Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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

FORWARD-LOOKING STATEMENT WARNING

Certain statements included by reference in this filing containing the words "could," "may," "believes," "anticipates," "intends," "expects," and similar such words constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Any forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, 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 other factors referenced in Item 1A. Risk Factors. Given these uncertainties, undue reliance should not be placed on forward-looking statements.

Overview

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We have been manufacturing and marketing our products since 1997. Syringes comprised 65.1% of our sales in 2025. EasyPoint^® products accounted for 31.2% of sales in 2025 and other products, including our IV safety catheter and blood collection products were 3.7% of our total product sales in 2025.

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 ("Section 301") of the Trade Act of 1974 ("Trade Act"). Among those products included were syringes and needles, at a rate of 100%. Beginning in early 2025 and throughout much of the year, additional widespread tariffs were imposed on most products imported into the U.S. citing authority under the International Emergency Economic Powers Act ("IEEPA"). Those tariffs were in addition to the Section 301 tariffs which existed at the time. Throughout 2025, the prevailing tariff rates on various products and certain countries of origin, including many of our products, fluctuated greatly. These fluctuations negatively impacted our ability to predict the cost of importing certain goods or groups of goods and negatively impacted our business. In February 2026, the U.S. Supreme Court ruled that the President's use of IEEPA to impose reciprocal tariffs exceeded his authority and that the IEEPA tariffs must be vacated. Looking forward after the Supreme Court's ruling, the 2024 Section 301 tariff of 100% on syringes and needles from China remains unchanged. Additionally, following the Supreme Court's ruling on the tariffs imposed under IEEPA, effective February 20, 2026 a 10% ad valorem duty went into effect under Section 122 of the Trade Act, which is in addition to the above-mentioned Section 301 tariffs.

As of March 9, 2026, the prevailing tariff rate on most syringe and needle products imported from China was 120%. Other products we import from China, which do not fall under the category of needles and syringes, are subject to a 20% tariff rate. As foreign trade policy continues to evolve, including the impact of the Supreme Court's ruling, uncertainty as to future tariff rates and affected products remains. Tariffs are expected to have a continuing material impact on our ability to source finished goods and certain raw materials and component parts, and to our results of operations and financial position. We continue 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. We obtained 62.6% of our products from our manufacturers in China in 2025, most of which are impacted by the tariffs, however, a portion was shipped directly to international customers, on which no tariffs were assessed. Tariffs are expected to continue to have a material impact to our results of operations and financial position. Approximately $1.8 million was incurred in tariff expense in 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. We implemented reductions in force in the second and third quarters of 2025 in both manufacturing and non-manufacturing functions.

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 second 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 is 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.

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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 $34.4 million in debt and equity securities as of December 31, 2025, which represented 24.1% 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. 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.

The unrealized loss on debt and equity securities was $5.0 million due to the decreased market values of those securities; however, we realized gain on the sale of equity securities of $5.6 million.

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 our fiscal years ended December 31, 2025 and 2024. Dollar amounts have been rounded for ease of reading.

Comparison of Year Ended

December 31, 2025 and Year Ended December 31, 2024

Domestic sales accounted for 84.2% and 88.9% of the revenues in 2025 and 2024, respectively. Domestic revenues increased 9.7% principally due to an increase in VanishPoint^® and EasyPoint^® needle sales. Domestic unit sales increased 3.6%. Domestic unit sales were 73.7% of total unit sales for 2025. International revenues increased 64.0%, primarily driven by higher EasyPoint^® needle sales, while international unit volume increased 164.7%. Revenue growth was lower than unit growth due to discounted pricing on international units, which had a negative impact on gross margin. Overall unit sales increased 23.3% and our overall revenues increased by 15.8%. There is uncertainty as to the timing of future international orders.

Cost of manufactured product increased 12.7%. Royalty expense increased 6.6% due to the associated increase in gross sales.

Approximately $1.8 million was incurred in tariff expense in 2025. These costs are included in Cost of manufactured product.

As a result of the above, gross profit margins increased from (3.1)% in 2024 to 0.1% in 2025.

Operating expenses increased 5.7%, primarily due to an impairment charge of $954 thousand and increased sales and marketing expenses due to increased headcount. The impairment charge of $954 thousand was primarily related to older syringe and tooling equipment.

The loss from operations was $21.2 million as compared to a loss from operations of $21.1 million in 2024.

The unrealized loss on debt and equity securities in 2025 was $5.0 million due to the decreased market values of those securities. A $5.6 million gain was realized from the sale of debt and equity securities in 2025.

The provision for income taxes was $291 thousand as compared to a provision for income taxes of $8.4 million as for 2024. The difference is primarily related to fully reserving our deferred tax asset in the second quarter of 2024.

A comparison of the results of operations for the years ended December 31, 2024 and December 31, 2023 is omitted from this discussion. Such comparison was included in our Annual Report on Form 10-K filed with the SEC on March 28, 2025 in Item 7 of Part II thereof.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow used by operations was $7.1 million in 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 year was the predominant factor. We recognized approximately $6.0 million in other income from the TIA. Changes in working capital also impacted cash flows from operating activities. Accounts receivable increased by $451 thousand, inventories increased by $197 thousand, and accounts payable decreased by $1.0 million.

Cash flow from investing activities was $6.0 million in 2025 due primarily to the sale of $37.1 million in debt and equity securities.

Cash used by financing activities was $567 thousand for 2025. This was primarily due to repayments of long-term debt and payment of preferred stock dividends.

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.

The imposition of tariffs on our products will continue to have a material effect on our operating results and liquidity. Recent 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 cost approximately $1 million in 2025. Those products accounted for roughly 11% of our overall domestic unit sales and 10.1% of our domestic syringe unit sales in 2025.

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 2024-2026 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, 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 year-end liabilities are detailed in our financial statements, including Notes 7, 8 and 9 to the financial statements. We believe we will have adequate means to meet our currently foreseeable long-term liquidity needs, although the 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 investments. If cash needs cannot be met using existing cash and investments, management would reduce operational costs, similar to reductions in administrative support in the second quarter of 2025. In the event that the foregoing is insufficient, we may liquidate certain assets.

Capital Resources

As of December 31, 2025, there were no commitments for material capital expenditures.

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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, and 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 December 31, 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 $2.4 million.

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