ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2018 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . |
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) |
Large Accelerated Filer o | Accelerated Filer o | Non-accelerated Filer o (Do not check if a smaller reporting company) | Emerging growth company o | Smaller reporting company ý |
SHARPS COMPLIANCE CORP. AND SUBSIDIARIES | ||
PAGE | ||
March 31, | June 30, | |||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 5,499 | $ | 4,675 | ||||
Accounts receivable, net of allowance for doubtful accounts of $95 and $78, respectively | 6,103 | 7,553 | ||||||
Inventory, net | 4,163 | 4,098 | ||||||
Prepaid and other current assets | 761 | 694 | ||||||
TOTAL CURRENT ASSETS | 16,526 | 17,020 | ||||||
PROPERTY, PLANT AND EQUIPMENT, net | 6,538 | 6,543 | ||||||
OTHER ASSETS | 159 | 120 | ||||||
GOODWILL | 6,735 | 6,735 | ||||||
INTANGIBLE ASSETS, net | 3,648 | 4,046 | ||||||
TOTAL ASSETS | $ | 33,606 | $ | 34,464 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 1,836 | $ | 1,710 | ||||
Accrued liabilities | 1,618 | 1,800 | ||||||
Current maturities of long-term debt | 558 | 601 | ||||||
Deferred revenue | 2,107 | 2,421 | ||||||
TOTAL CURRENT LIABILITIES | 6,119 | 6,532 | ||||||
LONG-TERM DEFERRED REVENUE, net of current portion | 475 | 478 | ||||||
OTHER LONG-TERM LIABILITIES | 199 | 165 | ||||||
LONG-TERM DEBT, net of current portion | 1,594 | 2,002 | ||||||
TOTAL LIABILITIES | 8,387 | 9,177 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock, $0.01 par value per share; 20,000,000 shares authorized; 16,377,636 and 16,304,027 shares issued, respectively, and 16,082,021 and 16,008,412 shares outstanding, respectively. | 164 | 163 | ||||||
Treasury stock, at cost, 295,615 shares repurchased | (1,554 | ) | (1,554 | ) | ||||
Additional paid-in capital | 28,520 | 28,063 | ||||||
Accumulated deficit | (1,911 | ) | (1,385 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY | 25,219 | 25,287 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 33,606 | $ | 34,464 |
Three-Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
REVENUES | $ | 9,427 | $ | 8,588 | ||||
Cost of revenues | 7,131 | 6,236 | ||||||
GROSS PROFIT | 2,296 | 2,352 | ||||||
Selling, general and administrative | 2,800 | 2,790 | ||||||
Depreciation and amortization | 203 | 200 | ||||||
OPERATING LOSS | (707 | ) | (638 | ) | ||||
OTHER INCOME (EXPENSE) | ||||||||
Interest income | 5 | 4 | ||||||
Interest expense | (23 | ) | (34 | ) | ||||
TOTAL OTHER EXPENSE | (18 | ) | (30 | ) | ||||
LOSS BEFORE INCOME TAXES | (725 | ) | (668 | ) | ||||
INCOME TAX EXPENSE | 32 | — | ||||||
NET LOSS | $ | (757 | ) | $ | (668 | ) | ||
NET LOSS PER COMMON SHARE - Basic and Diluted | $ | (0.05 | ) | $ | (0.04 | ) | ||
WEIGHTED AVERAGE SHARES USED IN COMPUTING LOSS PER COMMON SHARE: | ||||||||
Basic and diluted | 16,082 | 15,994 |
Nine-Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
REVENUES | $ | 30,229 | $ | 27,826 | ||||
Cost of revenues | 21,774 | 19,620 | ||||||
GROSS PROFIT | 8,455 | 8,206 | ||||||
Selling, general and administrative | 8,346 | 9,388 | ||||||
Depreciation and amortization | 608 | 600 | ||||||
OPERATING LOSS | (499 | ) | (1,782 | ) | ||||
