8-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)

July 1, 2016

Commission File Number: 001-34269

_______________________

SHARPS COMPLIANCE CORP.

(Exact name of registrant as specified in its charter)

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)

(713) 432-0300

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Amendment No. 2

This Form 8-K/A is filed as an amendment (“Amendment No. 2”) to the Current Report on Form 8-K filed by Sharps Compliance Corp. under Items 1.01, 2.01, 2.03 and 8.01 on July 1, 2016 and amended on September 14, 2016 (“Amendment No. 1”). Amendment No. 2 is being filed to include the financial statements and financial information required under Item 9.01.

TABLE OF CONTENTS

Item 8.01 Other Events.

Item 9.01 Financial Statements and Exhibits

SIGNATURES

INDEX TO EXHIBITS

Item 8.01. Other Events

As previously announced on July 6, 2016, Sharps Compliance Corp. (the “Company”), through its wholly owned subsidiary, Sharps Compliance, Inc., a Texas corporation, entered into an Agreement for Purchase and Sale of LLC Units (the “Agreement”) for the acquisition by the Company of Citiwaste, LLC, a New York limited liability corporation and sole proprietorship (“Citiwaste”).

The financial statements of Citiwaste as of and for the year ended December 31, 2015 are included herein as Exhibit 99.1. The unaudited financial statements as of and for the six months ended June 30, 2016 and 2015 are included herein as Exhibit 99.2. Unaudited pro forma condensed consolidated financial statements as of and for the twelve-month period ended June 30, 2016 and the notes thereto with respect to the acquisition of Citiwaste are included herein as Exhibit 99.3.

Item 9.01. Financial Statements and Exhibits

a)	Financial Statements of Business Acquired. In accordance with Item 9.01(a), the audited financial statements of Citiwaste, LLC as of and for the year ended December 31, 2015 and the independent auditor’s report thereto, and the unaudited financial statements of Citiwaste, LLC as of and for six months ended June 30, 2016 and 2015 are included herein as Exhibits 99.1 and 99.2, respectively.
b)	Pro forma financial information. The unaudited pro forma condensed financial statements as of and for the year ended June 30, 2016 and the notes thereto with respect to the acquisition are included herein as Exhibit 99.3.
c)	Exhibit	Description
	Exhibit 23.1	Consent of Pannell Kerr Forster of Texas, P.C., the independent auditor of Citiwaste, LLC.
	Exhibit 99.1	Audited financial statements of Citiwaste, LLC as of and for the year ended December 31, 2015.
	Exhibit 99.2	Unaudited financial statements of Citiwaste, LLC as of and for the six months ended June 30, 2016 and 2015.
	Exhibit 99.3	Unaudited pro forma condensed financial statements as of and for the year ended June 30, 2016.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements and information relating to the Company and its subsidiaries that are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. When used in this report, the words “may,” “position,” “plan,” “potential,” “continue,” “anticipate,” “believe,” “expect,” “estimate,” “project” and “intend” and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements. Such statements reflect known and unknown risks, uncertainties and assumptions related to certain factors, including without limitation, competitive factors, general economic conditions, customer relations, relationships with vendors, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. Consequently, no forward-looking statements can be guaranteed. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and as such should not consider the preceding list or the risk factors to be a complete list of all potential risks and uncertainties. The Company does not intend to update these forward-looking statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	REGISTRANT:
Dated: September 19, 2016	Sharps Compliance Inc.
	By: /s/ DIANA P. DIAZ
	Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit Number Description

Exhibit 23.1 Consent of Pannell Kerr Forster of Texas, P.C., the independent auditor of Citiwaste, LLC.

Exhibit 99.1 Audited financial statements of Citiwaste, LLC as of and for the year ended December 31, 2015.

Exhibit 99.2 Unaudited financial statements of Citiwaste, LLC as of and for the six months ended June 30, 2016 and 2015.

Exhibit 99.3 Unaudited pro forma condensed combined financial statements as of and for the year ended June 30, 2016.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITOR

We hereby consent to the use in this Form-8K/A of Sharps Compliance Corp. of our report dated September 19, 2016, with respect to the financial statements of Citiwaste, LLC for the year ended December 31, 2015.

/s/ Pannell Kerr Forster of Texas, P.C.

Houston, Texas

September 19, 2016

EX-99.1

Exhibit 99.1

CitiWaste, LLC

Financial Statements

December 31, 2015

CitiWaste, LLC

December 31, 2015

Table of Contents

	Page(s)
Independent Auditors’ Report	1
Balance Sheet	2
Statement of Operations	3
Statement of Changes in Equity	4
Statement of Cash Flows	5
Notes to Financial Statements	6-9

INDEPENDENT AUDITORS’ REPORT

To the Members of

Citiwaste, LLC

We have audited the accompanying financial statements of CitiWaste, LLC (the “Company”) which comprise the balance sheet as of December 31, 2015, and the related statements of operations, changes in equity, and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements for the purpose of designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CitiWaste, LLC as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.

