UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2000
[ ] 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)
9050 KIRBY DRIVE, HOUSTON, TEXAS 77054
(Address of principal executive offices) (Zip Code)
(713) 432-0300
Registrant's telephone number
Securities Registered under 12(g) of the Exchange Act: TITLE OF EACH CLASS
-------------------
Common Stock, $0.01
Par Value
Check whether the registrant (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 [ ]
Number of shares outstanding of the issuer's Capital Stock as of February 12:
8,626,444
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-December 31, 2000
(Unaudited) and June 30, 2000 ................................. 3
Unaudited Condensed Consolidated Statements of Operations -
For the three months ended December 31, 2000 and 1999 ......... 4
Unaudited Condensed Consolidated Statements of Operations -
For the six months ended December 31, 2000 and 1999 ........... 5
Unaudited Condensed Consolidated Statements of Cash Flows -
For the six months ended December 31, 2000 and 1999 ........... 6
Notes to Unaudited Condensed Consolidated Financial Statements ... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders ............... 11
Item 6. Exhibits and Reports on Form 8-K .................................. 12
SIGNATURE ................................................................. 12
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
ASSETS 2000 2000
----------- -----------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 91,869 $ 153,346
Short-term investments ............................ 375,000 40,984
Accounts receivable, net .......................... 792,545 794,643
Inventory ......................................... 285,669 221,105
Prepaids and other ................................ 55,602 80,831
----------- -----------
Total current assets ......................... 1,600,685 1,290,909
PROPERTY AND EQUIPMENT, net ........................ 219,805 180,736
INTANGIBLE ASSETS, net ............................. 50,613 60,736
NOTE RECEIVABLE FROM STOCKHOLDER ................... 320,000 320,000
----------- -----------
Total assets ................................ $ 2,191,103 $ 1,852,381
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable .................................. $ 330,014 $ 354,538
Accrued liabilities ............................... 102,785 129,087
Accrued disposal costs ............................ 1,399,847 1,371,193
Deferred revenue .................................. 101,162 --
Current maturities of notes payable ............... 14,049 64,718
----------- -----------
Total current liabilities .................... 1,947,857 1,919,536
NOTES PAYABLE, net of current maturities ........... 5,822 8,780
----------- -----------
Total liabilities ............................ 1,953,679 1,928,316
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value per share;
1,000,000 shares authorized; -0- shares
issued and outstanding .......................... -- --
Common stock, $.01 par value per share; 20,000,000
shares authorized; 8,626,444 and 7,626,444 shares
issued and outstanding, respectively ............ 86,264 76,264
Additional paid-in capital ........................ 5,382,189 4,392,188
Accumulated deficit ............................... (5,231,029) (4,544,387)
----------- -----------
Total stockholders' equity (deficit) ......... 237,424 (75,935)
----------- -----------
Total liabilities and stockholders'
equity (deficit) ........................... $ 2,191,103 $ 1,852,381
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
3
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED DECEMBER 31,
----------------------------
2000 1999
----------- -----------
REVENUES:
Distribution, net .......................... $ 1,058,754 $ 989,000
Consulting services ........................ 50,700 40,000
Environmental .............................. 37,369 --
----------- -----------
Total revenues ......................... 1,146,823 1,029,000
COSTS AND EXPENSES:
Cost of revenues ........................... 724,610 576,000
Selling, general and administrative ........ 809,094 821,000
Depreciation and amortization .............. 29,323 24,000
----------- -----------
Operating loss ......................... (416,204) (392,000)
INTEREST INCOME, net ......................... 8,389 13,000
----------- -----------
Net loss ............................... $ (407,815) $ (379,000)
=========== ===========
BASIC AND DILUTED NET LOSS PER
SHARE ..................................... $ (.05) $ (.05)
=========== ===========
SHARES USED IN COMPUTING NET LOSS PER
SHARE, BASIC AND DILUTED ................... 8,626,444 7,626,444
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
4
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS
ENDED DECEMBER 31,
----------------------------
2000 1999
----------- -----------
REVENUES:
Distribution, net .......................... $ 2,006,879 $ 1,964,000
Consulting services ........................ 85,700 71,000
Environmental .............................. 43,917 --
----------- -----------
Total revenues ......................... 2,136,496 2,035,000
COSTS AND EXPENSES:
Cost of revenues ........................... 1,260,839 1,171,000
Selling, general and administrative ........ 1,526,292 1,544,000
Depreciation and amortization .............. 54,662 48,000
----------- -----------
Operating loss ......................... (705,297) (728,000)
INTEREST INCOME, net ......................... 18,655 27,000
----------- -----------
Net loss ............................... $ (686,642) $ (701,000)
=========== ===========
