☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
|
74-2657168
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
9220 Kirby Drive, Suite 500, Houston, Texas
|
77054
|
(Address of principal executive offices)
|
(Zip Code)
|
Large Accelerated Filer ☐
|
Accelerated Filer ☐
|
Non-accelerated Filer ☐
|
Smaller reporting company ☒
|
(Do not check if a smaller reporting company)
|
|
||
PART I
|
FINANCIAL INFORMATION
|
PAGE
|
Item 1.
|
Financial Statements
|
|
3
|
||
4
|
||
5
|
||
6
|
||
7
|
||
8
|
||
Item 2.
|
13
|
|
Item 3.
|
20
|
|
Item 4.
|
21
|
|
Part II
|
OTHER INFORMATION
|
|
Item 1.
|
21
|
|
Item 1A.
|
21
|
|
Item 2.
|
21
|
|
Item 6.
|
22
|
|
23
|
PART I
|
FINANCIAL INFORMATION
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
December 31,
|
June 30,
|
|||||||
2015
|
2015
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
14,459
|
$
|
15,157
|
||||
Accounts receivable, net of allowance for doubtful accounts of $53 and $34, respectively
|
6,306
|
6,647
|
||||||
Inventory
|
3,787
|
2,738
|
||||||
Prepaid and other current assets
|
612
|
733
|
||||||
TOTAL CURRENT ASSETS
|
25,164
|
25,275
|
||||||
PROPERTY, PLANT AND EQUIPMENT, net
|
4,266
|
3,810
|
||||||
GOODWILL
|
1,039
|
-
|
||||||
INTANGIBLE ASSETS, net of accumulated amortization of $427 and $385, respectively
|
1,204
|
666
|
||||||
TOTAL ASSETS
|
$
|
31,673
|
$
|
29,751
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$
|
1,723
|
$
|
1,770
|
||||
Accrued liabilities
|
2,407
|
1,917
|
||||||
Deferred revenue
|
2,264
|
1,877
|
||||||
TOTAL CURRENT LIABILITIES
|
6,394
|
5,564
|
||||||
LONG-TERM DEFERRED REVENUE, net of current portion
|
511
|
483
|
||||||
OTHER LONG-TERM LIABILITIES
|
216
|
118
|
||||||
TOTAL LIABILITIES
|
7,121
|
6,165
|
||||||
COMMITMENTS AND CONTINGENCIES
|
||||||||
STOCKHOLDERS' EQUITY
|
||||||||
Common stock, $0.01 par value per share; 20,000,000 shares authorized; 15,740,458 and 15,575,041 shares issued, respectively and 15,481,186 and 15,383,791 shares outstanding, respectively
|
158
|
156
|
||||||
Treasury stock, at cost, 259,272 and 191,250 shares repurchased, respectively
|
(1,349
|
)
|
(809
|
)
|
||||
Additional paid-in capital
|
25,013
|
24,344
|
||||||
Retained earnings (accumulated deficit)
|
730
|
(105
|
)
|
|||||
TOTAL STOCKHOLDERS' EQUITY
|
24,552
|
23,586
|
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
31,673
|
$
|
29,751
|
Three-Months
Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
REVENUES
|
$
|
9,992
|
$
|
8,693
|
||||
Cost of revenues
|
6,673
|
5,465
|
||||||
GROSS PROFIT
|
3,319
|
3,228
|
||||||
Selling, general and administrative
|
2,585
|
2,415
|
||||||
Depreciation and amortization
|
70
|
69
|
||||||
OPERATING INCOME
|
664
|
744
|
||||||
INTEREST INCOME
|
9
|
10
|
||||||
TOTAL INTEREST INCOME
|
9
|
10
|
||||||
INCOME BEFORE INCOME TAXES
|
673
|
754
|
||||||
INCOME TAX EXPENSE - Current
|
58
|
5
|
||||||
TOTAL INCOME TAX EXPENSE
|
58
|
5
|
||||||
NET INCOME
|
$
|
615
|
$
|
749
|
||||
NET INCOME PER COMMON SHARE
|
||||||||
Basic
|
$
|
0.04
|
$
|
0.05
|
||||
Diluted
|
$
|
0.04
|
$
|
0.05
|
||||
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
|
||||||||
Basic
|
15,467
|
15,281
|
||||||
Diluted
|
16,062
|
15,423
|
Six-Months
Ended December 31,
|
||||||||
2015
|
2014
|
|||||||
REVENUES
|
$
|
17,861
|
$
|
15,740
|
||||
Cost of revenues
|
11,663
|
10,178
|
||||||
GROSS PROFIT
|
6,198
|
5,562
|
||||||
Selling, general and administrative
|
5,181
|
4,738
|
||||||
Depreciation and amortization
|
122
|
154
|
||||||
OPERATING INCOME
|
895
|
670
|
||||||
INTEREST INCOME
|
18
|
18
|
||||||
TOTAL INTEREST INCOME
|
18
|
18
|
||||||
INCOME BEFORE INCOME TAXES
|
913
|
688
|
||||||
INCOME TAX EXPENSE - Current
|
78
|
13
|
||||||
TOTAL INCOME TAX EXPENSE
|
78
|
13
|
||||||
NET INCOME
|
$
|
835
|
$
|
675
|
||||
NET INCOME PER COMMON SHARE
|
||||||||
Basic
|
$
|
0.05
|
$
|
0.04
|
||||
Diluted
|
$
|
0.05
|
$
|
0.04
|
||||
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
|
||||||||
Basic
|
15,443
|
15,285
|
||||||
Diluted
|
15,994
|
15,428
|
Common Stock
|
Treasury Stock
|
Additional
Paid-in
|
Retained Earnings
(Accumulated |
Total
Stockholders' |
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit)
|
Equity
|
||||||||||||||||||||||
Balances, June 30, 2014
|
15,460,940
|
$
|
155
|
(161,801
|
)
|
$
|
(681
|
)
|
$
|
23,695
|
$
|
(1,265
|
)
|
$
|
21,904
|
|||||||||||||
Exercise of stock options
|
61,109
|
-
|
-
|
-
|
139
|
-
|
139
|
|||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
511
|
-
|
511
|
|||||||||||||||||||||
Issuance of restricted stock
|
52,992
|
1
|
-
|
-
|
(1
|
)
|
-
|
-
|
||||||||||||||||||||
Shares repurchased
|
-
|
-
|
(29,449
|
)
|
(128
|
)
|
-
|
-
|
(128
|
)
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
1,160
|
1,160
|
|||||||||||||||||||||
Balances, June 30, 2015
|
15,575,041
|
156
|
(191,250
|
)
|
(809
|
)
|
24,344
|
(105
|
)
|
23,586
|
||||||||||||||||||
Exercise of stock options
|
112,425
|
1
|
-
|
-
|
312
|
-
|
313
|
|||||||||||||||||||||
Stock-based compensation
|
-
|
-
|
-
|
-
|