OTHER INCOME (EXPENSE) | ||||||||
Interest income | 15 | 12 | ||||||
Interest expense | (70 | ) | (92 | ) | ||||
TOTAL OTHER EXPENSE | (55 | ) | (80 | ) | ||||
LOSS BEFORE INCOME TAXES | (554 | ) | (1,862 | ) | ||||
INCOME TAX BENEFIT | (28 | ) | — | |||||
NET LOSS | $ | (526 | ) | $ | (1,862 | ) | ||
NET LOSS PER COMMON SHARE - Basic and Diluted | $ | (0.03 | ) | $ | (0.12 | ) | ||
WEIGHTED AVERAGE SHARES USED IN COMPUTING LOSS PER COMMON SHARE: | ||||||||
Basic and diluted | 16,046 | 15,930 |
Common Stock | Treasury Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||
Balances, June 30, 2016 | 15,740,458 | $ | 158 | (295,615 | ) | $ | (1,554 | ) | $ | 25,331 | $ | (92 | ) | $ | 23,843 | |||||||||||
Exercise of stock options | 95,050 | 1 | — | — | 341 | — | 342 | |||||||||||||||||||
Stock-based compensation | — | — | — | — | 496 | — | 496 | |||||||||||||||||||
Issuance of common shares for acquisition | 415,527 | 4 | — | — | 1,895 | — | 1,899 | |||||||||||||||||||
Issuance of restricted stock | 52,992 | — | — | — | — | — | — | |||||||||||||||||||
Net loss | — | — | — | — | — | (1,293 | ) | (1,293 | ) | |||||||||||||||||
Balances, June 30, 2017 | 16,304,027 | 163 | (295,615 | ) | (1,554 | ) | 28,063 | (1,385 | ) | 25,287 | ||||||||||||||||
Stock-based compensation | — | — | — | — | 375 | — | 375 | |||||||||||||||||||
Issuance of common shares for lease | 20,617 | — | — | — | 83 | — | 83 | |||||||||||||||||||
Issuance of restricted stock | 52,992 | 1 | — | — | (1 | ) | — | — | ||||||||||||||||||
Net loss | — | — | — | — | — | (526 | ) | (526 | ) | |||||||||||||||||
Balances, March 31, 2018 | 16,377,636 | $ | 164 | (295,615 | ) | $ | (1,554 | ) | $ | 28,520 | $ | (1,911 | ) | $ | 25,219 |
Nine-Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (526 | ) | $ | (1,862 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,174 | 1,100 | ||||||
Loss on disposal of property, plant and equipment | — | 10 | ||||||
Stock-based compensation expense | 375 | 389 | ||||||
Deferred tax benefit | (37 | ) | — | |||||
Changes in operating assets and liabilities, net of effects of business acquisitions: | ||||||||
Accounts receivable | 1,450 | 1,118 | ||||||
Inventory | 101 | (477 | ) | |||||
Prepaid and other assets | 14 | (192 | ) | |||||
Accounts payable and accrued liabilities | (111 | ) | 335 | |||||
Deferred revenue | (317 | ) | (239 | ) | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 2,123 | 182 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property, plant and equipment | (800 | ) | (2,439 | ) | ||||
Cash proceeds from sale of property, plant and equipment | 10 | 23 | ||||||
Additions to intangible assets | (58 | ) | (128 | ) | ||||
Payments for business acquisitions, net of cash acquired | — | (7,261 | ) | |||||
NET CASH USED IN INVESTING ACTIVITIES | (848 | ) | (9,805 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from exercise of stock options | — | 342 | ||||||
Proceeds from long-term debt | — | 5,600 | ||||||
Repayments of long-term debt | (451 | ) | (3,062 | ) | ||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (451 | ) | 2,880 | |||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 824 | (6,743 | ) | |||||