September 19, 2016

CitiWaste, LLC

Balance Sheet

December 31, 2015

Assets
Current assets
Cash and cash equivalents	$	9,351
Accounts receivable, net		519,788
Total current assets		529,139
Property and equipment
Vehicles		143,294
Computer software		20,004
Less: accumulated depreciation		(111,787	)
Property and equipment, net		51,511
Intangible assets, net		241,438
Total assets	$	822,088
Liabilities and Equity
Current liabilities
Accounts payable	$	253,732
Accrued liabilities		144,315
Current maturities of long-term debt		92,340
Total current liabilities		490,387
Long-term debt, net of current portion		149,651
Total liabilities		640,038
Commitments and contingencies		-
Members' equity		182,050
Total liabilities and equity	$	822,088

See notes to financial statements.

2

CitiWaste, LLC

Statement of Operations

Year Ended December 31, 2015

Sales	$	2,511,389
Operating expenses
Selling, general and administrative		2,242,127
Depreciation and amortization		17,442
Total operating expenses		2,259,569
Net income	$	251,820

See notes to financial statements.

3

CitiWaste, LLC

Statement of Changes in Equity

Year Ended December 31, 2015

	Total Members' Equity
Balance, December 31, 2014	$	79,659
Distributions to members		(149,429	)
Net income		251,820
Balance, December 31, 2015	$	182,050

See notes to financial statements.

4

CitiWaste, LLC

Statement of Cash Flows

Year Ended December 31, 2015

Cash flows from operating activities
Net income	$	251,820
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		17,442
Bad debt expense		14,315
Changes in operating assets and liabilities
Accounts receivable		(221,343	)
Accounts payable		86,782
Accrued liabilities		51,342
Net cash provided by operating activities		200,358
Cash flows from investing activities
Purchases of property and equipment		(20,004	)
Net cash used in investing activities		(20,004	)
Cash flows from financing activities
Distributions to members		(149,429	)
Payments on long-term debt		(32,669	)
Net cash used in financing activities		(182,098	)
Net decrease in cash and cash equivalents		(1,744	)
Cash and cash equivalents - beginning of year		11,095
Cash and cash equivalents - end of year	$	9,351
Non-cash investing and financing activities:
Acquisition of customer accounts through promissory note	$	250,380

See notes to financial statements.

5

CitiWaste, LLC

Notes to Financial Statements

December 31, 2015

Note 1 - Summary of Significant Accounting Policies

Nature of business

Citiwaste, LLC (the “Company”) was formed in Brooklyn, New York in October 2004. The Company is a medical waste disposal company offering services to transport regulated medical and hazardous waste, sharps disposal and OSHA training for industries such as healthcare facilities, medical labs, funeral homes and other sectors that require medical waste and regulated material disposal. The Company has a location in Brooklyn, New York and is licensed to serve and has customer locations in New York, New Jersey, Connecticut and Massachusetts.

Basis of accounting

The Company maintains its accounts on the accrual method of accounting in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Accounting principles and the methods of applying those principles that materially affect the determination of financial position, results of operations, and cash flows are summarized are below.

Revenue recognition

The Company recognizes revenue when (i) goods are transported or delivered, (ii) the price is substantially fixed or determinable and (iii) collectability is reasonably assured.

Cash and cash equivalents

For the purposes of the statements of cash flows, the Company considers all short-term, highly liquid, investments with an original maturity of three months or less to be cash equivalents.

Accounts receivable

Accounts receivable consist of trade receivables recorded at original invoice amount, less an estimated allowance for uncollectible accounts. Trade credit is generally extended on a short-term basis and does not bear interest. Changes in the estimated collectability of trade receivables are recorded in the results of operations for the period in which the estimate is revised. Trade receivables that are deemed uncollectible are written off against the allowance for doubtful accounts. At December 31, 2015, the Company has recorded an allowance for doubtful accounts for $23,240.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful life of five years for vehicles. Depreciation expense for the year ended December 31, 2015 was $8,500. The Company’s software is in the development phase and has not been placed into service. Accordingly, no depreciation expense was recognized during 2015.

6

CitiWaste, LLC

Notes to Financial Statements

December 31, 2015

Note 1 - Summary of Significant Accounting Policies (Continued)

Property and equipment (continued)

The costs of ordinary repairs and maintenance are charged to expense as incurred, while significant enhancements and replacements are capitalized. When property and equipment are sold or retired, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations.

Intangible assets

Intangible assets consist of acquired customer relationships. During September 2015, the Company acquired approximately 400 accounts for $250,380 (See Note 2). This intangible asset with a definite useful life is amortized over the estimated useful life of seven years. Amortization expense is expected to approximate $36,000 over the next five years. Amortization expense for the year ended December 31, 2015 was $8,942.