358
|
-
|
358
|
|||||||||||||||||||||
Issuance of restricted stock
|
52,992
|
1
|
-
|
-
|
(1
|
)
|
-
|
-
|
||||||||||||||||||||
Shares repurchased
|
-
|
-
|
(68,022
|
)
|
(540
|
)
|
-
|
-
|
(540
|
)
|
||||||||||||||||||
Net income
|
-
|
-
|
-
|
-
|
-
|
835
|
835
|
|||||||||||||||||||||
Balances, December 31, 2015
|
15,740,458
|
$
|
158
|
(259,272
|
)
|
$
|
(1,349
|
)
|
$
|
25,013
|
$
|
730
|
$
|
24,552
|
Six-Months Ended
December 31,
|
||||||||
2015
|
2014
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income
|
$
|
835
|
$
|
675
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
379
|
460
|
||||||
Stock-based compensation expense
|
358
|
257
|
||||||
Changes in operating assets and liabilities, net of effects of business acqusition:
|
||||||||
Restricted cash
|
-
|
111
|
||||||
Accounts receivable
|
434
|
367
|
||||||
Legal settlement receivable
|
-
|
1,538
|
||||||
Inventory
|
(943
|
)
|
(888
|
)
|
||||
Prepaid and other current assets
|
121
|
(445
|
)
|
|||||
Accounts payable and accrued liabilities
|
(105
|
)
|
804
|
|||||
Deferred revenue
|
415
|
107
|
||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
1,494
|
2,986
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase of property, plant and equipment
|
(761
|
)
|
(237
|
)
|
||||
Payments for acquisition, net of cash acquired
|
(1,204
|
)
|
-
|
|||||
NET CASH USED IN INVESTING ACTIVITIES
|
(1,965
|
)
|
(237
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from exercise of stock options
|
313
|
21
|
||||||
Shares repurchased
|
(540
|
)
|
(128
|
)
|
||||
NET CASH USED IN FINANCING ACTIVITIES
|
(227
|
)
|
(107
|
)
|
||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(698
|
)
|
2,642
|
|||||
CASH AND CASH EQUIVALENTS, beginning of period
|
15,157
|
13,717
|
||||||
CASH AND CASH EQUIVALENTS, end of period
|
$
|
14,459
|
$
|
16,359
|
||||
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
||||||||
Income taxes paid
|
$
|
85
|
$
|
10
|
||||
NON-CASH INVESTING ACTIVITIES:
|
||||||||
Unpaid consideration related to acquisitions
|
$
|
529
|
$
|
-
|
||||
Transfer of equipment to inventory
|
$
|
106
|
$
|
-
|
Three-Months Ended
|
Six-Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Stock-based compensation expense included in:
|
||||||||||||||||
Cost of revenues
|
$
|
10
|
$
|
6
|
$
|
18
|
$
|
10
|
||||||||
Selling, general and administrative
|
207
|
135
|
340
|
247
|
||||||||||||
Total
|
$
|
217
|
$
|
141
|
$
|
358
|
$
|
257
|
Three-Months Ended
|
Six-Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Net income, as reported
|
$
|
615
|
$
|
749
|
$
|
835
|
$
|
675
|
||||||||
Weighted average common shares outstanding
|
15,467
|
15,281
|
15,443
|
15,285
|
||||||||||||
Effect of dilutive stock options
|
595
|
142
|
551
|
143
|
||||||||||||
Weighted average diluted common shares outstanding
|
16,062
|
15,423
|
15,994
|
15,428
|
||||||||||||
Net income per common share
|
||||||||||||||||
Basic
|
$
|
0.04
|
$
|
0.05
|
$
|
0.05
|
$
|
0.04
|
||||||||
Diluted
|
$
|
0.04
|
$
|
0.05
|
$
|
0.05
|
$
|
0.04
|
||||||||
Employee stock options excluded from computation of dilutive income per share amounts because their effect would be anti-dilutive
|
120
|
392
|
216
|
237
|
Three-Months Ended
December 31,
|
Six-Months Ended
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Options exercised
|
11,000
|
10,250
|
112,425
|
10,250
|
||||||||||||
Proceeds (in thousands)
|
$
|
45
|
$
|
21
|
$
|
313
|
$
|
21
|
||||||||
Average exercise price per share
|
$
|
3.98
|
$
|
2.12
|
$
|
2.77
|
$
|
2.12
|
Three-Months Ended
|
Six-Months Ended
|
|||||||||||||||
December 31,
|
December 31,
|
|||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Shares repurchased
|
68,022
|
-
|
68,022
|
29,449
|
||||||||||||
Cash paid for shares repurchased (in thousands)
|
$
|
540
|
$
|
-
|
$
|
540
|
$
|
128
|
||||||||
Average price paid per share
|
$
|
7.94
|
$
|
-
|
$
|
7.94
|
$
|
4.35
|
December 31,
2015
|
June 30,
2015
|
|||||||
(Unaudited)
|
||||||||
Raw materials
|
$
|
1,236
|
$
|
1,393
|
||||
Finished goods
|
2,551
|
1,345
|
||||||
Total
|
$
|
3,787
|
$
|
2,738
|
Accounts receivable
|
$
|
51
|
||
Fixed assets
|
70
|
|||
Intangibles
|
267
|
|||
Goodwill
|
413
|
|||
Accounts payable and accrued liabilities
|
(101
|
)
|
||
Total purchase price
|
$
|
700
|
Accounts receivable
|
$
|
42
|
||
Fixed assets
|
68
|
|||
Intangibles
|
313
|
|||
Goodwill
|
626
|
|||
Accounts payable and accrued liabilities
|
(16
|
)
|
||
Total purchase price
|
$
|
1,033
|
Three-Months Ended December 31,
|
Six-Months Ended December 31,
|
|||||||||||||||||||||||||||||||
2015
|
%
|
2014
|
%
|
2015
|
%
|
2014
|
%
|
|||||||||||||||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||||||||||||||||
Revenue
|
$
|
9,992
|
100.0
|
%
|
$
|
8,693
|
100.0
|
%
|
$
|
17,861
|
100.0
|
%
|
$
|
15,740
|
100.0
|
%
|
||||||||||||||||
Cost of revenue
|
6,673
|
66.8
|
%
|
5,465
|
62.9
|
%
|
11,663
|
65.3
|
%
|
10,178
|
64.7
|
%
|
||||||||||||||||||||
Gross profit
|
3,319
|
33.2
|
%
|
3,228
|
37.1
|
%
|
6,198
|
34.7
|
%
|
5,562
|
35.3
|
%
|