CASH AND CASH EQUIVALENTS, beginning of period | 4,675 | 12,435 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 5,499 | $ | 5,692 | ||||
SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||
Income taxes paid | $ | 3 | $ | — | ||||
Interest paid on long-term debt | $ | 64 | $ | 91 | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Issuance of common stock for acquisition | $ | — | $ | 1,889 | ||||
Issuance of common stock for lease | $ | 83 | $ | — | ||||
Unpaid consideration related to acquisitions | $ | — | $ | 52 | ||||
Transfer of equipment to inventory | $ | 166 | $ | 130 | ||||
Property, plant and equipment financed through accounts payable | $ | 89 | $ | 66 |
Non-interest bearing, unsecured note payable assumed in acquisition, monthly payments of $7; maturing September 2018. | $ | 41 | |
Term loan, bearing interest at 4.25%, monthly payments of $43; maturing March 2022. | 2,111 | ||
Total long-term debt | 2,152 | ||
Less: current portion | 558 | ||
Long-term debt, net of current portion | $ | 1,594 |
Twelve Months Ending March 31, | |||
2019 | $ | 558 | |
2020 | 517 | ||
2021 | 517 | ||
2022 | 517 | ||
2023 | 43 | ||
$ | 2,152 |
Three-Months Ended March 31, | Nine-Months Ended March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Stock-based compensation expense included in: | ||||||||||||||||
Cost of revenues | $ | 6 | $ | 8 | $ | 33 | $ | 33 | ||||||||
Selling, general and administrative | 108 | 108 | 342 | 356 | ||||||||||||
Total | $ | 114 | $ | 116 | $ | 375 | $ | 389 |
Three-Months Ended March 31, | Nine-Months Ended March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net loss, as reported | $ | (757 | ) | $ | (668 | ) | $ | (526 | ) | $ | (1,862 | ) | ||||
Weighted average common shares outstanding | 16,082 | 15,994 | 16,046 | 15,930 | ||||||||||||
Effect of dilutive stock options | — | — | — | — | ||||||||||||
Weighted average diluted common shares outstanding | 16,082 | 15,994 | 16,046 | 15,930 | ||||||||||||
Net loss per common share | ||||||||||||||||
Basic and diluted | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.12 | ) | ||||
Employee stock options excluded from computation of dilutive loss per share amounts because their effect would be anti-dilutive | 401 | 269 | 401 | 304 |
Three-Months Ended March 31, | Nine-Months Ended March 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Options Exercised | — | 19,300 | — | 95,050 | ||||||||||||
Proceeds (in thousands) | $ | — | $ | 84 | $ | — | $ | 342 | ||||||||
Average exercise price per share | $ | — | $ | 4.34 | $ | — | $ | 3.60 |
March 31, 2018 | June 30, 2017 | |||||||||||||||||||||||||
Estimated Useful Lives | Original Amount | Accumulated Amortization | Net Amount | Original Amount | Accumulated Amortization | Net Amount | ||||||||||||||||||||
Customer relationships | 7 years | $ | 3,007 | $ | (811 | ) | $ | 2,196 | $ | 3,007 | $ | (490 | ) | $ | 2,517 | |||||||||||
Permits | 6 - 15 years | 1,430 | (365 | ) | 1,065 | 1,373 | (288 | ) | 1,085 | |||||||||||||||||
Patents | 5 - 17 years | 383 | (274 | ) | 109 | 383 | (264 | ) | 119 | |||||||||||||||||
Trade name | 7 years | 270 | (68 | ) | 202 | 270 | (39 | ) | 231 | |||||||||||||||||
Non-compete | 5 years | 117 | (41 | ) | 76 | 117 | (23 | ) | 94 | |||||||||||||||||