Impairment of long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and exceeds its fair value. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.

If such asset is considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted future cash flows. As of December 31, 2015 management believes all long-lived assets are fully realizable, thus no impairment is required.

Sales tax

Sales tax collected from customers is excluded from revenues. The obligation is included in accrued expenses until the taxes are remitted to the appropriate taxing authorities.

Income taxes

The Company does not pay federal income tax on its taxable income. Instead, the members are liable for federal income tax on their respective shares of the Company’s taxable income reported on their Federal income tax returns.

The Company recognizes in the financial statements the impact of an uncertain tax position only if it is more likely than not of being sustained upon examination by the taxing authority based on the technical merits of the position. Any penalties or interest assessed as a result of an examination will be recognized in income tax expense.

7

CitiWaste, LLC

Notes to Financial Statements

December 31, 2015

Note 1 - Summary of Significant Accounting Policies (Continued)

Financial instruments and credit risk

Financial instruments, which potentially subject the Company to credit risk include cash, accounts receivable and long-term debt. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. From time to time, the balances in these accounts may exceed the federally insured limits. The Company has not incurred losses related to these deposits.The carrying values of the Company’s financial instruments approximate their fair values as of December 31, 2015 because of their short term nature.

Concentration of significant vendors

During 2015, one vendor accounted for 12% of the Company’s purchases and 57% of accounts payable as of December 31, 2015.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2 - Long-Term Debt

Long-term debt consists of the following as of December 31:

Notes payable to a vehicle finance company, bearing interest at rates of 9.98% and 10.33%, monthly payments of $413 and $560; maturing in July 2016 and September 2017; and secured by vehicles and personal guarantees of the members.	$	12,596
Non-interest bearing, unsecured note payable to the seller of the acquired customer relationships (See Note 1), 36 monthly payments of $6,955; maturing September 2018.		229,395
Total long-term debt		241,991
Less: current portion		(92,340	)
Long-term debt, net of current portion	$	149,651

The aggregate maturities of long-term debt for the five years subsequent to December 31, 2015 and thereafter are as follows:

Year Ended December 31,	Amount
2016	$	92,340
2017		87,176
2018		62,475
	$	241,991

8

CitiWaste, LLC

Notes to Financial Statements

December 31, 2015

Note 2 - Long-Term Debt (Continued)

In conjunction with the acquisitions of the customer relationships, the purchase agreement has a determination of purchase price clause that states if the revenues for the period of October 1, 2015 through September 30, 2016 (the “2016 Revenue Determination”) earned by the purchaser from all purchased accounts is less than $125,193 then the aggregate purchase price shall be reduced pro rata by the proportionate difference between the 2016 Revenue Determination and $166,924, and the monthly payments under the promissory note for the balance of the term shall be adjusted to reflect the adjusted purchase price. As of December 31, 2015, the Company determined that the purchase price will not be adjusted under the purchase price clause due to uncertainties of the 2016 Revenue Determination.

Management determined interest expense for the year December 31, 2015 to be immaterial.

Note 3 - Commitments and Contingencies

Litigation

In the normal course of business, the Company is subject to various claims, legal actions, and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In the Company’s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying financial statements.

Operating leases

The Company leases vehicles and office space under operating leases which expire at various dates through March 2019. The expense related to these non-cancellable operating leases is included in selling, general and administrative expenses and amounted to approximately $108,000 for the year ended December 31, 2015.

The Company’s future minimum payments under noncancelable operating leases for each of the years subsequent to December 31, 2015 are as follows:

Year Ended December 31,	Amount
2016	$	179,779
2017		106,386
2018		17,705
2019		4,426
	$	308,296

Note 4 - Related Party Transactions

The Company leases a facility from the owner. Rent expense was $30,000 for the year ended December 31, 2015. The transfer station facility is owned by a related party. The Company’s payroll is processed by an entity also owned by the owners.

Note 5 - Subsequent Events

On July 1, 2016, Sharps Compliance, Inc., a Texas corporation, acquired all of the issued and outstanding membership interests of the Company.

Management has evaluated subsequent events as of September 19, 2016, the date the financial statements were available to be issued and has determined that there are no other subsequent events to be reported.

9

EX-99.2

Exhibit 99.2

CitiWaste, LLC

Financial Statements

June 30, 2016

CitiWaste, LLC

June 30, 2016

Table of Contents

	Page(s)
Independent Accountants’ Review Report	1
Balance Sheets	2
Statements of Operations	3
Statements of Changes in Equity	4
Statements of Cash Flows	5
Notes to Financial Statements	6-9

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Members of

CitiWaste, LLC

We have reviewed the accompanying balance sheets of CitiWaste, LLC (the “Company”), as of June 30, 2016 and 2015, and the related statements of operations, changes in equity, and cash flows for the six months then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of Company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error.

