-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P7A9eiRXV1kZ0RuazeOQVUxpTYS1SWO/+4QdrBjOZf2lrbv3Et2IMjlx3tmDds63 xfjKH/1Kw2WLcBjKJssqHQ== 0001157523-05-004604.txt : 20050511 0001157523-05-004604.hdr.sgml : 20050511 20050511114221 ACCESSION NUMBER: 0001157523-05-004604 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050511 DATE AS OF CHANGE: 20050511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARPS COMPLIANCE CORP CENTRAL INDEX KEY: 0000898770 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 742657168 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22390 FILM NUMBER: 05819412 BUSINESS ADDRESS: STREET 1: 9350 KIRBY DRIVE STREET 2: STE 300 CITY: HOUSTON STATE: TX ZIP: 77054 BUSINESS PHONE: 713-432-0300 MAIL ADDRESS: STREET 1: 9350 KIRBY DRIVE STREET 2: STE 300 CITY: HOUSTON STATE: TX ZIP: 77054 FORMER COMPANY: FORMER CONFORMED NAME: US MEDICAL SYSTEMS INC DATE OF NAME CHANGE: 19970128 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL POLYMERS TECHNOLOGIES INC DATE OF NAME CHANGE: 19930916 10QSB 1 a4881141.txt SHARPS COMPLIANCE 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-QSB |x| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005 |_| TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to . Commission File Number: 0-22390 ------------------- SHARPS COMPLIANCE CORP. (Name of small business issuer in its Charter) Delaware 74-2657168 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 9350 Kirby Drive, Suite 300, Houston, Texas 77054 (Address of principal executive offices) (Zip Code) (713) 432-0300 (Issuer's telephone number) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |x| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 10,538,144 shares of Common Stock, $0.01 par value as of May 6, 2005. Transitional Small Business Disclosure Format (check one): Yes |_| No |x| SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
INDEX PAGE PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 2005 (Unaudited) and June 30, 2004...........................................................................3 Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004.................................4 Unaudited Condensed Consolidated Statements of Operations for the nine months ended March 31, 2005 and 2004..................................5 Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended March, 2005 and 2004.....................................6 Notes to Unaudited Condensed Consolidated Financial Statements ........................7 Item 2. Management's Discussion and Analysis or Plan of Operations............................11 Item 3. Controls and Procedures...............................................................14 PART II OTHER INFORMATION Item 1. Legal Proceedings ...................................................................14 Item 2. Changes in Securities.................................................................15 Item 6. Exhibits..............................................................................15 SIGNATURES.....................................................................................16
2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SHARPS COMPLIANCE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS March 31, June 30, 2005 2004 ---------------------- ------------------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents $255,302 $242,803 Restricted cash 10,010 14,678 Accounts receivable, net of allowance of $19,828 and $12,896, respectively 776,915 981,408 Inventory 426,388 393,238 Prepaid and other assets 87,669 138,798 ---------------------- ------------------- TOTAL CURRENT ASSETS 1,556,284 1,770,925 PROPERTY AND EQUIPMENT, net of accumulated depreciation of $614,278 and $507,945, respectively 447,972 539,800 INTANGIBLE ASSETS, net of accumulated amortization of $102,041 and $101,582, respectively 9,592 10,051 ---------------------- ------------------- TOTAL ASSETS $2,013,848 $2,320,776 ====================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $480,200 $592,943 Accrued liabilities 245,456 338,153 Deferred revenue - pump return 59,980 110,702 Current portion of deferred revenue - incineration 96,247 108,299 Current portion of deferred revenue - transportation 696,870 553,938 Notes payable and current portion of long-term debt - 185,932 Current maturities of capital lease obligations 46,324 37,513 ---------------------- ------------------- TOTAL CURRENT LIABILITIES 1,625,077 1,927,480 LONG-TERM DEFERRED REVENUE - INCINERATION, net of current portion 22,180 30,408 LONG-TERM DEFERRED REVENUE - TRANSPORTATION, net of current portion 203,630 179,506 LONG-TERM DEBT, net of current portion - 10,826 OBLIGATIONS UNDER CAPITAL LEASES, net of current maturities 55,043 84,446 OTHER LIABILITIES 61,750 45,500 ---------------------- ------------------- TOTAL LIABILITIES 1,967,680 2,278,166 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY Common stock, $.01 par value per share; 20,000,000 shares authorized; 10,538,144 and 10,538,256 shares issued and outstanding, respectively 105,381 105,381 Additional paid-in capital 7,457,639 7,457,639 Accumulated deficit (7,516,852) (7,520,410) ------------------------------------------ TOTAL STOCKHOLDERS' EQUITY 46,168 42,610 ---------------------- ------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,013,848 $2,320,776 ====================== =================== The accompanying notes are an integral part of these condensed consolidated financial statements.