||||||||||||||||||||
SG&A expense
|
2,585
|
25.9
|
%
|
2,415
|
27.8
|
%
|
5,181
|
29.0
|
%
|
4,738
|
30.1
|
%
|
||||||||||||||||||||
Depreciation and amortization
|
70
|
0.7
|
%
|
69
|
0.8
|
%
|
122
|
0.7
|
%
|
154
|
1.0
|
%
|
||||||||||||||||||||
Operating income
|
664
|
6.6
|
%
|
744
|
8.6
|
%
|
895
|
5.0
|
%
|
670
|
4.3
|
%
|
||||||||||||||||||||
Interest income
|
9
|
0.1
|
%
|
10
|
0.1
|
%
|
18
|
0.1
|
%
|
18
|
0.1
|
%
|
||||||||||||||||||||
Income before income taxes
|
673
|
6.7
|
%
|
754
|
8.7
|
%
|
913
|
5.1
|
%
|
688
|
4.4
|
%
|
||||||||||||||||||||
Income tax expense
|
58
|
0.6
|
%
|
5
|
0.1
|
%
|
78
|
0.4
|
%
|
13
|
0.1
|
%
|
||||||||||||||||||||
Net income
|
$
|
615
|
6.2
|
%
|
$
|
749
|
8.6
|
%
|
$
|
835
|
4.7
|
%
|
$
|
675
|
4.3
|
%
|
Three-Months Ended December 31,
|
||||||||||||
(Unaudited)
|
||||||||||||
2015
|
2014
|
Variance
|
||||||||||
BILLINGS BY MARKET:
|
||||||||||||
Retail
|
$
|
3,037
|
$
|
3,065
|
$
|
(28
|
)
|
|||||
Home Health Care
|
2,091
|
1,752
|
339
|
|||||||||
Professional
|
1,861
|
1,707
|
154
|
|||||||||
Pharmaceutical Manufacturer
|
2,515
|
1,303
|
1,212
|
|||||||||
Assisted Living
|
518
|
455
|
63
|
|||||||||
Government
|
242
|
150
|
92
|
|||||||||
Environmental
|
75
|
46
|
29
|
|||||||||
Other
|
188
|
195
|
(7
|
)
|
||||||||
Subtotal
|
10,527
|
8,673
|
1,854
|
|||||||||
GAAP Adjustment *
|
(535
|
)
|
20
|
(555
|
)
|
|||||||
Revenue Reported
|
$
|
9,992
|
$
|
8,693
|
$
|
1,299
|
Six-Months Ended December 31,
|
||||||||||||
(Unaudited)
|
||||||||||||
2015
|
2014
|
Variance
|
||||||||||
BILLINGS BY MARKET:
|
||||||||||||
Retail
|
$
|
4,786
|
$
|
5,060
|
$
|
(274
|
)
|
|||||
Home Health Care
|
4,042
|
3,505
|
537
|
|||||||||
Professional
|
3,572
|
3,158
|
414
|
|||||||||
Pharmaceutical Manufacturer
|
3,754
|
2,688
|
1,066
|
|||||||||
Assisted Living
|
1,044
|
905
|
139
|
|||||||||
Government
|
706
|
284
|
422
|
|||||||||
Environmental
|
154
|
140
|
14
|
|||||||||
Other
|
450
|
428
|
22
|
|||||||||
Subtotal
|
18,508
|
16,168
|
2,340
|
|||||||||
GAAP Adjustment *
|
(647
|
)
|
(428
|
)
|
(219
|
)
|
||||||
Revenue Reported
|
$
|
17,861
|
$
|
15,740
|
$
|
2,121
|
·
|
A large professional market that consists of dentists, veterinarians, clinics, private practice physicians, urgent care facilities, ambulatory surgical centers and others such as acupuncture and tattoo services. This regulated market consists of small to medium quantity generators of medical, pharmaceutical and hazardous waste where we can offer a lower cost to service with solutions to match individual facility needs. The Company addresses this market from two directions: (i) field sales which focuses on larger-dollar and nationwide opportunities where we can integrate the route-based pickup service along with our mailback solutions to create a comprehensive medical waste management offering and (ii) inside and online sales which focus on the individual or small group professional offices.
|
·
|
The shift of healthcare from traditional settings to the retail pharmacy and clinic markets, where the Company focuses on driving increased promotion of the Sharps Recovery System. The number of U.S. retail clinics is projected to increase significantly, as much as 20%-25% per year, driven by the increasing demand of newly insured patients under healthcare reform, as well as patients looking for more convenient care and retail pharmacies increasing the variety and volume of healthcare services they provide. According to the Centers for Disease Control ("CDC"), 25% of flu shots for adults were administered in a retail clinic with the trend expected to increase. In addition to the continued growth in the flu shot business, there are also growth opportunities for more primary care in the retail or alternative site setting and correspondingly growth opportunities for the Company based on its significant presence in the retail market. A recent study shows that Americans visit retail clinics 10 million times a year, which represents only 2% of "all primary care patient encounters."
|
·
|
The passage of new regulations for ultimate user medication disposal allows the Company to offer new solutions (MedSafe and TakeAway Medication Recovery System envelopes) that meet the regulations for ultimate user controlled substances disposal (Schedules II-V) to retail pharmacies. Additionally, with the new regulations, the Company is able to provide the MedSafe and TakeAway Medication Recovery Systems to assisted living and hospice to address a long standing issue within long-term care.
|
·
|
The changing demographics of the U.S. population - one out of five Americans will be 65 years or older by 2030, which will increase the need for cost-effective medical waste management solutions, especially in the long-term care and home healthcare markets. With multiple solutions for managing regulated healthcare-related waste, the Company delivers value as a single-source provider with blended mailback and route-based pickup services matched to on the waste volumes of each facility.