Accountants’ Responsibility

Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with U.S. generally accepted accounting principles. We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountants’ Conclusion

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with U.S. generally accepted accounting principles.

September 19, 2016

CitiWaste, LLC

Balance Sheets

	June 30,
	2016			2015
Assets
Current assets
Cash and cash equivalents	$	5,000		$	152,055
Accounts receivable, net		495,478			335,540
Total current assets		500,478			487,595
Property and equipment
Vehicles		143,294			143,294
Computer software		24,305			-
Less: accumulated depreciation		(116,036	)		(107,537	)
Property and equipment, net		51,563			35,757
Intangible assets, net		223,554			-
Total assets	$	775,595		$	523,352
Liabilities and Equity
Current liabilities
Accounts payable	$	257,019		$	219,279
Accrued liabilities		145,894			175,754
Current maturities of long-term debt		88,975			11,684
Total current liabilities		491,888			406,717
Long-term debt, net of current portion		105,204			6,754
Total liabilities		597,092			413,471
Commitments and contingencies		-			-
Members’ equity		178,503			109,881
Total liabilities and equity	$	775,595		$	523,352

See independent accountant’s review report and accompanying notes to financial statements.

2

CitiWaste, LLC

Statements of Operations

	Six Months Ended June 30,
	2016		2015
Sales	$	1,558,716	$	1,147,423
Operating expenses
Selling, general and administrative		1,229,087		985,157
Depreciation and amortization		22,134		4,250
Total operating expenses		1,251,221		989,407
Net income	$	307,495	$	158,016

See independent accountant’s review report and accompanying notes to financial statements..

3

CitiWaste, LLC

Statements of Changes in Equity

Six Months Ended June 30, 2016 and 2015

	Members’ Equity
Balance, January 1, 2015	$	79,659
Distributions to members		(127,794	)
Net income		158,016
Balance, June 30, 2015	$	109,881
Balance, January 1, 2016	$	182,050
Distributions to members		(311,042	)
Net income		307,495
Balance, June 30, 2016	$	178,503

See independent accountant’s review report and accompanying notes to financial statements.

4

CitiWaste, LLC

Statements of Cash Flows

	Six Months Ended June 30,
	2016			2015
Cash flows from operating activities
Net income	$	307,495		$	158,016
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		22,134			4,250
Bad debt expense		27,571			2,508
Changes in operating assets and liabilities
Accounts receivable		(3,261	)		(25,288	)
Accounts payable		3,287			52,329
Accrued liabilities		1,579			82,781
Net cash provided by operating activities		358,805			274,596
Cash flows from investing activities
Purchases of property and equipment		(4,302	)		-
Net cash used in investing activities		(4,302	)		-
Cash flows from financing activities
Distributions to members		(311,042	)		(127,794	)
Payments on long-term debt		(47,812	)		(5,842	)
Net cash used in financing activities		(358,854	)		(133,636	)
Net increase (decrease) in cash and cash equivalents		(4,351	)		140,960
Cash and cash equivalents - beginning of period		9,351			11,095
Cash and cash equivalents - end of period	$	5,000		$	152,055

See independent accountant’s review report and accompanying notes to financial statements.

5

CitiWaste, LLC

Notes to Financial Statements

June 30, 2016

Note 1 - Summary of Significant Accounting Policies

Nature of business

CitiWaste, LLC (the “Company”) was formed in Brooklyn, New York in October 2004. The Company is a medical waste disposal company offering services to transport regulated medical and hazardous waste, sharps disposal and OSHA training for industries such as healthcare facilities, medical labs, funeral homes and other sectors that require medical waste and regulated material disposal. The Company has a location in Brooklyn, New York and is licensed to serve and has customer locations in New York, New Jersey, Connecticut and Massachusetts.

Basis of accounting

The Company maintains its accounts on the accrual method of accounting in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Accounting principles and the methods of applying those principles that materially affect the determination of financial position, results of operations, and cash flows are summarized below.

Revenue recognition

The Company recognizes revenue when (i) goods are transported or delivered, (ii) the price is substantially fixed or determinable and (iii) collectability is reasonably assured.

Cash and cash equivalents

For the purposes of the statements of cash flows, the Company considers all short-term, highly liquid, investments with an original maturity of three months or less to be cash equivalents.

