Kannual report for 2006 which was filed on April 2, 2007, and which is availableon EDGAR, other than the following:

 

Most international salesare filled by production from Double Dove. In the event that we were unable to purchase such product from DoubleDove, we would need to find an alternative supplier to avoid a disruption insupply.    For the first nine months of2007, approximately 73.8% of our total syringe production was provided byDouble Dove.

 

**Item 2.        UnregisteredSales of Equity Securities and Use of Proceeds.**

 

Unregistered Sales ofEquity Securities and Use of Proceeds

 

One non-accreditedinvestor converted 6,250 shares of Series V Class B Convertible Preferred Stockon a one for one basis for no additional consideration.

 

15

 

Working CapitalRestrictions and Limitations on the Payment of Dividends

 

The certificatesof designation for each of the outstanding series of Class B ConvertiblePreferred Stock each provide that, if a dividend upon any shares of PreferredStock is in arrears, no dividends may be paid or declared or any otherdistribution made upon any stock ranking junior to such stock, and generally nosuch junior stock may be redeemed. Currently, the dividends on all outstanding Preferred Stock are inarrears.

 

We maintain cash for use as collateral forletters of credit we provide from time to time to enable, among other things,the purchase of product from China. As of September 30, 2007, we had no fundsheld as restricted cash for such purposes. The Board of Directors has authorized management to borrow and incurindebtedness in the form of letters of credit in an aggregate amount, at anyone time, of $5,000,000.

 

**Item 3.        DefaultsUpon Senior Securities.**

 

Series I ClassB Convertible Preferred Stock

 

As of the ninemonths ended September 30, 2007, the amount of dividends in arrears was $55,000and the total arrearage was $281,000.

 

Series IIClass B Convertible Preferred Stock

 

As of the ninemonths ended September 30, 2007, the amount of dividends in arrears was$169,000 and the total arrearage was $847,000.

 

Series IIIClass B Convertible Preferred Stock

 

As of the ninemonths ended September 30, 2007, the amount of dividends in arrears was$100,000 and the total arrearage was $2,953,000.

 

Series IVClass B Convertible Preferred Stock

 

As of the ninemonths ended September 30, 2007, the amount of dividends in arrears was$415,000 and the total arrearage was $6,339,000.

 

Series V ClassB Convertible Preferred Stock

 

As of the ninemonths ended September 30, 2007, the amount of dividends in arrears was$314,000 and the total arrearage was $2,796,000.

 

**Item 4.       Submission of Matters to a Vote of Security Holders.**

 

The 2007 Annual Meeting of Stockholders (the “Annual Meeting”)was held on September 28, 2007, at 10:00 a.m., CST.  The purpose of the meeting was to elect twoClass 1 Directors.

 

Of the 23,744,164 shares of Common Stock entitled tovote, 21,667,272 shares were represented in person or by proxy at the Annual Meeting,which is more than the 11,872,082 required to constitute a quorum.  Accordingly, the election of two Class 1Directors was put to a vote and the results were as follows:

 

| Nominees      |   | For        |   | Withheld |
|---------------|--------|------------|--------|----------|
|          |   |       |   |     |
| Marco Laterza |   | 20,726,511 |   | 940,761  |
| Jimmie Shiu   |   | 20,696,783 |   | 970,489  |

 

16

 

Accordingly, Mr.Laterza and Dr. Shiu were elected as Class 1 Directors to serve until our 2009Annual Meeting.  As of the adjournment ofthe Annual Meeting, the Board of Directors consisted of the following members:

 

| Marco Laterza    |   | Class 1 Director |
|------------------|--------|------------------|
| Jimmie Shiu      |   | Class 1 Director |
| Thomas J. Shaw   |   | Class 2 Director |
| Steven R. Wisner |   | Class 2 Director |
| Douglas W. Cowan |   | Class 2 Director |
| Clarence Zierhut |   | Class 2 Director |
| Marwan Saker     |   | Class 2 Director |

 

 

**Item 6.        Exhibits.**

 
| Exhibit No. |   | Description  of Document                          |
|-------------|--------|---------------------------------------------------|
|        |   |                                              |
| 31.1        |   | Certification  of Principal Executive Officer     |
|        |   |                                              |
| 31.2        |   | Certification  of Principal Financial Officer     |
|        |   |                                              |
| 32          |   | Certification  Pursuant to 18 U.S.C. Section 1350 |

 

**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
| DATE:  November 14, 2007 | RETRACTABLE TECHNOLOGIES, INC.                   |                       |
|------------------------------------|--------------------------------------------------|----------------------------|
|                               |       (Registrant) |                       |
|                               |                                             |                       |
|                               |                                             |                       |
|                               | BY:                                              |   s/ Douglas W. Cowan |   |
|                               |                                             | DOUGLAS W. COWAN           |   |
|                               |                                             | VICE PRESIDENT AND         |   |
|                               |                                             | CHIEF FINANCIAL OFFICER    |   |

 

17