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Retractable Technologies, Inc. Decreased Its Loss From Operations Dramatically For The Nine Months Ended September 30, 2011

Comparison of Nine Months Ended September 30, 2011 and September 30, 2010

Domestic sales accounted for 81.3% and 87.0% of the revenues for the nine months ended September 30, 2011 and 2010, respectively. Domestic revenues decreased 13.8% principally due to lower volumes and lower average sales prices. Domestic unit sales decreased 5.1%. Domestic unit sales were 71.0% of total unit sales for the nine months ended September 30, 2011. International unit sales and revenues increased 37.1% and 33.9%, respectively, due primarily to South American sales. Overall, unit sales increased 4.2%.

Gross profit decreased 14.5% primarily due to lower revenues mitigated by lower unit cost. The average cost of manufactured product sold per unit decreased by 6.6%. Profit margins can fluctuate depending upon, among other things, the cost of manufactured product and the capitalized cost of product recorded in inventory, as well as product sales mix. Royalty expense decreased 5.0% due to lower gross sales.

Operating expenses decreased 30.3% or $4.7 million. The decrease in General and administrative expense was the most significant. The decrease of $3.8 million in General and administrative expense was due mainly to legal expenses, stock option expense, and bonuses paid last year. Sales and marketing expense decreased 15.6% due principally to lower fees and lower compensation costs. Research and development costs decreased 37.7% due to lower validation and sample costs.

As mentioned above, our operating loss was $1.1 million compared to an operating loss for the same period last year of $4.2 million. This was due primarily to the reduction in operating expenses.

Litigation settlements, net reflects cash proceeds of $6.0 million from Hospira less royalty expense of $300,000 for the nine months ended September 30, 2011. Litigation settlements, net for the nine months ended September 30, 2010 reflects our settlement with Abbott and Hospira, including a payment of $6.0 million, a waiver of an invoice due to us of $144,000, and a $1.4 million marketing fee payable to Abbott.

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