Accounts receivable

Accounts receivable consist of trade receivables recorded at original invoice amount, less an estimated allowance for uncollectible accounts. Trade credit is generally extended on a short-term basis and does not bear interest. Changes in the estimated collectability of trade receivables are recorded in the results of operations for the period in which the estimate is revised. Trade receivables that are deemed uncollectible are written off against the allowance for doubtful accounts. At June 30, 2016 and 2015, the Company has recorded an allowance for doubtful accounts for $50,811 and $11,433, respectively.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful life of five years for vehicles. Depreciation expense for the periods ended June 30, 2016 and 2015 was $4,250 and $4,250, respectively. The Company’s software is in the development phase and has not been placed into service. Accordingly, no depreciation expense was recognized during 2016.

6

CitiWaste, LLC

Notes to Financial Statements

June 30, 2016

Note 1 - Summary of Significant Accounting Policies (Continued)

Property and equipment (continued)

The costs of ordinary repairs and maintenance are charged to expense as incurred, while significant enhancements and replacements are capitalized. When property and equipment are sold or retired, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations.

Intangible assets

Intangible assets consist of acquired customer relationships. During September 2015, the Company acquired approximately 400 accounts for $250,380 (See Note 2). This intangible assets with a definite useful life is amortized over the estimated useful life of seven years. Amortization expense is expected to approximate $36,000 over the next five years. Amortization expense for the year ended June 30, 2016 and 2015 was $17,884 and $0, respectively.

Impairment of long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and exceeds its fair value. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset.

If such asset is considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted future cash flows. As of June 30, 2016 and 2015, management believes all long-lived assets are fully realizable, thus no impairment is required.

Sales tax

Sales tax collected from customers is excluded from revenues. The obligation is included in accrued expenses until the taxes are remitted to the appropriate taxing authorities.

Income taxes

The Company does not pay federal income tax on its taxable income. Instead, the members are liable for federal income tax on their respective shares of the Company’s taxable income reported on their Federal income tax returns.

The Company recognizes in the financial statements the impact of an uncertain tax position only if it is more likely than not of being sustained upon examination by the taxing authority based on the technical merits of the position. Any penalties or interest assessed as a result of an examination will be recognized in income tax expense.

7

CitiWaste, LLC

Notes to Financial Statements

June 30, 2016

Note 1 - Summary of Significant Accounting Policies (Continued)

Financial instruments and credit risk

Financial instruments, which potentially subject the Company to credit risk, include cash, accounts receivable and long-term debt. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. From time to time, the balances in these accounts may exceed the federally insured limits. The Company has not incurred losses related to these deposits. The carrying values of the Company’s financial instruments approximate their fair values as of June 30, 2016 and 2015 because of their short term nature.

Concentration of significant vendors

During 2016, one vendor accounted for 11% of the Company’s purchases and 54% of accounts payable as of June 30, 2016. During 2015, one vendor accounted for 13% of the Company’s purchases and 68% of accounts payable as of June 30, 2015.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2 - Long-Term Debt

Long-term debt consists of the following at June 30:

	2016			2015
Notes payable to a vehicle finance company, bearing interest at rates of 9.98% and 10.33%, monthly payments of $413 and $560; maturing in July 2016 and September 2017; and secured by vehicles and personal guarantees of the members.	$	6,754		$	18,438
Non-interest bearing, unsecured note payable to the seller of the acquired customer relationships (See Note 1), 36 monthly payments of $6,955; maturing September 2018.		187,425			-
Total long-term debt		194,179			18,438
Less: current portion		(88,975	)		(11,684	)
Long-term debt, net of current portion	$	105,204		$	6,754

The aggregate maturities of long-term debt for the twelve month periods subsequent to June 30, 2016 are as follows:

Period Ended	Amount
2017	$	88,975
2018		105,204
	$	194,179

8

CitiWaste, LLC

Notes to Financial Statements

June 30, 2016

Note 2 - Long-Term Debt (Continued)

In conjunction with the acquisitions of the customer relationships, the purchase agreement has a determination of purchase price clause that states if the revenues for the period of October 1, 2015 through September 30, 2016 (the “2016 Revenue Determination”) earned by the purchaser from all purchased accounts is less than $125,193 then the aggregate purchase price shall be reduced pro rata by the proportionate difference between the 2016 Revenue Determination and $166,924, and the monthly payments under the promissory note for the balance of the term shall be adjusted to reflect the adjusted purchase price. At June 30, 2016, the Company determined that the purchase price will not be adjusted under the purchase price clause because the Company has determined that the 2016 Revenue Determination will be met.

Management determined interest expense for the years June 30, 2016 and 2015 to be immaterial.

Note 3 - Commitments and Contingencies

Litigation

In the normal course of business, the Company is subject to various claims, legal actions, and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In the Company’s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying financial statements.

Operating leases

The Company leases vehicles and office space under operating leases which expire at various dates through March 2019. The expense related to these non-cancellable operating leases are included in selling, general and administrative expenses and amounted to approximately $88,000 and $48,000 for the six months ended June 30, 2016 and 2015, respectively.