3 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, -------------------------------------------------- 2005 2004 -------------------------------------------------- (Unaudited) REVENUES: Distribution, net $ 2,123,791 $ 2,000,030 Consulting and environmental services 108,853 79,916 TOTAL REVENUES 2,232,644 2,079,946 COSTS AND EXPENSES: Cost of revenues 1,398,141 1,234,515 Selling, general and administrative 892,494 864,047 Depreciation and amortization 37,798 40,253 ---------------------- --------------------------- TOTAL COSTS AND EXPENSES 2,328,434 2,138,815 ---------------------- --------------------------- OPERATING LOSS (95,789) (58,869) OTHER EXPENSE Interest expense (5,123) (9,980) Other - (316) ---------------------- --------------------------- TOTAL OTHER EXPENSE (5,123) (10,296) ---------------------- --------------------------- NET LOSS BEFORE INCOME TAXES (100,912) (69,165) INCOME TAXES 4,693 - ---------------------- --------------------------- NET LOSS $(96,219) $(69,165) ====================== =========================== NET LOSS PER COMMON SHARE Basic $(.01) $(.01) ====================== =========================== Diluted $(01) $(.01) ====================== =========================== WEIGHTED AVERAGE SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE Basic 10,538,144 10,538,256 ====================== =========================== Diluted 10,538,144 10,538,256 ====================== =========================== The accompanying notes are an integral part of these condensed consolidated financial statements.
4 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Nine Months Ended March 31, 2005 2004 -------------------------- (Unaudited) REVENUES: Distribution, net $ 6,609,598 $ 5,895,720 Consulting and environmental services 271,477 255,658 TOTAL REVENUES 6,881,075 6,151,378 -------------- ----------- COSTS AND EXPENSES: Cost of revenues 4,116,632 3,703,825 Selling, general and administrative 2,621,420 2,498,772 Depreciation and amortization 121,054 118,501 -------------- ----------- TOTAL COSTS AND EXPENSES 6,859,106 6,321,098 -------------- ----------- OPERATING INCOME (LOSS) 21,969 (169,720) OTHER INCOME EXPENSE Interest income - 48 Interest expense (18,411) (37,875) Other - (556) -------------- ----------- TOTAL OTHER EXPENSE (18,411) (38,383) -------------- ----------- NET INCOME (LOSS) BEFORE INCOME TAXES 3,558 (208,103) INCOME TAXES - - -------------- ----------- NET INCOME (LOSS) $3,558 $(208,103) ============== =========== NET INCOME (LOSS) PER COMMON SHARE Basic $- $(.02) ============== =========== Diluted $- $(.02) ============== =========== WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON SHARE Basic 10,538,144 10,345,074 ============== =========== Diluted 10,980,340 10,345,074 ============== =========== The accompanying notes are an integral part of these condensed consolidated financial statements. 5 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, -------------------------------------------- 2005 2004 ---------------------- --------------------- CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited) Net income (loss) $3,558 $(208,103) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 121,053 118,501 Bad debt expense 6,842 - Gain on disposal of equipment 275 556 Changes in operating assets and liabilities: Decrease in restricted cash 4,668 140,735 (Increase) decrease in accounts receivable 197,651 (74,209) Increase in inventory (33,150) (76,823) Decrease in prepaids and other assets 51,129 13,602 Increase (decrease) in accounts payable and accrued liabilities (189,190) 37,828 Increase (decrease) in deferred revenue 96,054 (81,832) ---------------------- --------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 258,890 (129,745) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (37,986) (43,760) Disposal of fixed asset 17,876 - Patent - (10,409) ---------------------- --------------------- NET CASH USED IN INVESTING ACTIVITIES (20,110) (54,169) CASH FLOWS FROM FINANCING ACTIVITIES: Payment on notes payable (31,675) (115,895) Net payments on factoring agreement (165,085) (169,420) Payments on capital lease obligations (29,523) (18,315) Issuance of common stock - 500,000 ---------------------- --------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (226,282) 196,370 ---------------------- --------------------- NET INCREASE IN CASH AND CASH EQUIVALENT 12,499 12,456 CASH AND CASH EQUIVALENTS, beginning of period 242,803 135,884 ---------------------- --------------------- CASH AND CASH EQUIVALENTS, end of period $255,302 $148,340 ====================== ===================== NONCASH INVESTING AND FINANCING ACTIVITIES: Property and equipment additions acquired under capital lease $8,931 $9,752 ====================== =====================