BASIC AND DILUTED NET LOSS PER SHARE ......... $ (.08) $ (.09)
=========== ===========
SHARES USED IN COMPUTING NET LOSS PER
SHARE, BASIC AND DILUTED ................... 8,289,487 7,626,444
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
5
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS
ENDED DECEMBER 31,
---------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................ $ (686,642) $ (701,000)
Adjustments to reconcile net loss
to net cash used in operating activities-
Depreciation and amortization ........................... 54,661 43,000
Amortization of deferred compensation ................... -- 5,000
Changes in operating assets and liabilities-
(Increase) decrease in accounts receivable .............. 2,098 (343,000)
(Increase) decrease in inventory ........................ (64,564) (209,000)
(Increase) decrease in prepaids and other current
assets ................................................ (25,229) 37,000
Increase (decrease) in accounts payable and
accrued liabilities ................................... (50,826) 15,000
Increase in accrued disposal costs ...................... 28,654 298,000
Increase in deferred revenue ............................ 101,162 --
----------- -----------
Net cash used in operating activities ................... (590,228) (855,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ..................... (83,607) (26,000)
Sales of short-term investments ......................... 665,984 1,422,000
Purchases of short-term investments ..................... (1,000,000) (122,000)
----------- -----------
Net cash provided by (used in) investing activities .. (417,622) 1,274,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable ............................... (53,627) (18,000)
Issuance of common stock ................................ 1,000,000 --
----------- -----------
Net cash provided by (used in) financing activities . 946,373 (18,000)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................. (61,477) 401,000
CASH AND CASH EQUIVALENTS, beginning of period ............ 153,346 15,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period .................. $ 91,869 $ 416,000
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
6
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. ORGANIZATION AND BACKGROUND:
ORGANIZATION
The accompanying condensed consolidated financial statements include the
accounts of Sharps Compliance Corp. ("SCC") (formerly U.S. Medical Systems,
Inc.) and its wholly owned subsidiaries, Sharps Compliance, Inc., dba Sharps
Compliance, Inc. of Texas ("SCI"), Sharps e-Tools.com, Inc. ("Sharps e-Tools"),
and Sharps Environmental Services, Inc., dba Sharps Environmental Services of
Texas, Inc. ("Sharps Environmental Services") (collectively, "Sharps" or the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
BUSINESS
Sharps focuses on developing cost-effective, logistical and educational
solutions for healthcare and non-healthcare institutional markets. These
solutions include the Sharps Disposal by Mail(TM) System, Trip LesSystem(TM),
Pitch It(TM) IV Poles, Sharps e-Tools and Sharps Environmental Services. Sharps
products and services are provided primarily to create cost and logistical
efficiencies. These products and services facilitate compliance with state and
federal regulations by tracking, incinerating and documenting the disposal of
medical waste. Additionally, these services facilitate compliance with
educational and training as set forth by federal, state, local and regulatory
agencies.
Waste generators who use the Sharps Disposal by Mail (TM) System are responsible
for mailing the systems to the Panola County Resource Recovery Facility (the
"Disposal Facility") for incineration. Effective July 1, 2000, the Company
entered into an agreement with the City of Carthage, Texas and Panola County
(collectively, the "City") to manage and operate the Disposal Facility. The
length of the agreement is three years, and Sharps is responsible for
maintaining the Disposal Facility as required by federal, state, local and/or
regulatory agencies. Prior to July 1, 2000, Sharps paid the City to perform the
incineration function on Sharps' behalf. Sharps is also responsible for paying
the postage costs associated with the Sharps Disposal by Mail (TM) System being
mailed to the Disposal Facility by the waste generators.
Prior to July 1, 2000, Sharps recorded accrued disposal costs for both postage
and incineration based on the number of Sharps Disposal by Mail(TM) Systems sold
that management estimated would eventually be returned for incineration.
However, subsequent to June 30, 2000, Sharps began accruing only for estimated
postage costs as the Company assumed operation of the Disposal Facility
effective July 1, 2000. For sales subsequent to June 30, 2000, deferred revenue
is recorded for non-refundable payments received for which the incineration
services have not been performed (See Note 3), and incineration costs are
expensed as incurred. Sharps estimates returns of the Sharps Disposal by
Mail(TM) Systems based on historical experience. Accrued disposal costs are
adjusted prospectively for revisions in the estimated disposal costs and return
rate, if any. Depending upon the experience of Sharps, such revisions could be
significant. Management cannot accurately predict when Sharps will be required
to fund disposal costs. Although management believes it will not have to pay all
of the accrued disposal costs within one year of December 31, 2000, the Company
does not have sufficient information to classify any amounts as long term.