The Company’s future minimum payments under noncancelable operating leases for each of the twelve month periods subsequent to June 30, 2016 are as follows:

Period Ended	Amount
2017	$	143,083
2018		62,046
2019		13,279
	$	218,408

Note 4 - Related Party Transactions

The Company leases a facility from the owner. Rent expense was $30,000 and $15,000 for the periods ended June 30, 2016 and 2015, respectively. The transfer station facility is owned by a related party. The Company’s payroll is processed by an entity also owned by the owners.

Note 5 - Subsequent Events

On July 1, 2016, Sharps Compliance, Inc., a Texas Corporation, acquired all of the issued and outstanding membership interests of the Company.

Management has evaluated subsequent events as of September 19, 2016, the date the financial statements were available to be issued and has determined that there are no other subsequent events to be reported.

9

EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is based upon the historical consolidated financial statements of Sharps Compliance Corp. (the “Company”) for the year ended June 30, 2016, included in the Company’s annual report on Form 10-K for the year ended June 30, 2016 and of Citiwaste (as defined below) for the year ended December 31, 2015 and the six months ended June 30, 2015 and 2016, included in this Form 8-K/A.

The unaudited pro forma condensed combined financial information has been prepared to reflect the following:

· the Acquisition (as defined below), including the payment of related fees and expenses;

· the Common Stock Consideration (as defined below) issued by us to the sellers of Citiwaste as part of the purchase price; and

· the debt borrowed by us in the Debt Financing (as defined below).

In this Form 8-K/A, unless otherwise specified or the context requires otherwise:

· “Citiwaste” refers to Citiwaste, LLC, a New York limited liability corporation and sole proprietorship.

· “Acquisition” refers to the Company’s acquisition of all of the issued and outstanding membership interests of Citiwaste on July 1, 2016 for $7,000,000 in cash and for Common Stock Consideration (as defined below).

· “Common Stock Consideration” refers to the 456,760 shares of common stock of the Company issued to the sellers of Citiwaste as consideration.

· “Debt Financing” means the $3,000,000 borrowed under the acquisition portion of the Company’s credit agreement entered into on April 9, 2015 and amended June 20, 2016 (the “Credit Agreement”) in connection with the acquisition of Citiwaste.

The unaudited pro forma condensed combined balance sheet as of June 30, 2016, is presented as if the Acquisition, issuance of Common Stock Consideration and Debt Financing had occurred on June 30, 2016. The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2016 is presented as if the Acquisition, issuance of Common Stock Consideration and Debt Financing had occurred on July 1, 2015. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Acquisition, issuance of Common Stock Consideration and Debt Financing, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial information is based upon preliminary estimates. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the purchase price allocation in connection with the acquisition of Citiwaste. The Acquisition consideration will be allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the Acquisition. The final allocation is dependent upon certain valuations and other analyses that are not yet completed and are required to make a definitive allocation. The actual amounts recorded at the completion of the measurement period may differ materially from the information presented in the accompanying unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and is subject to numerous other uncertainties. The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that the Company would have reported had the Citiwaste acquisition been completed as of the dates presented, and should not be taken as a representation of the Company’s future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial information does not reflect any operating efficiencies and/or cost saving that the Company may achieve with respect to the combined companies.

The unaudited pro forma condensed combined financial information has been prepared on the assumption that the Acquisition and Debt Financing will be completed on the terms and in accordance with the assumptions set forth below. Any significant changes in the assumed interest rates associated with the Debt Financing or the cost of the Acquisition (whether as a result of contractual purchase price adjustments or otherwise) from those assumed for purposes of preparing the estimated pro forma financial information may cause a significant change in the estimated pro forma financial information. In addition, the pro forma adjustments for the Acquisition do not include any post-closing adjustments that may occur pursuant to the Acquisition Agreement, which may include adjustments of the purchase price, and any such post-closing adjustments may be material.

The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company included in the Annual Report on Form 10-K for the year ended June 30, 2016 and of Citiwaste included in this Form 8-K/A for the year ended December 31, 2015 and the six months ended June 30, 2015 and 2016.

SHARPS COMPLIANCE CORP.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2016

(In thousands)