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 SHARPS COMPLIANCE CORP. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2005 NOTE 1. ORGANIZATION AND BACKGROUND The accompanying consolidated financial statements include the financial transactions and accounts of Sharps Compliance Corp. and it's 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.) and Sharps Safety, Inc. (collectively, "Sharps" or the "Company"). All significant intercompany accounts and transactions have been eliminated upon consolidation. 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") and, accordingly, do not include all information and footnotes required under accounting principles generally accepted in the United States 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 March 31, 2005 and the results of its operations and cash flows for the three and nine months ended March 31, 2005 and 2004. The results of operations for the three and nine months ended March 31, 2005, are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2005. These condensed consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-KSB for the year ended June 30, 2004. Certain reclassifications have been made in the prior year consolidated statement of operations to conform to current year presentation. NOTE 3. REVENUE RECOGNITION The Company adopted the Securities and Exchange Commission's ("SEC") Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition", which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. Under SAB No. 101, certain products offered by the Company have revenue producing components that are recognized over multiple delivery points (Sharps Disposal by Mail Systems, referred to as "Mailback" and Sharps Return Boxes, referred to as "Pump Returns") and can consist of up to three separate elements as follows: (1) the sale of the container system, (2) the transportation of the container system and (3) the treatment and disposal (incineration) of the container system. The individual fair value of the transportation and incineration services are determined by the sales price of the service offered by third parties, with the fair value of the container being the residual value. Revenue for the sale of the container is recognized upon delivery to the customer, at which time the customer takes title and assumes risk of ownership. Transportation revenue on Mailbacks is recognized when the customer returns the mailback container system and the container has been received at the Company's treatment facility. The Mailback container system is mailed to the incineration facility using the United States Postal Service ("USPS"). Incineration revenue is recognized upon the destruction and certification of destruction having been prepared on the container. Since the transportation element and the incineration elements are undelivered services at the point of initial sale of the container, the Mailback 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 container systems sold may not be returned. Accordingly, portions of the transportation and incineration elements are recognized at the point of sale. 7 NOTE 4. ACCOUNT RECEIVABLE In September and October 2003, the Company secured judgments against Ameritech Environmental, Inc. ("Ameritech") totaling $176,958 related to the non-payment by Ameritech for services provided by the Company in 2002. The assets of Ameritech representing collateral for the judgments were sold by Ameritech to MedSolutions, Inc. of Dallas, Texas ("MedSolutions") in November 2003. In January 2004, the Company secured a Garnishment Order against MedSolutons whereby MedSolutions was ordered to pay to the Company $170,765, plus interest at 5%. Payments under the Garnishment Order are scheduled to be made monthly in the amount of $4,375 (inclusive of interest) with a balloon payment of $137,721 due November 7, 2004. MedSolutions is currently in breach of the Garnishment Order. In January 2005, the Company filed suit against MedSolutions and Ameritech in the 234th Judicial District Court of Harris County, Texas. The suit alleges collusion, fraudulent conveyance and fraudulent inducement by and between MedSolutions and Ameritech to defraud payment to the Company for amounts owed, as described above. The Company has also requested the Court to appoint a Receiver for all sums owed to protect assets pending review by the Court. In the quarters ending March 31, 2003 and June 30, 2003, the Company wrote-off all outstanding amounts, $75,996 and $106,397 respectively, due from Ameritech. Therefore, any potential future recoveries of receivables would be recorded as a credit to the allowance for bad debts. Any recovery that may be received by the Company will be reduced by collection-related legal fees estimated at one-third of any amounts collected. Although the Company will continue to aggressively pursue collection of the outstanding amounts under the Garnishment Orders, no assurances regarding collection can be made. NOTE 5. NOTES PAYABLE AND LONG-TERM DEBT Notes payable and long-term debt consisted of the following:
March 31, 2005 June 30, 2004 ---------------------- ---------------------- (Unaudited) Factoring agreement with financial institution $ - $ 165,083 Note payable to Futura - 13,889 Promissory note to a finance company for the purchase of an automobile - 17,786 ---------------------- ------------------- - 196,758 Less: current portion of notes payable and long-term debt - 185,932 ---------------------- ------------------- Total notes payable and long-term debt $ - $ 10,826 ====================== ===================