Total intangible assets, net | $ | 5,207 | $ | (1,559 | ) | $ | 3,648 | $ | 5,150 | $ | (1,104 | ) | $ | 4,046 |
Twelve Months Ending March 31, | |||
2019 | $ | 606 | |
2020 | 606 | ||
2021 | 606 | ||
2022 | 586 | ||
2023 | 540 | ||
Thereafter | 704 | ||
$ | 3,648 |
March 31, 2018 | June 30, 2017 | |||||||
Raw materials | $ | 1,374 | $ | 1,272 | ||||
Finished goods | 2,789 | 2,826 | ||||||
Total | $ | 4,163 | $ | 4,098 |
Three-Months Ended March 31, | ||||||||||||||
2018 | % Total | 2017 | % Total | |||||||||||
REVENUES BY SOLUTION: | ||||||||||||||
Mailbacks | $ | 4,602 | 48.8 | % | $ | 4,997 | 58.2 | % | ||||||
Route-based pickup services | 1,888 | 20.0 | % | 1,641 | 19.1 | % | ||||||||
Unused medications | 1,832 | 19.4 | % | 867 | 10.1 | % | ||||||||
Third party treatment services | 44 | 0.5 | % | 149 | 1.7 | % | ||||||||
Other (1) | 1,061 | 11.3 | % | 934 | 10.9 | % | ||||||||
Total revenues | $ | 9,427 | 100.0 | % | $ | 8,588 | 100.0 | % | ||||||
Nine-Months Ended March 31, | ||||||||||||||
2018 | % Total | 2017 | % Total | |||||||||||
REVENUES BY SOLUTION: | ||||||||||||||
Mailbacks | $ | 16,618 | 55.0 | % | $ | 17,661 | 63.5 | % | ||||||
Route-based pickup services | 5,479 | 18.1 | % | 4,686 | 16.8 | % | ||||||||
Unused medications | 4,321 | 14.3 | % | 2,400 | 8.6 | % | ||||||||
Third party treatment services | 815 | 2.7 | % | 291 | 1.0 | % | ||||||||
Other (1) | 2,996 | 9.9 | % | 2,788 | 10.1 | % | ||||||||
Total revenues | $ | 30,229 | 100.0 | % | $ | 27,826 | 100.0 | % |
(1) | The Company’s other products include non-mailback products such as IV poles, accessories, containers, asset return boxes and other miscellaneous items. |
Three-Months Ended March 31, | Nine-Months Ended March 31, | |||||||||||||||||||||||||||
2018 | % | 2017 | % | 2018 | % | 2017 | % | |||||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||||||||||
Revenues | $ | 9,427 | 100.0 | % | $ | 8,588 | 100.0 | % | $ | 30,229 | 100.0 | % | $ | 27,826 | 100.0 | % | ||||||||||||
Cost of revenues | 7,131 | 75.6 | % | 6,236 | 72.6 | % | 21,774 | 72.0 | % | 19,620 | 70.5 | % | ||||||||||||||||
Gross profit | 2,296 | 24.4 | % | 2,352 | 27.4 | % | 8,455 | 28.0 | % | 8,206 | 29.5 | % | ||||||||||||||||
SG&A expense | 2,800 | 29.7 | % | 2,790 | 32.5 | % | 8,346 | 27.6 | % | 9,388 | 33.7 | % | ||||||||||||||||
Depreciation and amortization | 203 | 2.2 | % | 200 | 2.3 | % | 608 | 2.0 | % | 600 | 2.2 | % | ||||||||||||||||
Operating loss | (707 | ) | (7.5 | )% | (638 | ) | (7.4 | )% | (499 | ) | (1.7 | )% | (1,782 | ) | (6.4 | )% | ||||||||||||
Interest income | 5 | 4 | 15 | 12 | ||||||||||||||||||||||||
Interest expense | (23 | ) | (34 | ) | (70 | ) | (92 | ) | ||||||||||||||||||||
Total other expense | (18 | ) | (0.2 | )% | (30 | ) | (0.3 | )% | (55 | ) | (0.2 | )% | (80 | ) | (0.3 | )% | ||||||||||||
Loss before income taxes | (725 | ) | (7.7 | )% | (668 | ) | (7.8 | )% | (554 | ) | (1.8 | )% | (1,862 | ) | (6.7 | )% | ||||||||||||
Income tax expense (benefit) | 32 | 0.3 | % | — | — | % | (28 | ) | (0.1 | )% | — | — | % | |||||||||||||||
Net Loss | $ | (757 | ) | (8.0 | )% | $ | (668 | ) | (7.8 | )% | $ | (526 | ) | (1.7 | )% | $ | (1,862 | ) | (6.7 | )% |
Three-Months Ended March 31, | ||||||||||||
(Unaudited) | ||||||||||||