	Sharps Compliance Corp. Historical		Citiwaste LLC Historical		Pro Forma Adjustments (Note 3)			Notes	Pro Forma Combined
ASSETS:
Current assets:
Cash and cash equivalents	$	12,435	$	5	$	(4,500	)	3(a)	$	7,940
Accounts receivable, net		5,814		495		-				6,309
Inventory		3,919		-		-				3,919
Prepaid and other current assets		695		-		-				695
Total current assets		22,863		500		(4,500	)			18,863
Property, plant and equipment, net		5,032		52		-				5,084
Other assets		84		-		-				84
Goodwill		1,039		-		5,908		3(b)		6,947
Intangible assets, net		1,129		224		3,000		3(c)		4,353
Total assets	$	30,147	$	776	$	4,408			$	35,331
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	1,620	$	257	$	-			$	1,877
Accrued liabilities		1,534		146		-				1,680
Current maturies of long-term debt		-		89		500		3(d)		589
Deferred revenue		2,477		-		-				2,477
Total current liabilities		5,631		492		500				6,623
Long-term deferred revenue		483		-		-				483
Other long-term liabilities		190		-		-				190
Lont-term debt		-		105		2,500		3(d)		2,605
Total liabilities		6,304		597		3,000				9,901
Stockholders’ equity:
Total stockholders' equity		23,843		179		1,408		3(e)		25,430
Total liabilities and stockholders' equity	$	30,147	$	776	$	4,408			$	35,331

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

SHARPS COMPLIANCE CORP.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended June 30, 2016

(In thousands, except per share data)

	Sharps Compliance Corp. Historical		Citiwaste LLC Historical		Pro Forma Adjustments (Note 4)			Notes	Pro Forma Combined
Revenues	$	33,383	$	2,923	$	-			$	36,306
		-				-
Cost of revenues		22,272		1,651		-				23,923
Gross profit		11,111		1,272		-				12,383
Selling, general and adminstrative expense		10,812		835		500		4(a)		12,147
Depreciation and amortization		294		35		454		4(b)		783
Operating Income (Loss)		5		402		(954	)			(547	)
Interest income (expense)		32		-		(102	)	4(c)		(70	)
Income before income taxes		37		402		(1,056	)			(617	)
Income tax expense (benefit)		24		32		(84	)	4(d)		(28	)
Net Income (Loss)	$	13	$	370	$	(972	)		$	(589	)
Net income (loss) per share
Basic	$	0.00							$	(0.04	)
Diluted	$	0.00							$	(0.04	)
Weighted Average Shares Outstanding
Basic		15,448				457		5		15,905
Diluted		15,838				457		5		15,905

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

SHARPS COMPLIANCE CORP.

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Basis of Pro Forma Presentation

The accompanying unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of Regulation S-X and such financial information is based upon the historical consolidated financial statements of Sharps Compliance Corp. (the “Company”) for the year ended June 30, 2016, included in the Company’s annual report on Form 10-K for the year ended June 30, 2016 and of Citiwaste (as defined below) for the year ended December 31, 2015 and the six months ended June 30, 2015 and 2016, included in this Form 8-K/A.

The unaudited pro forma condensed combined financial information has been prepared to reflect the following:

· the Acquisition (as defined below), including the payment of related fees and expenses;

· the Common Stock Consideration (as defined below) issued by us to the sellers of Citiwaste as part of the purchase price; and

· the debt borrowed by us in the Debt Financing (as defined below).

In this Form 8-K/A, unless otherwise specified or the context requires otherwise:

· “Citiwaste” refers to Citiwaste, LLC, a New York limited liability corporation and sole proprietorship.

· “Acquisition” refers to the Company’s acquisition of all of the issued and outstanding membership interests of Citiwaste on July 1, 2016.

· “Common Stock Consideration” refers to the 456,760 shares of common stock of the Company issued to the sellers of Citiwaste as consideration.

· “Debt Financing” means the $3,000,000 borrowed under the acquisition portion of the Company’s credit agreement entered into on April 9, 2015 and amended June 20, 2016 (the “Credit Agreement”) in connection with the acquisition of Citiwaste.

The unaudited pro forma condensed combined balance sheet as of June 30, 2016, is presented as if the Acquisition, issuance of Common Stock Consideration and Debt Financing had occurred on June 30, 2016. The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2016 is presented as if the Acquisition, issuance of Common Stock Consideration and Debt Financing had occurred on July 1, 2015. The historical consolidated financial information has been adjusted to give effect to estimated pro forma events that are (1) directly attributable to the Acquisition, issuance of Common Stock Consideration and Debt Financing, (2) factually supportable and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results of operations.

Citiwaste’s historical fiscal year ends on December 31. For the purposes of the unaudited pro forma combined financial information, Citiwaste’s historical results have been aligned to more closely conform to the Company’s fiscal year which ends on June 30. Specifically, Citiwaste’s statement of operations for the year ended June 30, 2016 was calculated by combining Citiwaste’s statements of operations for the year ended December 31, 2015 and for the six months ended June 30, 2016 and deducting Citiwaste’s statement of operations for the six months ended June 30, 2015.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial information is based upon preliminary estimates. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the purchase price allocation in connection with the acquisition of Citiwaste. The Acquisition consideration will be allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the Acquisition. The final allocation is dependent upon certain valuations and other analyses that are not yet completed and are required to make a definitive allocation. The actual amounts recorded at the completion of the measurement period may differ materially from the information presented in the accompanying unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only, contains a variety of adjustments, assumptions and preliminary estimates and is subject to numerous other uncertainties. The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that the Company would have reported had the Citiwaste acquisition been completed as of the dates presented, and should not be taken as a representation of the Company’s future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial information does not reflect any operating efficiencies and/or cost saving that the Company may achieve with respect to the combined companies.