The Company maintains an arrangement with a financial institution for a $1.25 million asset-based line of credit. The agreement allows the Company to factor customer receivables generated out of its ordinary course of business. The maximum amount available under the line of credit is $1.0 million (or $1.25 million of its gross receivable balance). The agreement is automatically renews on an annual basis (August 30 of each year) unless terminated by either party. The Company may borrow up to 80% of the eligible receivables presented and incurs interest on gross invoices financed at a prime rate of interest plus 2%, plus administrative fees of .25% on gross receivables presented. The interest rate decreases to prime plus 1.25% (versus 2%) at such times as the Company's Adjusted Quick Ratio is 1.25 to 1.00 or greater. Adjusted Quick Ratio is defined as cash plus accounts receivable (less than 90 days from invoice date), divided by current liabilities less deferred revenue. During the quarter ended March 31, 2005, there were no borrowings under the arrangement. 8 NOTE 6. OBLIGATIONS UNDER CAPITAL LEASES Capital lease obligations consist of the following:
March 31, 2005 June 30, 2004 ------------------ ------------------ Capital lease for the purchase of accounting and operating system software and hardware, due in monthly installments of $4,061, interest imputed at 21% through February 2007 $ 76,613 $ 99,315 Capital lease for purchase of phone system due in monthly installments of $455, interest imputed at 12% through August 2007 11,399 14,315 Capital lease for purchase of copier/printer due in monthly installments of $157, interest imputed at 21% through August 2006 2,173 3,252 Capital lease for purchase of phone system upgrades due in monthly installments of $157, interest imputed at 16% through December 2007 4,217 5,077 Capital lease for purchase of forklift due in monthly installments of $290, interest imputed at 11% through July 2007 6,965 - ------------------ ------------------ 101,367 121,959 Less: current portion 46,324 37,513 ------------------ ------------------ $ 55,043 $ 84,446 ================== ==================
NOTE 7. STOCK-BASED COMPENSATION The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", but elected to continue to account for its employee stock-based compensation plan under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations in accounting for its stock option plan. While the Company continues to use APB No. 25, pro forma information regarding net income (loss) and earnings per share is required under SFAS No. 123 and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS Statement No. 123", including that the information be determined as if the Company had accounted for its stock options under the fair value method prescribed by SFAS No. 123. The Company uses the Black-Scholes option valuation model to value options granted. Because changes in input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide the only measure of fair value for the employee stock options. The Company used the following weighted-average assumptions for options granted during the quarters ended March 31, 2005 and 2004, as follows: risk-free interest rates of 4.33% and 4.04%, respectively; expected annual dividend yield of 0%; volatility factors of the expected market price of the Company's common stock of approximately 50% and 45%, respectively; and a weighted-average expected life of the options of 7 years. Had compensation expense for stock based compensation been determined consistent with the provisions of SFAS No. 123 (and as amended by SFAS No. 148), the Company's net loss for the quarters ended March 31, 2005 and 2004, respectively, would have been increased, as follows: Three Months Ended March 31, ------------------------------- 2005 2004 --------------- ----------- (Unaudited) (Unaudited) Net loss, as reported $ (96,219) $ (69,165) Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects $ (66,473) $ (73,911) --------------- -------------- Net loss, pro forma $ (162,692) $ (143,076) =============== ============== Basic and diluted net loss per share, as reported $ (.01) $ (.01) =============== ============== Basic and diluted net loss per share, pro forma $ (.02) $ (.01) =============== ============== 9 Had compensation expense for stock based compensation been determined consistent with the provisions of SFAS No. 123 (and as amended by SFAS No. 148), the Company's net income (loss) for the nine months ended March 31, 2005 and 2004, respectively, would have been increased, as follows: Nine Months Ended March 31, ------------------------------- 2005 2004 --------------- ------------ (Unaudited) (Unaudited) Net income (loss), as reported $ 3,558 $ (208,103) Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects $ (197,520) $ (221,225) ------------- ---------------- Net loss, pro forma $ (193,962) $ (429,328) ============= ================ Basic and diluted net loss per share, as reported $ - $ (.02) ============= ================ Basic and diluted net loss per share, pro forma $ (.01) $ (.04) ============= ================ NOTE 8. EARNINGS PER SHARE Earnings per share is measured at two levels: basic per share and diluted per share. Basic per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted per share is computed by dividing