|
·
|
Local, state and federal agencies have growing needs for solutions to manage medical and pharmaceutical waste — the Company's Sharps Recovery System is ideal for as-needed disposal of sharps and other small quantities of medical waste generated within government buildings, schools and communities. The Company also provides TakeAway Medication Recovery System envelopes and MedSafe solutions to government agencies in need of proper and regulatory compliant medication disposal.
|
·
|
With an increased number of self-injectable medication treatments and local regulations, the Company believes its flagship product, the Sharps Recovery System, continues to offer the best option for proper sharps disposal at an affordable price. The Company delivers premium services to pharmaceutical manufacturers that sell high-dollar, self-injectable medications, which include data management, compliance reporting, fulfillment, proper containment with disposal, branding and conformity with applicable regulations. In addition, the Company provides self-injectors with online and retail purchase options of sharps mailback systems, such as the Sharp Recovery System and Complete Needle Collection & Disposal System, respectively.
|
·
|
A heightened interest by many commercial companies who are looking to improve workplace safety with proper sharps disposal and unused medication disposal solutions — the Company offers a variety of services to meet these needs, including the Sharps Secure Needle Disposal System, Sharps Recovery System, Biohazard Spill Kits and TakeAway Medication Recovery System envelopes.
|
·
|
In July 2015, the Company augmented its network of medical and hazardous waste service providers with an acquisition of a route-based pickup service in the northeast serving Pennsylvania, Maryland and parts of Ohio. Additionally, the Company has begun to service parts of Texas and Louisiana with route-based pickup service. In December 2015, the Company acquired another route-based pickup service in the northeast which further expanded its operations in Pennsylvania and neighboring states. With the addition of these route-based pickup regions and the network of medical and hazardous waste service providers servicing the entire U.S., the Company offers customers a blended product portfolio to effectively manage multi-site and multi-sized locations, including those that generate larger quantities of waste. The network has had a significant positive impact on our pipeline of sales opportunities — over 60% of this pipeline is attributable to opportunities providing comprehensive waste management service offerings where both the mailback and pickup service are integrated into the offering.
|
·
|
The Company has new solution offerings that include ultimate user medication disposal (MedSafe and TakeAway Medication Recovery System) and mailback services for DEA registrant expired inventory of controlled substances (TakeAway Medication Recovery System DEA Reverse Distribution for Registrants).
|
·
|
The Company's strong financial position with a cash balance of $14.5 million and no debt as of December 31, 2015.
|
· | Accounts receivable decreased by $0.4 million, net of assets acquired, to $6.3 million at December 31, 2015 from $6.6 million at June 30, 2015. The decrease is due to timing of billings and collections. |
· | Inventory increased by $1.0 million to $3.8 million at December 31, 2015 from $2.7 million at June 30, 2015. The increase in inventory is due to timing of sales and adjustment of inventory levels to facilitate customer orders as well as transfers of Medsafe equipment to inventory of $0.1 million. |
· | Accounts payable and accrued liabilities decreased by $0.1 million, net of assets acquired and unpaid consideration, to $4.1 million at December 31, 2015 from $3.7 million at June 30, 2015. The decrease is the result of the timing of payments. Accounts payable includes $0.5 million of unpaid consideration related to acquisitions. |
· | Deferred revenue increased by $0.4 million to $2.8 million at December 31, 2015 from $2.4 million at June 30, 2015. The increase is due to the increase in billings for the period. |
Period
|
(a) Total
Number of
Shares
Purchased
|
(b)
Average
Price Paid
per Share
|
(c) Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
|
(d) Maximum
Approximate
Dollar Value
of Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
|
||||||||||||
October 1 - October 31, 2015
|
-
|
$
|
-
|
-
|
$
|
2,190,824
|
||||||||||
November 1 - November 30, 2015
|
50,041
|
7.68
|
50,041
|
1,806,464
|
||||||||||||
December 1 - December 31, 2015
|
17,981
|
8.67
|
17,981
|
1,650,612
|
||||||||||||
68,022
|
$
|
7.94
|
68,022
|
1,650,612
|
(a)
|
Exhibits:
|
Subsidiaries of the Registrant (filed herewith)
|
|
Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act (filed herewith)
|
|
Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act (filed herewith)
|
|
Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act (filed herewith)
|
|
Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act (filed herewith)
|
|
101.INS
|
XBRL Instance Document (filed herewith)
|
101.SCH
|
XBRL Taxonomy Extension Schema Document (filed herewith)
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
|
101.DEF
|
XBRL Taxonomy Extension Linkbase Document (filed herewith)
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
|
REGISTRANT:
|
|
SHARPS COMPLIANCE CORP.
|
|
Dated: February 4, 2016
|
By: /s/ DAVID P. TUSA
|
David P. Tusa
|
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
Dated: February 4, 2016
|
By: /s/ DIANA P. DIAZ
|
Diana P. Diaz
|
|
Vice President and Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
Name
|
Jurisdiction of Incorporation
|
Sharps Compliance, Inc. of Texas (dba Sharps Compliance, Inc.)
|
Texas
|
Sharps e-Tools.com Inc.
|
Delaware
|
Sharps Safety, Inc.
|
Texas
|
Sharps Manufacturing, Inc.
|
Delaware
|
Sharps Environmental Services, Inc. (dba Sharps Environmental Services of Texas, Inc.)
|
Delaware
|
Alpha/Bio/Med Services LLC*
|
Pennsylvania
|
Bio-Team Mobile LLC**
|
Pennsylvania
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sharps Compliance Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date: February 4, 2016
|
/s/David P. Tusa
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sharps Compliance Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
Date: February 4, 2016
|
/s/Diana P. Diaz
|
Vice President and Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
(1)
|
The Form 10-Q report for the period ended December 31, 2015, filed with the Securities and Exchange Commission on February 4, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Form 10-Q report for the period ended December 31, 2015 fairly presents, in all material respects, the financial condition and results of operations of Sharps Compliance Corp.
|
Date: February 4, 2016
|
/s/David P. Tusa
|
Chief Executive Officer and President
|
(1)
|
The Form 10-Q report for the period ended December 31, 2015, filed with the Securities and Exchange Commission on February 4, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Form 10-Q report for the period ended December 31, 2015 fairly presents, in all material respects, the financial condition and results of operations of Sharps Compliance Corp.