The unaudited pro forma condensed combined financial information has been prepared on the assumption that the Acquisition and Debt Financing will be completed on the terms and in accordance with the assumptions set forth below. Any significant changes in the assumed interest rates associated with the Debt Financing or the cost of the Acquisition (whether as a result of contractual purchase price adjustments or otherwise) from those assumed for purposes of preparing the estimated pro forma financial information may cause a significant change in the estimated pro forma financial information. In addition, the pro forma adjustments for the Acquisition do not include any post-closing adjustments that may occur pursuant to the Acquisition Agreement, which may include adjustments of the purchase price, and any such post-closing adjustments may be material.

2. Preliminary Purchase Consideration and Related Allocation

Upon completion of a business combination, the Company allocates the purchase price of acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

The Citiwaste purchase price consists of $7.0 million in cash and 456,760 shares of common stock of the Company valued at $2.1 million, for a total consideration of $9.1 million. The following amounts represent the preliminary estimates of the fair value of the assets acquired and liabilities assumed:

(In thousands)	Amount
Cash	$	5
Accounts receivable		495
Fixed assets		52
Intangibles		3,224
Goodwill		5,908
Accounts payable, accrueds and other liabilities		(597	)
Fair value of net assets acquired	$	9,087

3. Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet are as follows:

(a) To record the cash paid for Citiwaste and estimated acquisition-related transaction costs less cash proceeds from the Debt Financing.

(In thousands)	Amount
Cash paid to sellers of Citiwaste	$	(7,000	)
Estimated acquisition-related transaction costs(2)		(500	)
Cash from Debt Financing(1)		3,000
Total pro forma adjustment to cash and cash equivalents	$	(4,500	)

⁽¹⁾ In connection with the acquisition of Citiwaste LLC, the Company borrowed $3.0 million under the acquisition portion of its Credit Agreement. Advances under the acquisition portion of the Credit Agreement, which are limited to 75% of the purchase price of an acquired company, will convert to a five-year term note which bears interest at WSJ Prime plus 0.25% which is currently 3.75%.

⁽²⁾ Reflects estimated acquisition-related transaction costs of $0.5 million shown as a reduction of cash with a corresponding decrease in retained earnings.

(b) To record the preliminary estimate of goodwill for the Company’s acquisition of Citiwaste.

(c) To record the preliminary estimate of the fair value of intangible assets acquired in connection with the Company’s acquisition of Citiwaste which are primarily attributable to customer relationships with an estimated useful life of seven (7) years.

(d) To record an increase in debt from the Debt Financing completed in connection with the Company’s acquisition of Citiwaste.

(e) To record the preliminary estimate of changes in the Company’s total equity due to the following:

(In thousands)	Elimination of Pre-Acquisition Citiwaste Equity Balances			Sharps Compliance Corp's Issuance of Equity Shares		Estimated Acquisition Related Transaction Costs			Total Adjustments to Stockholders' Equity
Common stock	$	-		$	5	$	-		$	5
Additional paid-in capital		-			2,082		-			2,082
Retained earnings		(179	)		-		(500	)		(679	)
Total adjustments to stockholders' equity	$	(179	)	$	2,087	$	(500	)	$	1,408

4. Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations are as follows:

(a) To record estimated acquisition-related transaction costs of $0.5 million incurred by the Company in connection with the Acquisition.

(b) To record estimated amortization expense related to the intangible assets.

(c) To record estimated interest expense on the $3.0 million borrowed as part of the Debt Financing. Interest expense was estimated using an assumed interest rate of 3.75% applied to outstanding debt reduced by scheduled debt repayments of $50,000 per month. Each 1/8% change in the WSJ Prime rate would result in a change in pro forma interest expense of approximately $3,400 for the year ended June 30, 2016.

(d) To record the estimated tax effect from the pro forma adjustments assuming an effective tax rate of 8% reflecting estimated state income taxes for the year ended June 30, 2016 as the Company is currently in a valuation allowance position and had net operating losses to offset current and deferred income taxes.

5. Pro Forma Earnings per Common Share

The following table sets forth the computation of basic and diluted pro forma earnings per common share for the year ended June 30, 2016:

(In thousands, except per share data)	Year Ended June 30, 2016
Pro forma combined net loss	$	(589	)
Weighted average common shares outstanding		15,905
Effect of dilutive shares		-
Weighted average diluted common shares outstanding		15,905
Net loss per common share
Basic	$	(0.04	)
Diluted	$	(0.04	)