During the six months ended December 31, 2000 and 1999, the Company accrued
$362,143 and $538,000, respectively, for estimated disposal costs and funded
$333,489 and $240,000, respectively, of actual disposal costs.
Sharps continues to sole-source each of its manufacturing, assembly,
transportation and software development functions. Sharps may be affected by its
dependence on the suppliers of these functions. Management believes the risk is
mitigated by the long-standing business relationships with and reputation of
Sharps' suppliers. The Company also has entered into agreements, effective July
2000, with a strategic partner to provide online education programs related to
the Company's e-Tools service line and, as discussed above, the City to manage
and operate the Disposal Facility. Although there are no assurances with regard
to the continued future business associations after expirations of certain
agreements between Sharps and its suppliers, management believes that
alternative sources would be available at similar costs due to the generic
nature of the products and services offered.
Sharps has incurred significant losses from operations since its inception and
has had working capital deficits in the past. Sharps expects to continue to
incur substantial costs related to sales, marketing and administrative
activities. There can be no assurance that Sharps will ever attain profitable
operations or will be able to generate sufficient revenue levels to support
operations.
7
The future success of Sharps is dependent upon many factors, including
environmental regulation, continuity of its distributorship agreements,
successful completion of its product development activities and the
identification and penetration of additional markets for its products and
services. Management believes that the Company's current resources will be
sufficient to fund operations through fiscal year 2001. However, if the Company
is unable to achieve its projected sales or cash flows from operations, the
Company may require additional financing to meet its operating cash flow needs.
Management believes that it will be successful in raising such financing, if
necessary, however there can be no assurance that the Company will be able to
obtain financing on acceptable terms. The Company has been advised by its
independent public accountants that their report on the June 30, 2001, financial
statements may be modified with respect to the Company's ability to continue as
a going concern.
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 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 financial position of the Company as of December 31, 2000
and the results of its operations and its cash flows for the six months ended
December 31, 2000 and 1999. The results of operations for the six months ended
December 31, 2000, are not necessarily indicative of the results to be expected
for the entire fiscal year ending June 30, 2001. 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, 2000.
3. REVENUE RECOGNITION
Sharps has adopted Staff Accounting Bulletin No. 101, "Revenue Recognition"
("SAB No. 101"), which provides guidance related to revenue recognition based on
interpretations and practices followed by the Securities and Exchange
Commission. Adoption of SAB No. 101 did not have a material effect on the
Company's financial position or results of operations, although its revenue
recognition has been modified for a change in business that occurred in July
2000 (See Note 1).
Prior to July 1, 2000, product sales were recognized as revenue when the Sharps
Disposal by Mail(TM) System was delivered and accepted by the customer.
Effective July 1, 2000, the Company assumed responsibility for operation of the
Disposal Facility and, accordingly, began deferring a portion of the product
sales revenue associated with providing the incineration service. Deferred
revenue is recognized when the Sharps Disposal by Mail(TM) Systems sold are
returned to the Disposal Facility and incinerated. The deferral amount is based
on objective evidence of fair value for the incineration function, based on
sales of this service to other third parties. Further, the deferral amount is
based on the number of Sharps Disposal by Mail(TM) Systems that management
estimates will eventually be incinerated at the Disposal Facility. Deferred
revenue will be adjusted prospectively for revisions in the estimated return
rate, if any. Depending upon the experience of the Company, such revisions could
be significant.
4. STOCKHOLDERS' EQUITY
On August 31, 2000, the Company completed a private placement of 1,000,000
shares of its common stock for proceeds of $1,000,000.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
AND INFORMATION RELATING TO SCC 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 "ANTICIPATE," "BELIEVE," "ESTIMATE" AND "INTEND" AND WORDS OR
PHRASES OF SIMILAR IMPORT, AS THEY RELATE TO SCC OR ITS SUBSIDIARIES 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.