|
Date: February 4, 2016
|
/s/Diana P. Diaz
|
Vice President and Chief Financial Officer
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Feb. 01, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SHARPS COMPLIANCE CORP | |
Entity Central Index Key | 0000898770 | |
Current Fiscal Year End Date | --06-30 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 15,479,286 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2015 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Jun. 30, 2015 |
---|---|---|
CURRENT ASSETS | ||
Accounts receivable, allowance for doubtful accounts | $ 53 | $ 34 |
INTANGIBLE ASSETS, accumulated amortization | $ 427 | $ 385 |
STOCKHOLDERS' EQUITY | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 15,740,458 | 15,575,041 |
Common stock, shares outstanding (in shares) | 15,481,186 | 15,383,791 |
Treasury stock, shares repurchased (in shares) | 259,272 | 191,250 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) [Abstract] | ||||
REVENUES | $ 9,992 | $ 8,693 | $ 17,861 | $ 15,740 |
Cost of revenues | 6,673 | 5,465 | 11,663 | 10,178 |
GROSS PROFIT | 3,319 | 3,228 | 6,198 | 5,562 |
Selling, general and administrative | 2,585 | 2,415 | 5,181 | 4,738 |
Depreciation and amortization | 70 | 69 | 122 | 154 |
OPERATING INCOME | 664 | 744 | 895 | 670 |
INTEREST INCOME | 9 | 10 | 18 | 18 |
TOTAL INTEREST INCOME | 9 | 10 | 18 | 18 |
INCOME BEFORE INCOME TAXES | 673 | 754 | 913 | 688 |
INCOME TAX EXPENSE - Current | 58 | 5 | 78 | 13 |
TOTAL INCOME TAX EXPENSE | 58 | 5 | 78 | 13 |
NET INCOME | $ 615 | $ 749 | $ 835 | $ 675 |
NET INCOME PER COMMON SHARE | ||||
Basic (in dollars per share) | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.04 |
Diluted (in dollars per share) | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.04 |
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE: | ||||
Basic (in shares) | 15,467 | 15,281 | 15,443 | 15,285 |
Diluted (in shares) | 16,062 | 15,423 | 15,994 | 15,428 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands |
Common Stock [Member] |
Treasury Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings (Accumulated Deficit) [Member] |
Total |
---|---|---|---|---|---|
Balances at Jun. 30, 2014 | $ 155 | $ (681) | $ 23,695 | $ (1,265) | $ 21,904 |
Balances (in shares) at Jun. 30, 2014 | 15,460,940 | (161,801) | |||
Exercise of stock options | $ 0 | $ 0 | 139 | 0 | 139 |
Exercise of stock options (in shares) | 61,109 | 0 | |||
Stock-based compensation | $ 0 | $ 0 | 511 | 0 | 511 |
Issuance of restricted stock | $ 1 | $ 0 | (1) | 0 | 0 |
Issuance of restricted stock (in shares) | 52,992 | 0 | |||
Shares repurchased | $ 0 | $ (128) | 0 | 0 | (128) |
Shares repurchased (in shares) | 0 | (29,449) | |||
Net income | $ 0 | $ 0 | 0 | 1,160 | 1,160 |
Balances at Jun. 30, 2015 | $ 156 | $ (809) | 24,344 | (105) | $ 23,586 |
Balances (in shares) at Jun. 30, 2015 | 15,575,041 | (191,250) | 15,383,791 | ||
Exercise of stock options | $ 1 | $ 0 | 312 | 0 | $ 313 |
Exercise of stock options (in shares) | 112,425 | 0 | 112,425 | ||
Stock-based compensation | $ 0 | $ 0 | 358 | 0 | $ 358 |
Issuance of restricted stock | $ 1 | 0 | (1) | 0 | 0 |
Issuance of restricted stock (in shares) | 52,992 | ||||
Shares repurchased | $ 0 | $ (540) | 0 | 0 | $ (540) |
Shares repurchased (in shares) | 0 | (68,022) | (68,022) | ||
Net income | $ 0 | $ 0 | 0 | 835 | $ 835 |
Balances at Dec. 31, 2015 | $ 158 | $ (1,349) | $ 25,013 | $ 730 | $ 24,552 |
Balances (in shares) at Dec. 31, 2015 | 15,740,458 | (259,272) | 15,481,186 |
ORGANIZATION AND BACKGROUND |
6 Months Ended |
---|---|
Dec. 31, 2015 | |
ORGANIZATION AND BACKGROUND [Abstract] | |
ORGANIZATION AND BACKGROUND | NOTE 1 - ORGANIZATION AND BACKGROUND The accompanying unaudited condensed consolidated financial statements include the financial transactions and accounts of Sharps Compliance Corp. and its wholly owned subsidiaries, Sharps Compliance, Inc. of Texas (dba Sharps Compliance, Inc.), Sharps e-Tools.com, Inc. (“Sharps e-Tools”), Sharps Manufacturing, Inc., Sharps Environmental Services, Inc. (dba Sharps Environmental Services of Texas, Inc.), Sharps Safety, Inc., Alpha Bio/Med Services LLC and Bio-Team Mobile LLC (collectively, “Sharps” or the “Company”). All significant intercompany accounts and transactions have been eliminated upon consolidation. |
BASIS OF PRESENTATION |
6 Months Ended |
---|---|
Dec. 31, 2015 | |
BASIS OF PRESENTATION [Abstract] | |
BASIS OF PRESENTATION | NOTE 2 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information and with instructions to Form 10-Q and, accordingly, do not include all information and footnotes required under accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, these interim condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of December 31, 2015, the results of its operations for the three and six months ended December 31, 2015 and 2014, cash flows for the six months ended December 31, 2015 and 2014 and stockholders’ equity for the six months ended December 31, 2015 and the year ended June 30, 2015. The results of operations for the three and six months ended December 31, 2015 are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2016. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2015. |
SIGNIFICANT ACCOUNTING POLICIES |
6 Months Ended |
---|---|
Dec. 31, 2015 | |
SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition: The Company recognizes revenue from product sales and services when goods are shipped or delivered, services provided, and title and risk of loss pass to the customer except for those sales via multiple-deliverable revenue arrangements. Provisions for certain rebates, product returns and discounts to customers are accounted for as reductions in sales in the same period the related sales are recorded. Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including prices charged by competitors. Rebates are estimated based on contractual terms, historical experience, trend analysis and projected market conditions in the various markets served. Service agreements which include a vendor managed inventory program include terms that meet the “bill and hold” criteria and as such are recognized when the order is completed at which point title has transferred, there are no acceptance provisions and amounts are segregated in the Company’s warehouse. During the three and six months ended December 31, 2015, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $1.9 million and $2.5 million, respectively. During the three and six months ended December 31, 2014, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $0.8 million and $1.6 million, respectively. As of December 31, 2015 and June 30, 2015, $2.9 million and $1.6 million, respectively, of solutions sold through that date were held in vendor managed inventory pending fulfillment or shipment to patients of pharmaceutical manufacturers who offer these solutions to patients in an ongoing patient support program. Certain products offered by the Company have revenue producing components that are recognized over multiple delivery points (Sharps Recovery System™ and various other solutions like the TakeAway Environmental Return Systems™ referred to as “Mailbacks” and Sharps® Pump and Asset Return Boxes, referred to as “Pump Returns”) and can consist of up to three separate elements, or units of measure, as follows: (1) the sale of the compliance and container system, (2) return transportation and (3) treatment service. In accordance with the relative selling price methodology, an estimated selling price is determined for all deliverables that qualify for separate units of accounting. The actual consideration received in a multiple-deliverable arrangement is then allocated to the units based on their relative sales price. The selling price for the transportation revenue and the treatment revenue utilizes third party evidence. The Company estimates the selling price of the compliance and container system based on the product and services provided including compliance with local, state and Federal laws, adherence to stringent manufacturing and