net income (loss) by the weighted average number of common shares after considering the additional dilution related to common stock options. In computing diluted per share, the outstanding common stock options are considered dilutive using the treasury stock method. The following information is necessary to calculate per share for the periods presented: Nine Months Ended March 31, --------------------------------- 2005 2004 ------------------ ----------- Net income (loss), as reported $ 3,558 $ (208,103) ---------------- ----------- Weighted average common shares outstanding 10,538,144 10,345,074 Effect of Dilutive stock options 442,196 - ---------------- ----------- Weighted average diluted common shares outstanding 10,980,340 10,345,074 ---------------- ----------- Net income per common share Basic $ - - $ 0.02 Diluted $ - $ 0.02 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS This quarterly report on Form 10-QSB contains certain forward-looking statements and information relating to Sharps 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 "anticipate," "believe," "estimate" and "intend" and words or phrases of similar import, as they relate to Sharps or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, 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. The Company does not intend to update these forward-looking statements. GENERAL Sharps is a leading developer of cost effective solutions for improving safety and efficiency related to the proper disposal of medical waste by industry and consumers. These solutions include Sharps Disposal by Mail System(TM), Pitch-It(TM) IV Poles, Trip LesSystem(TM), Sharps Pump Return Box, Sharps Enteral Pump Return Box, Sharps Secure(TM), Sharps SureTemp Tote(TM), IsoWash(TM) Linen Recovery System, Sharps e-Tools, Sharps Environmental Services and Sharps Consulting. Some products and services facilitate compliance with state and federal regulations by tracking, incinerating and documenting the disposal of medical waste. Additionally, some products and services facilitate compliance with educational and training requirements required by federal, state, and local regulatory agencies. The Pro-Tec product line offers medical sharps disposal containers, specialized for safe disposal of biomedical waste in a full range of services. The Pro-Tec product line is a vertical business integration of the sharps disposal by mail products for the Company. The Company will have savings in product cost on its Sharps Disposable by Mail System(TM) and sales to third parties of this product. RESULTS OF OPERATIONS The following analyzes changes in the consolidated operating results and financial condition of the Company during the three months and nine months ended March 31, 2005 and 2004. The following table sets forth, for the periods indicated, certain items from the Company's Condensed Consolidated Statements of Operations, expressed as a percentage of revenue:
Three Months Ended Nine Months Ended March 31, March 31, ---------------------- ---------------------- 2005 2004 2005 2004 ---------- ---------- --------- ----------- Net revenues 100% 100% 100% 100% Costs and expenses: Cost of revenues (63%) (59%) (60%) (60%) Selling, general and administrative (40%) (42%) (38%) (41%) Depreciation and amortization (2%) (2%) (2%) (2%) ---------- ---------- --------- ----------- Total operating expenses (105%) (103%) (100%) (103%) ---------- ---------- --------- ----------- Income (loss) from operations (5%) (3%) 0% (3%) ---------- ---------- --------- ----------- Net income (loss) (4%) (3%) 0% (3%) ========== ========== ========= ===========
11 THREE MONTHS ENDED MARCH 31, 2005, COMPARED TO THREE MONTHS ENDED MARCH 31, 2004 Total revenues for the three months ended March 31, 2005 of $2,232,645 increased by $152,699, or 7%, over the total revenues for the three months ended March 31, 2004 of $2,079,946. The increase in revenues is primarily attributable to increased billings in the Agriculture ($115,259), Health Care ($29,066), and Hospitality ($23,269) markets. Cost of revenues for the three months ended March 31, 2005 of $1,3981,141 were 63% of revenues, which were higher than the cost of revenues for the three months ended March 31, 2004 of $ 1,234,515, or 59% of revenues. The increase was due to; (i) increased revenues over the corresponding prior year period and (ii) cost increases incurred during the three months ended March 31, 2005. Selling, general and administrative ("S, G&A") expenses for the three months ended March 31, 2005 of $892,494, increased by $28,447, or 3%, versus $864,047 for the corresponding period of the previous year. The increase was consistent with the revenue growth of the business for the three months ended March 31, 2005 versus March 31, 2004. NINE MONTHS ENDED MARCH 31, 2005, COMPARED TO NINE MONTHS ENDED MARCH 31, 2004 Total revenues for the nine months ended March 31, 2005 of $6,881,075 increased by $729,697, or 12%, over the total revenues for the nine months ended March 31, 2004 of $6,151,378. The increase in revenues is primarily attributable to increased billings in the Agriculture ($349,191), Healthcare ($254,041), Retail ($180,213) and Hospitality ($94,667) markets. Cost of revenues for