8
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
The Company's revenues were approximately $1,147,000 for the quarter ended
December 31, 2000, compared to revenue of approximately $990,000 for the quarter
ended September 30, 2000. The Company's revenue increased by $157,000 for the
quarter ended December 31, 2000 over the quarter ended September 30, 2000. The
increase in revenues is attributed to the increased acceptance of the Company's
Sharps Disposal by Mail(TM) Systems and Trip LesSystem(TM). The increase was
partially offset by the deferral of $13,000 of additional incineration revenue
for this quarter over the quarter ended September 30, 2000, resulting from the
Company assuming operation of the Panola County Resource Recovery Facility
effective July 1, 2000. Prior to July 1, 2000, such revenue was recognized at
the time the Sharps Disposal by Mail(TM) Systems were delivered and accepted by
the customer, as the Company had no significant further service obligation for
incineration. The Company expects that its results of operations will continue
to fluctuate between periods based upon the timing and level of sales to
distributors.
Gross margin, as a percentage of revenue for the quarter ended December 31,
2000, was approximately 37% compared to a gross margin of approximately 46% for
the quarter ended September 30, 2000. The decrease in gross margin was the
result of increases in freight costs and the decreased gross margin on the
product mix sold during the quarter. The Company plans to implement a price
increase during the third quarter.
Selling, general and administrative expenses increased by approximately $92,000
to $809,000 for the quarter ended December 31, 2000 from $717,000 for the
quarter ended September 30, 1999. This increase is primarily due to $12,000 of
costs associated with the operations of the Carthage incinerator for a full
quarter, $12,000 from increase of bad debt reserves and $19,000 from settlement
of a lawsuit by a former employee.
At the beginning of the quarter, the Company introduced a new product, the
SureTemp Tote(TM), to our existing customer base. SureTemp Tote(TM) is a NEW
patented system for shipping items that must travel in a temperature-controlled
environment. Preliminary feedback from customers has been positive. The Company
believes that the opportunity within the current healthcare customer base is
significant, with nearly 100% of our customers using a cold shipping system on a
daily basis.
RESULTS OF OPERATIONS
The discussion below analyzes changes in the consolidated operating results and
financial condition of the Company during the six months ended December 31, 2000
and 1999.
The following table sets forth, for the periods indicated, certain items from
the Company's Condensed Consolidated Financial Statements of Operations,
expressed as a percentage of revenue:
9
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ ------------------
2000 1999 2000 1999
------- ------- ------- -------
Net revenues ............................... 100% 100% 100% 100%
Costs and expenses:
Cost of revenues ........................ (63%) (56%) (59%) (58%)
Selling, general and administrative ..... (71%) (80%) (71%) (76%)
Depreciation and amortization ........... (3%) (2%) (3%) (2%)
------- ------- ------- -------
Total operating expenses ................... (137%) (138%) (133%) (136%)
------- ------- ------- -------
Loss from operations .................. (37%) (38%) (33%) (36%)
Total other income ......................... 1% 1% 1% 1%
------- ------- ------- -------
Net loss ................................... (36%) (37%) (32%) (35%)
======= ======= ======= =======
QUARTER ENDED DECEMBER 31, 2000 COMPARED TO QUARTER ENDED DECEMBER 31, 1999
The Company's revenues were approximately $1,147,000 for the quarter ended
December 31, 2000, compared to revenues of approximately $1,029,000 for the
quarter ended December 31, 1999. The increase in revenues is attributed to the
increased acceptance of the Company's Sharps Disposal by Mail(TM) Systems and
Trip LesSystem(TM). The increase was partially offset by the deferral of $57,000
of incineration revenue for this quarter period resulting from the Company
assuming operation of the Panola County Resource Recovery Facility effective
July 1, 2000. Prior to July 1, 2000, such revenue was recognized at the time the
Sharps Disposal by Mail(TM) Systems were delivered and accepted by the customer,
as the Company had no significant further service obligation for incineration.
The Company expects that its results of operations will continue to fluctuate
between periods based upon the timing and level of sales to distributors.
Environmental revenue was approximately $37,000 for the quarter ended December
31, 2000 compared to none for the quarter ended December 31, 1999, resulting
from the Company assuming the operations of the Panola County Resource Recovery
Facility effective July 1, 2000. The Company began incinerating third-party
waste at the facility in August 2000.
Consulting services revenue increased from approximately $40,000 for the quarter
ended December 31, 1999, to approximately $51,000 for the quarter ended December
31, 2000. The increase of 27% is due to broader acceptance of the service line
within the healthcare industry.
Gross margin decreased to 37%, for the quarter ended December 31, 2000 compared
to 44%, for the quarter ended December 31, 1999. The decrease in gross margin
was the result of increases in freight costs and a decreased gross margin on the
product mix sold during the quarter. The Company plans to implement a price
increase during the third quarter.
Selling, general and administrative expenses decreased by $12,000 to
approximately $809,000 for the quarter ended December 31, 2000 from
approximately $821,000 for the quarter ended December 31, 1999.