testing requirements, safety to the patient and the community as well as storage and containment capabilities. Revenue for the sale of the compliance and container is recognized upon delivery to the customer, at which time the customer takes title and assumes risk of ownership. Transportation revenue is recognized when the customer returns the compliance and container system and the container has been received at the Company’s owned or contracted facilities. The compliance and container system is mailed or delivered by an alternative logistics provider to the Company’s owned or contracted facilities. Treatment revenue is recognized upon the destruction or conversion and proof of receipt and treatment having been performed on the container. Since the transportation element and the treatment elements are undelivered services at the point of initial sale of the compliance and container, transportation and treatment revenue is deferred until the services are performed. The current and long-term portions of deferred revenues are determined through regression analysis and historical trends. Furthermore, through regression analysis of historical data, the Company has determined that a certain percentage of all compliance and container systems sold may not be returned. Accordingly, a portion of the transportation and treatment elements are recognized at the point of sale. Income Taxes: Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of a valuation allowance requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Under generally accepted accounting principles, the valuation allowance has been recorded to reduce our deferred tax assets to an amount that is more likely than not to be realized and is based on the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes. Accounts Receivable: Accounts receivable consist primarily of amounts due to the Company from our normal business activities. Accounts receivable balances are determined to be delinquent when the amount is past due based on the contractual terms with the customer. The Company maintains an allowance for doubtful accounts to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected accounts. Accounts receivable are charged to the allowance for doubtful accounts when the Company determines that the receivable will not be collected and/or when the account has been referred to a third party collection agency. The Company has a history of minimal uncollectible accounts. Stock-Based Compensation: Stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). |
RECENTLY ISSUED ACCOUNTING STANDARDS |
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Dec. 31, 2015 | |
RECENTLY ISSUED ACCOUNTING STANDARDS [Abstract] | |
RECENTLY ISSUED ACCOUNTING STANDARDS | NOTE 4 – RECENTLY ISSUED ACCOUNTING STANDARDS In May 2014, guidance for revenue recognition was issued which supersedes the revenue recognition requirements currently followed by the Company. The new guidance provides for a single five-step model to be applied in determining the amount and timing of the recognition of revenue related to contracts with customers. The new standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. The guidance is effective for annual reporting periods beginning after December 15, 2017 (effective July 1, 2018 for the Company). The Company is evaluating the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures and has not yet determined the method by which it will adopt the standard. In July 2015, guidance for inventory measurement was issued, which supersedes the policy currently followed by the Company. The new guidance requires the Company to measure inventory at the lower of cost or net realizable value. The provisions of the new guidance are effective for annual reporting periods beginning after December 15, 2016 (effective July 1, 2017 for the Company) including interim periods within the reporting period. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. In September 2015, guidance for business combinations was issued, which simplifies the accounting for measurement-period adjustments. The new guidance eliminates the requirement to restate prior period financial statements for measurement period adjustments following a business combination and requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. The provisions of the new guidance are effective for annual reporting periods beginning after December 15, 2015 (effective July 1, 2016 for the Company) including interim periods within the reporting period. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. |
INCOME TAXES |
6 Months Ended |
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Dec. 31, 2015 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | NOTE 5 - INCOME TAXES The establishment of valuation allowances and development of projected annual effective tax rates requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Under generally accepted accounting principles, the valuation allowance has been recorded to reduce the Company’s net deferred tax asset to an amount that is more likely than not to be realized and is based upon the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes. The Company’s net deferred tax assets have been fully reserved by a tax valuation allowance. The Company’s effective tax rate for the six months ended December 31, 2015 and 2014 was 8.5% and 1.9%, respectively, reflecting estimated state income taxes. The Company’s federal tax expense associated with taxable income during the six months ended December 31, 2015 and 2014 was offset by the utilization of net operating loss carryforwards. |
NOTES PAYABLE AND LONG-TERM DEBT |
6 Months Ended |
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Dec. 31, 2015 | |
NOTES PAYABLE AND LONG-TERM DEBT [Abstract] | |
NOTES PAYABLE AND LONG-TERM DEBT | NOTE 6 - NOTES PAYABLE AND LONG-TERM DEBT On April 9, 2015, the Company entered into a credit agreement with a commercial bank (“Credit Agreement”). The Credit Agreement, which replaces, in its entirety, the Company’s prior credit agreement, which was executed effective January 28, 2014 with the same commercial bank, provides for a two-year, $9.0 million line of credit facility, the proceeds of which may be utilized as follows: (i) $4.0 million for working capital, letters of credit (up to $500,000) and general corporate purposes and (ii) $5.0 million for acquisitions. Indebtedness under the Credit Agreement is secured by the Company’s accounts receivable and inventory with advances outstanding under the working capital portion of the credit facility at any time limited to a Borrowing Base (as defined in the Credit Agreement) equal to 80% of eligible accounts receivable plus 50% of eligible inventory. Advances under the acquisition portion of the credit facility are limited to 75% of the purchase price of an acquired company and convert to a five-year term note. Borrowings bear interest at WSJ Prime (for the working capital line) and WSJ Prime plus 0.25% (for the acquisition line), which was approximately 3.50% and 3.75%, respectively, as of December 31, 2015. The Company pays a fee of 0.25% per annum on the unused amount of the line of credit. As of December 31, 2015, the Company had no outstanding borrowings other than $0.3 million in letters of credit, which left $8.7 million of credit available under the Credit Agreement. The Credit Agreement contains affirmative and negative covenants that, among other things, require the Company to maintain a minimum level of tangible net worth of $12.5 million, minimum liquidity of $7.0 million and a minimum debt service coverage ratio of not less than 1.15 to 1.00. The Credit Agreement, which expires on April 9, 2017, also contains customary events of default which, if uncured, may terminate the Credit Agreement and require immediate repayment of all indebtedness to the lenders. The Company was in compliance with all the financial covenants under the Credit Agreement as of December 31, 2015. |
STOCK-BASED COMPENSATION |