the nine months ended March 31, 2005 of $4,116,632 were 60% of revenues versus $3,703,825, or 60% of the revenues for the corresponding period of the previous year. Selling, general and administrative ("S, G&A") expenses for the nine months ended March 31, 2005 of $2,621,418, increased by $122,648, or by 5%, versus $2,498,772 for the corresponding period of the previous. The increase in the S,G&A is primarily a result of increases in the following expenses: (i) compensation and commissions ($79,043), (ii) advertising and promotions ($21,947), (iii) employment placement ($21,000), and (iv) computer costs ($13,703). LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased by $12,499 to $255,302 at March 31, 2005 from $242,803 at June 30, 2004. Accounts receivable decreased by $204,493 to $776,915 at March 31, 2005 from $981,408 at June 30, 2004. The decrease was consistent with the decrease in revenues during the quarter ending March 31, 2005 of $2,232,644 as compared to the revenues during the quarter ending June 2004 of $2,468,015. Property and equipment decreased by $91,828 to $447,972 at March 31, 2005 from $539,800 at June 30, 2004. This decrease is primarily attributable to depreciation expense recognized for the corresponding nine-month period. Accounts payable decreased by $112,743 to $480,200 at March 31, 2005 from $592,943 at June 30, 2004. The decrease was due the timing of vendor payments. Notes payable and long-term debt of $196,758 at June 30, 2004 was completely repaid during the nine months ended March 31, 2005. Management believes that the Company's current cash resources along with its asset-based factoring line of credit will be sufficient to fund operations for the twelve months ended March 31, 2006. The Company maintains an arrangement with a financial institution for a $1.25 million asset-based line of credit. The agreement allows the Company to factor customer receivables generated out of its ordinary course of business. The maximum amount available under the line of credit is $1.0 million (or $1.25 million of its gross receivable balance). The agreement is automatically renews on an annual basis (August 30 of each year) unless terminated by either party. The Company may borrow up to 80% of the eligible receivables presented and incurs interest on gross invoices financed at a prime rate of interest plus 2%, plus administrative fees of .25% on gross receivables presented. The interest rate decreases to prime plus 1.25% (versus 2%) at such times as the Company's Adjusted Quick Ratio is 1.25 to 1.00 or greater. Adjusted Quick Ratio is defined as cash plus accounts receivable (less than 90 days from invoice date), divided by current liabilities less deferred revenue. During the quarter ended March 31, 2005, there were no borrowings under the arrangement. 12 CRITICAL ACCOUNTING ESTIMATES Certain products offered by the Company have revenue producing components that are recognized over multiple delivery points and can consist of up to three separate elements as follows: (1) the sale of the container system, (2) the transportation of the container system and (3) the treatment and disposal (incineration) of the container system. Since the transportation element and the incineration elements are undelivered services at the point of initial sale of the container, the 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 container systems sold may not be returned. Accordingly, a portion of the transportation and incineration elements is recognized at the point of sale. RECENTLY ISSUED ACCOUNTING STANDARDS In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities", and subsequently revised the interpretation in December 2003 ("FIN 46R") which requires that companies that control another entity through interests other than voting rights should consolidate the controlled entity. As revised, FIN 46R is generally effective for financial statements for interim or annual periods ending on or after March 15, 2004. The related disclosure requirements are effective immediately. Management does not believe the adoption of FIN 46R will have any impact on the Company's financial position or results of operations. In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which amends SFAS No. 133 to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and requires that contracts with similar characteristics to be accounted for on a comparable basis. The provisions of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 will not have a material impact on the Company's results of operations or financial position. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity", which establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS No. 