smed-20211231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

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			(I.R.S. Employer Identification No.)
incorporation or organization)


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)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Shares, $0.01 Par Value	SMED	The NASDAQ Capital Market

Indicate by check mark if the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange

Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes ☐ No ☒

As of January 31, 2022, there were 19,247,243 outstanding shares of the Registrant's common stock, par value $0.01 per share.


SHARPS COMPLIANCE CORP. AND SUBSIDIARIES


PART I	FINANCIAL INFORMATION	PAGE

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of December 3 1 , 2021 and June 30, 2021	4

	Condensed Consolidated Statements of Operations for the three months ended Decem ber 3 1 , 2021 and 2020	5

	Condensed Consolidated Statements of Operations for the six months ended December 31, 2021 and 2020	6

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended De cem ber 3 1 , 2021 and 2020	7

	Condensed Consolidated Statements of Cash Flows for the six months ended D ecem ber 3 1 , 2021 and 2020	8

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 4.	Controls and Procedures	26

Part II	OTHER INFORMATION	26

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26

Item 6.	Exhibits	27

	SIGNATURES	27

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHARPS COMPLIANCE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and par value amounts)


	December 31,		June 30,
	2021		2021
ASSETS
CURRENT ASSETS
Cash	$	36,001	$	27,767
Accounts receivable, net	13,047		9,738
Inventory	6,821		6,114
Contract asset	18		20
Prepaid and other current assets	1,857		1,459
TOTAL CURRENT ASSETS	57,744		45,098
PROPERTY, PLANT AND EQUIPMENT, net	11,155		10,843
OPERATING LEASE RIGHT OF USE ASSET	9,073		8,353
FINANCING LEASE RIGHT OF USE ASSET, net	980		907
INVENTORY, net of current portion	957		989
OTHER ASSETS	154		110
GOODWILL	7,996		6,735
INTANGIBLE ASSETS, net	2,772		2,239
DEFERRED TAX ASSET, net	—		157
TOTAL ASSETS	$	90,831	$	75,431
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	3,592	$	2,922
Accrued liabilities	3,208		3,940
Operating lease liability	2,457		2,368
Financing lease liability	189		160
Current maturities of long-term debt	480		735
Contract liability	5,062		7,028
TOTAL CURRENT LIABILITIES	14,988		17,153
CONTRACT LIABILITY, net of current portion	408		1,461
OPERATING LEASE LIABILITY, net of current portion	6,752		6,118
FINANCING LEASE LIABILITY, net of current portion	804		741
OTHER LIABILITIES	23		45
DEFERRED TAX LIABILITY, net	53		—
LONG-TERM DEBT, net of current portion	3,172		3,329
TOTAL LIABILITIES	26,200		28,847
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value per share; 40,000,000 shares authorized; 19,542,858 and 17,454,859 shares issued, respectively and 19,247,243 and 17,159,244 shares outstanding, respectively	197		176
Treasury stock, at cost, 295,615 shares repurchased	(1,554)		(1,554)
Additional paid-in capital	51,712		34,333
Retained earnings	14,276		13,629
TOTAL STOCKHOLDERS' EQUITY	64,631		46,584
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	90,831	$	75,431

The accompanying notes are an integral part of these condensed consolidated financial statements.

SHARPS COMPLIANCE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per-share data)


	Three-Months Ended December 31,
	2021		2020
REVENUES	$	18,878	$	17,011
Cost of revenues	12,271		11,374
GROSS PROFIT	6,607		5,637
Selling, general and administrative	4,388		3,756
Depreciation and amortization	236		205
OPERATING INCOME	1,983		1,676
OTHER INCOME (EXPENSE)
Interest income	14		—
Interest expense	(58)		(47)
Income associated with derivative instrument	27		10
TOTAL OTHER EXPENSE	(17)		(37)
INCOME BEFORE INCOME TAXES	1,966		1,639
INCOME TAX EXPENSE
Current	63		64
Deferred	466		347
TOTAL INCOME TAX EXPENSE	529		411
NET INCOME	$	1,437	$	1,228

NET INCOME PER COMMON SHARE - Basic and Diluted	$	0.07	$	0.07

WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
Basic	19,245		16,497
Diluted	19,400		16,929

The accompanying notes are an integral part of these condensed consolidated financial statements.

SHARPS COMPLIANCE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per-share data)


	Six-Months Ended December 31,
	2021		2020

REVENUES	$	32,793	$	30,162
Cost of revenues	22,765		20,902
GROSS PROFIT	10,028		9,260
Selling, general and administrative	8,588		7,544
Depreciation and amortization	454		409
OPERATING INCOME	986		1,307
OTHER INCOME (EXPENSE)
Interest income	14		—
Interest expense	(114)		(79)
Income associated with derivative instrument	34		15
TOTAL OTHER EXPENSE	(66)		(64)
INCOME BEFORE INCOME TAXES	920		1,243
INCOME TAX EXPENSE
Current	63		64
Deferred	210		244
TOTAL INCOME TAX EXPENSE	273		308
NET INCOME	$	647	$	935

NET INCOME PER COMMON SHARE - Basic and Diluted	$	0.03	$	0.06

WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
Basic	18,562		16,444
Diluted	18,656		16,875

The accompanying notes are an integral part of these condensed consolidated financial statements.

SHARPS COMPLIANCE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands, except share data)


	Common Stock				Treasury Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares		Amount		Shares	Amount
Balances, September 30, 2021		19,524,859	$	197	(295,615)	$	(1,554)	$	51,363	$	12,839	$	62,845

Stock-based compensation		—	—		—	—		349		—		349
Issuance of restricted stock		17,999	—		—	—		—		—		—
Net income		—	—		—	—		—		1,437		1,437
Balances, December 31, 2021		19,542,858	$	197	(295,615)	$	(1,554)	$	51,712	$	14,276	$	64,631

	Common Stock				Treasury Stock			Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
	Shares		Amount		Shares	Amount
Balances, September 30, 2020		16,718,103	$	169	(295,615)	$	(1,554)	$	30,589	$	468	$	29,578
Exercise of stock options		18,000	—		—	—		86		—		86
Stock-based compensation		—	—		—	—		140		—		140
Issuance of restricted stock		63,599	1		—	—		(1)		—		—
Net income		—	—		—	—		—		1,228		1,228
Balances, December 31, 2020		16,799,702

SEC Form 10-Q filed by Sharps Compliance Corp.