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STOCK-BASED COMPENSATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | NOTE 7 – STOCK-BASED COMPENSATION Stock-based compensation cost for options and restricted stock awarded to employees and directors is measured at the grant date, based on the calculated fair value of the award and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). Stock-based compensation costs from performance-based stock option awards are estimated at the date when key terms and conditions of the performance-based stock award are known (the “service inception date”), and in subsequent reporting periods, trued up at the grant date and recognized as expense over the employee’s requisite period (from the service inception date through the end of the vesting period). During the three and six months ended December 31, 2015 and 2014, stock-based compensation amounts are as follows (in thousands):
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EARNINGS PER SHARE |
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EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | NOTE 8 - EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted per share is computed by dividing net income by the weighted average number of common shares after considering the additional dilution related to common stock options, restricted stock and performance-based stock option awards. In computing diluted earnings per share, the outstanding common stock options and performance-based stock option awards are considered dilutive using the treasury stock method. The Company’s restricted stock awards are treated as outstanding for earnings per share calculations since these shares have full voting rights and are entitled to participate in dividends declared on common shares, if any, and undistributed earnings. As participating securities, the shares of restricted stock are included in the calculation of basic EPS using the two-class method. For the periods presented, the amount of earnings allocated to the participating securities was not material. The following information is necessary to calculate earnings per share for the periods presented (in thousands, except per-share data):
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EQUITY TRANSACTIONS |
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EQUITY TRANSACTIONS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY TRANSACTIONS | NOTE 9 - EQUITY TRANSACTIONS During the three and six months ended December 31, 2015 and 2014, stock options to purchase shares of the Company’s common stock were exercised as follows:
As of December 31, 2015, there was $0.5 million of stock option and restricted stock compensation expense related to non-vested awards which is expected to be recognized over a weighted average period of 2.6 years. On January 7, 2013, the Company announced that its Board of Directors approved a stock repurchase program effective January 3, 2013, authorizing the Company to repurchase in the aggregate up to $3.0 million of its outstanding common stock over a two-year period. On March 5, 2015, the Board approved a two-year extension on the stock repurchase program through January 1, 2017. During the three and six months ended December 31, 2015 and 2014, shares were repurchased as follows:
Total shares repurchased under the program are 259,272 shares at a cost of $1.3 million. As of December 31, 2015, approximately $1.7 million remained of the Company’s $3.0 million repurchase program. Sharps purchased all shares with cash resources. |
INVENTORY |
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INVENTORY [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
INVENTORY | NOTE 10 – INVENTORY The components of inventory are as follows (in thousands):
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Dec. 31, 2015 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | NOTE 11 – FAIR VALUE OF FINANCIAL INSTRUMENTS The Company considers the fair value of all financial instruments, including cash and cash equivalents, accounts receivable and accounts payable to approximate their carrying values at December 31, 2015 due to their short-term nature. |
ACQUISITION |
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ACQUISITION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITION | NOTE 12 – ACQUISITIONS Effective on July 17, 2015, the Company acquired Alpha Bio/Med Services LLC, a route-based pickup service located in Pennsylvania for total cash consideration of $0.7 million of which $0.1 million has been withheld for possible settlement amounts through July 2016. The following amounts represent the fair value of the assets acquired and liabilities assumed:
Effective on December 14, 2015, the Company acquired Bio-Team Mobile LLC, a route-based pickup service located in Pennsylvania for total cash consideration of $1.0 million of which $0.1 million has been withheld for possible settlement amounts through December 2016 and $0.3 million of cash consideration that was paid in January 2016. The following amounts represent the fair value of the assets acquired and liabilities assumed:
During the three and six months ended December 31, 2015, the Company incurred $0.1 million and $0.2 million, respectively, of acquisition related expenses for investment banking, legal and accounting fees which are included within selling, general and administrative expenses on our condensed consolidated statements of income. The results of operations of the acquired business have been included in the condensed consolidated statements of income from the date of acquisition. The goodwill recorded as of December 31, 2015 will be deductible for income taxes. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Dec. 31, 2015 | |
SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Revenue Recognition | Revenue Recognition: The Company recognizes revenue from product sales and services when goods are shipped or delivered, services provided, and title and risk of loss pass to the customer except for those sales via multiple-deliverable revenue arrangements. Provisions for certain rebates, product returns and discounts to customers are accounted for as reductions in sales in the same period the related sales are recorded. Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including prices charged by competitors. Rebates are estimated based on contractual terms, historical experience, trend analysis and projected market conditions in the various markets served. Service agreements which include a vendor managed inventory program include terms that meet the “bill and hold” criteria and as such are recognized when the order is completed at which point title has transferred, there are no acceptance provisions and amounts are segregated in the Company’s warehouse. During the three and six months ended December 31, 2015, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $1.9 million and $2.5 million, respectively. During the three and six months ended December 31, 2014, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $0.8 million and $1.6 million, respectively. As of December 31, 2015 and June 30, 2015, $2.9 million and $1.6 million, respectively, of solutions sold through that date were held in vendor managed inventory pending fulfillment or shipment to patients of pharmaceutical manufacturers who offer these solutions to patients in an ongoing patient support program. Certain products offered by the Company have revenue producing components that are recognized over multiple delivery points (Sharps Recovery System™ and various other solutions like the TakeAway Environmental Return Systems™ referred to as “Mailbacks” and Sharps® Pump and Asset Return Boxes, referred to as “Pump Returns”) and can consist of up to three separate elements, or units of measure, as follows: (1) the sale of the compliance and container system, (2) return transportation and (3) treatment service. In accordance with the relative selling price methodology, an estimated selling price is determined for all deliverables that qualify for separate units of accounting. The actual consideration received in a multiple-deliverable arrangement