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on the Company's results of operations or financial position. In November 2004, the FASB issued FASB Statement No. 151, which revised ARB No.43, relating to inventory costs. This revision is to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). This Statement requires that these items be recognized as a current period charge regardless of whether they meet the criterion specified in ARB 43. In addition, this Statement requires the allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after the date of this Statement is issued. Management believes this Statement will have no impact on the financial statements of the Company once adopted. In December 2004, the FASB issued FASB Statement No. 152, which amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real-estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. Management believes this Statement will have no impact on the financial statements of the Company once adopted. In December 2004, the FASB issued FASB Statement No. 153. This Statement addresses the measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date of this Statement is issued. Management believes this Statement will have no impact on the financial statements of the Company once adopted. 13 In December 2004, the FASB issued Statement No. 123 (revised 2004) ("FAS 123 (R)"), Share-Based Payments. FAS 123 (R) requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments, such as stock options granted to employees. The Company is required to apply FAS 123 (R) on a modified prospective method. Under this method, the Company is required to record compensation expense (as previous awards continue to vest) for the unvested portion of previously granted awards that remain outstanding at the date of adoption. In addition, the Company may elect to adopt FAS 123 (R) by restating previously issued financial statements, basing the amounts on the expense previously calculated and reported in their pro forma disclosures that had been required by FAS 123. For public entities that file as small business issuers, FAS 123 (R) is effective as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. Management has not completed its evaluation of the effect that FAS 123 (R) will have, but believes that the effect will be consistent with the application disclosed in its pro forma disclosures. ITEM 3. CONTROLS AND PROCEDURES Within the ninety days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the Company's evaluation. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In September and October 2003, the Company secured judgments against Ameritech Environmental, Inc. ("Ameritech") totaling $176,958 related to the non-payment by Ameritech for services provided by the Company in 2002. Ameritech sold the assets of Ameritech representing collateral for the judgments to MedSolutions, Inc. of Dallas, Texas ("MedSolutions") in November 2003. In January 2004, the Company secured a Garnishment Order against MedSolutons whereby MedSolutions was ordered to pay to the Company $170,765, plus interest at 5%. Payments under the Garnishment Order are scheduled to be made monthly in the amount of $4,375 (inclusive of interest) with a balloon payment of $137,721 due November 7, 2004. MedSolutions is currently in breach of the Garnishment Order. In January 2005, the Company filed suit against MedSolutions and Ameritech in the 234th Judicial District Court of Harris County, Texas. The suit alleges collusion, fraudulent conveyance and fraudulent inducement by and between MedSolutions and Ameritech to defraud payment to the Company for amounts owed, as described above. The Company has also requested the Court to appoint a Receiver for all sums owed to protect assets pending review by the Court. On June 14, 2004, the Company provided Mr. Ronald E. Pierce, its then current Chief Operating Officer ("Mr. Pierce"), with notice of non-renewal of his employment agreement. As such, July 14, 2004 was Mr. Pierce's last day of employment. The Company has advised Mr. Pierce that under the terms of the employment contract no further compensation (including services) was due. The Company then received various letters from Mr. Pierce's attorney advising that Mr. Pierce is taking the position that the non-renewal of the employment agreement was not timely and, therefore, Mr. Pierce was terminated without cause. Additionally, Mr. Pierce claims that the Company had no right to terminate him on the anniversary date of his Agreement without the obligation of paying Mr. Pierce as if he were terminated without cause. Mr. Pierce has demanded severance related payments totaling approximately $280,000 (including an $80,000 bonus) along with the full accelerated vesting of 500,000 stock options previously awarded to Mr. Pierce. The Company believes that notice of such non-renewal was timely, and that in accordance with Mr. Pierce's employment agreement, the Company was entitled to provide notice thirty (30) days prior to the anniversary of its intent to terminate the agreement, and no severance would therefore be due to Mr. Pierce. On July 30, 2004, the Company received notice from Mr. Pierce's attorney requesting commencement of arbitration to resolve the claim. No further communications have been received from Mr. Pierce's attorney since July 30, 2004. The Company believes it has meritorious defenses against Mr. Pierce's claims and has not recorded a liability related to this matter. On or about February 25, 2003, Jason Jodway, a then employee of the Company since April 1999, resigned in lieu of termination of employment by the Company. Thereafter, Mr. Jodway formed Attentus Medical Sales, Inc., a competing entity of the Company. In March 2005, the Company (through its wholly-owned subsidiary Sharps Compliance Inc.) filed a lawsuit in Harris County District Court, Texas 14 against Mr. Jodway and Attentus Medical Sales, Inc. The lawsuit claims, (i) breach of a confidentiality agreement, (ii) misappropriation of trade secrets and (iii) tortuous interference with the Company's existing and prospective contracts and business relationships. The Company intends to vigorously pursue its claim against Mr. Jodway and Attentus Medical Sales, Inc., though the Company has not quantified its damages to date. In April 2005, Mr. Jodway and Attentus Medical Sales, Inc. filed a general denial in the 152nd District Court of Harris County. Additionally, the defendant filed a counter-claim against Sharps Compliance Inc. asserting his last day of employment was March 28, 2003 and that he is entitled to receive back wages. The Company denies any obligation to Mr. Jodway for such back wages. ITEM 2. CHANGES IN SECURITIES On September 24, 2003 the Company completed a private placement of 625,000 shares of common stock at a price of $0.80 per share. The proceeds of $500,000 have been utilized by the Company for working capital purposes as well as to support growth plans to further expand the business into the industrial, retail, and other markets. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 31.1 Certification of Chief Executive Officer in Accordance with Section 302 of the Sarbanes-Oxley Act (filed herewith) 31.2 Certification of Chief Financial Officer in Accordance with Section 302 of the Sarbanes-Oxley Act (filed herewith) 32.1 Certification of Chief Executive Officer in Accordance with Section 906 of the Sarbanes-Oxley Act (filed herewith) 32.2 Certification of Chief Financial Officer in Accordance with Section 906 of the Sarbanes-Oxley Act (filed herewith) ITEMS 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. REGISTRANT: SHARPS COMPLIANCE CORP. Dated: May 11, 2005 By: /s/ Dr. Burton J. Kunik ----------------------- Chairman of the Board, Chief Executive Officer and President Dated: May 11, 2005 By: /s/ David P. Tusa ----------------- Senior Vice President, Chief Financial Officer and Corporate Secretary 16 EX-31.1 2 a4881141ex311.txt SHARPS COMPLIANCE EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER IN ACCORDANCE WITH SECTION 302 OF THE SARBANES-OXLEY ACT I, Dr. Burton J. Kunik, certify that: 1. I have reviewed this quarterly report on Form 10-QSB 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): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: May 11, 2005 /s/ DR. BURTON J. KUNIK ----------------------- Dr. Burton J. Kunik Chairman of the Board, Chief Executive Officer and President 17 EX-31.2 3 a4881141ex312.txt SHARPS COMPLIANCE EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER IN ACCORDANCE WITH SECTION 302 OF THE SARBANES-OXLEY ACT I, David P. Tusa, certify that: 1. I have reviewed this quarterly report on Form 10-QSB 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): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: May 11, 2005 /s/ DAVID P. TUSA ----------------- David P. Tusa Senior Vice President, Chief Financial Officer and Corporate Secretary 18 EX-32.1 4 a4881141ex321.txt SHARPS COMPLIANCE EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER IN ACCORDANCE WITH SECTION 906 OF THE SARBANES-OXLEY ACT In connection with the quarterly report of Sharps Compliance Corp. (the "Company") on Form 10-QSB for the three and nine months ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof, I, Dr. Burton J. Kunik, Chairman of the Board, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that: (1) The Form 10-QSB report for the three and nine months ended March 31, 2005, filed with the Securities and Exchange Commission on May 11, 2005, 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-QSB report for the three and nine months ended March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of Sharps Compliance Corp. By: /s/ DR. BURTON J. KUNIK Date: May 11, 2005 ----------------------- Dr. Burton J. Kunik Chairman of the Board, Chief Executive Officer and President 19 EX-32.2 5 a4881141ex322.txt SHARPS COMPLIANCE EXHIBIT 32.2 Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER IN ACCORDANCE WITH SECTION 906 OF THE SARBANES-OXLEY ACT In connection with the quarterly report of Sharps Compliance Corp. (the "Company") on Form 10-QSB for the three and nine months ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof, I, David P. Tusa, Senior Vice President, Chief Financial Officer and Corporate Secretary of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge that: (3) The Form 10-QSB report for the three and six months ended March 31, 2005, filed with the Securities and Exchange Commission on May 11, 2005, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (4) The information contained in the Form 10-QSB report for the three and nine months ended March 31, 2005 fairly presents, in all material respects, the financial condition and results of operations of Sharps Compliance Corp. By: /s/ DAVID P. TUSA Date: May 11, 2005 ----------------- David P. Tusa Senior Vice President, Chief Financial Officer And Corporate Secretary 20 -----END PRIVACY-ENHANCED MESSAGE-----