SIX MONTHS ENDED DECEMBER 31, 2000 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1999
The Company's revenues were approximately $2,136,000 for the six months ended
December 31, 2000, compared to revenues of approximately $2,035,000 for the six
months ended December 31, 1999. The increase in revenues is attributed to the
increased acceptance of the Company's Sharps Disposal by Mail(TM) Systems and
Trip LesSystem(TM). The increase was partially offset by the deferral of
$101,000 of incineration revenue for this six-month period resulting from the
Company assuming operation of the Panola County Resource Recovery Facility
effective July 1, 2000. Prior to July 1, 2000, such revenue was recognized at
the time the Sharps Disposal by Mail(TM) Systems were delivered and accepted by
the customer, as the Company had no significant further service obligation for
incineration. The Company expects that its results of operations will continue
to fluctuate between periods based upon the timing and level of sales to
distributors.
Environmental revenue was approximately $44,000 for the six months ended
December 31, 2000 compared to none for the six months ended December 31, 1999,
resulting from the Company assuming the operations of the Panola County Resource
Recovery Facility effective July 1, 2000. The Company began incinerating
third-party waste at the facility in August 2000.
10
Consulting revenue increased from approximately $71,000 for the six months ended
December 31, 1999, to approximately $86,000 for the six months ended December
31, 2000. The increase of 21% is due to broader acceptance of the service line
within the healthcare industry.
Gross margin decreased to 41% or approximately $876,000, for the six months
ended December 31, 2000 compared to 42% or approximately $864,000, for the six
months ended December 31, 1999. The decrease in gross margin was the result of
increases in freight costs and the decreased gross margin on the product mix
sold during the quarter. The Company plans to implement a price increase during
the third quarter.
Selling, general and administrative expenses decreased to approximately
$1,526,000 for the six months ended December 31, 2000 from approximately
$1,544,000 for the six months ended December 31, 1999.
The Company narrowed the net loss from operations from 1999 to 2000 by
approximately $14,000.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2000, the Company had approximately $467,000 in cash and
short-term investments. The negative working capital balance is primarily due to
the Company's disposal liability, which is classified as a current liability.
Management cannot accurately predict when Sharps will be required to fund
disposal costs. Although management believes it will not have to pay all of the
accrued disposal costs within one year of December 31, 2000, the Company does
not have sufficient information to classify any amounts as long term. On August
31, 2000, the Company significantly improved its working capital position
through the completion of a private placement of 1,000,000 shares of its common
stock for proceeds of $1,000,000.
Capital expenditures during the six months ended December 31, 2000 were
approximately $84,000 and consisted primarily of purchases of computers and
computer software development.
At December 31, 2000, total long-term debt outstanding was approximately $5,800
for the Company.
Sharps has incurred significant losses from operations since its inception and
has had working capital deficits in the past. Sharps expects to continue to
incur substantial costs related to sales, marketing and administrative
activities. There can be no assurance that Sharps will ever attain profitable
operations or will be able to generate sufficient revenue levels to support
operations. The future success of Sharps is dependent upon many factors,
including environmental regulation, continuity of its distributorship
agreements, successful completion of its product development activities and the
identification and penetration of additional markets for its products and
services. Management believes that the Company's current resources will be
sufficient to fund operations through fiscal year 2001. However, if the Company
is unable to achieve its projected sales or cash flows from operations, the
Company may require additional financing to meet its operating cash flow needs.
Management believes that it will be successful in raising such financing, if
necessary, however there can be no assurance that the Company will be able to
obtain financing on acceptable terms.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Sharps is involved in certain legal actions and claims arising in the normal
course of business. While the outcome of these matters cannot be predicted with
certainty, management believes these matters will not have a material adverse
effect on Sharps' consolidated financial position, results of operations or
liquidity.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on November 14, 2000, the following
matters were adopted by the margins indicated:
1. To elect directors Lee Cooke, Parris H. Holmes, Dr. Burt Kunik and Philip
C. Zerrillo to serve until the 2001 Annual Meeting of Stockholders.
11
For: 6,105,216
Against: -
Abstain: 384
2. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending June 30, 2001.
For: 6,105,150
Against: 158
Abstain: 292
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
The following exhibit is filed as part of this report.
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedule (filed herewith)
b) Reports on Form 8-K
None.
ITEMS 2, 3, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
SIGNATURE
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: February 13, 2000 By: /S/ GARY L. SHELL
Vice President and Chief
Financial Officer
Dated: February 13, 2000 By: /S/ DR. BURT KUNIK
President and Chief
Executive Officer
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