is then allocated to the units based on their relative sales price. The selling price for the transportation revenue and the treatment revenue utilizes third party evidence. The Company estimates the selling price of the compliance and container system based on the product and services provided including compliance with local, state and Federal laws, adherence to stringent manufacturing and testing requirements, safety to the patient and the community as well as storage and containment capabilities. Revenue for the sale of the compliance and container is recognized upon delivery to the customer, at which time the customer takes title and assumes risk of ownership. Transportation revenue is recognized when the customer returns the compliance and container system and the container has been received at the Company’s owned or contracted facilities. The compliance and container system is mailed or delivered by an alternative logistics provider to the Company’s owned or contracted facilities. Treatment revenue is recognized upon the destruction or conversion and proof of receipt and treatment having been performed on the container. Since the transportation element and the treatment elements are undelivered services at the point of initial sale of the compliance and container, transportation and treatment revenue is deferred until the services are performed. The current and long-term portions of deferred revenues are determined through regression analysis and historical trends. Furthermore, through regression analysis of historical data, the Company has determined that a certain percentage of all compliance and container systems sold may not be returned. Accordingly, a portion of the transportation and treatment elements are recognized at the point of sale. |
Income Taxes | Income Taxes: Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of a valuation allowance requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Under generally accepted accounting principles, the valuation allowance has been recorded to reduce our deferred tax assets to an amount that is more likely than not to be realized and is based on the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes. |
Accounts Receivable | Accounts Receivable: Accounts receivable consist primarily of amounts due to the Company from our normal business activities. Accounts receivable balances are determined to be delinquent when the amount is past due based on the contractual terms with the customer. The Company maintains an allowance for doubtful accounts to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected accounts. Accounts receivable are charged to the allowance for doubtful accounts when the Company determines that the receivable will not be collected and/or when the account has been referred to a third party collection agency. The Company has a history of minimal uncollectible accounts. |
Stock-Based Compensation | Stock-Based Compensation: Stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). |
STOCK-BASED COMPENSATION (Tables) |
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STOCK-BASED COMPENSATION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allocated cost of share based compensation | During the three and six months ended December 31, 2015 and 2014, stock-based compensation amounts are as follows (in thousands):
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EARNINGS PER SHARE (Tables) |
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EARNINGS PER SHARE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | The following information is necessary to calculate earnings per share for the periods presented (in thousands, except per-share data):
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Stock options exercised to purchase common stock | During the three and six months ended December 31, 2015 and 2014, stock options to purchase shares of the Company’s common stock were exercised as follows:
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Schedule of share repurchases | During the three and six months ended December 31, 2015 and 2014, shares were repurchased as follows:
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INVENTORY (Tables) |
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Components of inventory | The components of inventory are as follows (in thousands):
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ACQUISITION (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||
Alpha Bio Med Services LLC [Member] | |||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||
Preliminary purchase price allocation | The following amounts represent the fair value of the assets acquired and liabilities assumed:
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Bio-Team Mobile LLC [Member] | |||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||
Preliminary purchase price allocation | The following amounts represent the fair value of the assets acquired and liabilities assumed:
|
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Jun. 30, 2015 |
|
Revenue Recognition [Abstract] | |||||
Revenue recorded from bill and hold inventory | $ 1.9 | $ 0.8 | $ 2.5 | $ 1.6 | |
Bill and hold inventory | $ 2.9 | $ 2.9 | $ 1.6 |
INCOME TAXES (Details) |
6 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Effective income tax rate reconciliation [Abstract] | ||
Effective income tax rate | 8.50% | 1.90% |
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Stock-based compensation expense | $ 217 | $ 141 | $ 358 | $ 257 |
Cost of Revenues [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Stock-based compensation expense | 10 | 6 | 18 | 10 |
Selling, General and Administrative [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Stock-based compensation expense | $ 207 | $ 135 | $ 340 | $ 247 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Jun. 30, 2015 |
|
EARNINGS PER SHARE [Abstract] | |||||
Net income, as reported | $ 615 | $ 749 | $ 835 | $ 675 | $ 1,160 |
Weighted average common shares outstanding (in shares) | 15,467 | 15,281 | 15,443 | 15,285 | |
Effect of dilutive stock options (in shares) | 595 | 142 | 551 | 143 | |
Weighted average diluted common shares outstanding (in shares) | 16,062 | 15,423 | 15,994 | 15,428 | |
Net income per common share | |||||
Basic (in dollars per share) | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.04 | |
Diluted (in dollars per share) | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.04 | |
Employee stock options excluded from computation of dilutive income per share amounts because their effect would be anti-dilutive (in shares) | 120 | 392 | 216 | 237 |
INVENTORY (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Jun. 30, 2015 |
---|---|---|
Components of inventory [Abstract] | ||
Raw materials | $ 1,236 | $ 1,393 |
Finished goods | 2,551 | 1,345 |
Total | $ 3,787 | $ 2,738 |
ACQUISITION (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2015 |
Jan. 31, 2016 |
Dec. 14, 2015 |
Jul. 17, 2015 |
Jun. 30, 2015 |
|
Purchase Price Allocation | ||||||
Goodwill | $ 1,039 | $ 1,039 | $ 0 | |||
Acquisition related expenses | $ 100 | $ 200 | ||||
Alpha Bio Med Services LLC [Member] | ||||||
Purchase Price Allocation | ||||||
Accounts receivable | $ 51 | |||||
Fixed assets | 70 | |||||
Intangibles | 267 | |||||
Goodwill | 413 | |||||
Accounts payable and accrued liabilities | (101) | |||||
Total purchase price | 700 | |||||
Cash consideration withheld for possible settlement amounts through 2016 | $ 100 | |||||
Bio-Team Mobile LLC [Member] | ||||||
Purchase Price Allocation | ||||||
Accounts receivable | $ 42 | |||||
Fixed assets | 68 | |||||
Intangibles | 313 | |||||
Goodwill | 626 | |||||
Accounts payable and accrued liabilities | (16) | |||||
Total purchase price | 1,033 | |||||
Cash consideration withheld for possible settlement amounts through 2016 | $ 100 | |||||
Bio-Team Mobile LLC [Member] | Subsequent Event [Member] | ||||||
Purchase Price Allocation | ||||||
Cash consideration withheld for possible settlement amounts through 2016 | $ 300 |
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