2018 | 2017 | Variance | ||||||||||
BILLINGS BY MARKET: | ||||||||||||
Professional | $ | 3,178 | $ | 2,982 | $ | 196 | ||||||
Home Health Care | 1,872 | 1,873 | (1 | ) | ||||||||
Retail | 1,640 | 806 | 834 | |||||||||
Pharmaceutical Manufacturer | 973 | 1,377 | (404 | ) | ||||||||
Assisted Living | 657 | 625 | 32 | |||||||||
Government | 520 | 424 | 96 | |||||||||
Environmental | 44 | 149 | (105 | ) | ||||||||
Other | 232 | 195 | 37 | |||||||||
Subtotal | 9,116 | 8,431 | 685 | |||||||||
GAAP Adjustment * | 311 | 157 | 154 | |||||||||
Revenue Reported | $ | 9,427 | $ | 8,588 | $ | 839 |
Three-Months Ended March 31, | ||||||||||||||
2018 | % Total | 2017 | % Total | |||||||||||
BILLINGS BY SOLUTION: | ||||||||||||||
Mailbacks | $ | 4,291 | 47.1 | % | $ | 4,840 | 57.4 | % | ||||||
Route-based pickup services | 1,888 | 20.7 | % | 1,641 | 19.5 | % | ||||||||
Unused medications | 1,832 | 20.1 | % | 867 | 10.3 | % | ||||||||
Third party treatment services | 44 | 0.5 | % | 149 | 1.8 | % | ||||||||
Other (1) | 1,061 | 11.6 | % | 934 | 11.0 | % | ||||||||
Total billings | $ | 9,116 | 100.0 | % | $ | 8,431 | 100.0 | % | ||||||
GAAP adjustment (2) | 311 | 157 | ||||||||||||
Revenue reported | $ | 9,427 | $ | 8,588 |
(1) | The Company’s other products include IV poles, accessories, containers, asset return boxes and other miscellaneous items. |
(2) | Represents the net impact of the revenue recognition adjustment required to arrive at reported generally accepted accounting principles (“GAAP”) revenue. Customer billings include all invoiced amounts associated with products shipped or services rendered during the period reported. GAAP revenue includes customer billings as well as numerous adjustments necessary to reflect, (i) the deferral of a portion of current period sales and (ii) recognition of certain revenue associated with products returned for treatment and destruction. The difference between customer billings and GAAP revenue is reflected in the Company’s balance sheet as deferred revenue. |
Nine-Months Ended March 31, | ||||||||||||
(Unaudited) | ||||||||||||
2018 | 2017 | Variance | ||||||||||
BILLINGS BY MARKET: | ||||||||||||
Professional | $ | 9,634 | $ | 8,817 | $ | 817 | ||||||
Home Health Care | 5,987 | 5,760 | 227 | |||||||||
Retail | 5,621 | 4,507 | 1,114 | |||||||||
Pharmaceutical Manufacturer | 3,972 | 4,568 | (596 | ) | ||||||||
Assisted Living | 1,882 | 1,789 | 93 | |||||||||
Government | 1,484 | 1,245 | 239 | |||||||||
Environmental | 815 | 291 | 524 | |||||||||
Other | 636 | 567 | 69 | |||||||||
Subtotal | 30,031 | 27,544 | 2,487 | |||||||||
GAAP Adjustment * | 198 | 282 | (84 | ) | ||||||||
Revenue Reported | $ | 30,229 | $ | 27,826 | $ | 2,403 |
Nine-Months Ended March 31, | ||||||||||||||
2018 | % Total | 2017 | % Total | |||||||||||
BILLINGS BY SOLUTION: | ||||||||||||||
Mailbacks | $ | 16,420 | 54.7 | % | $ | 17,379 | 63.1 | % | ||||||
Route-based pickup services | 5,479 | 18.2 | % | 4,686 | 17.0 | % | ||||||||
Unused medications | 4,321 | 14.4 | % | 2,400 | 8.7 | % | ||||||||
Third party treatment services | 815 | 2.7 | % | 291 | 1.1 | % | ||||||||
Other (1) | 2,996 | 10.0 | % | 2,788 | 10.1 | % | ||||||||
Total billings | $ | 30,031 | 100.0 | % | $ | 27,544 | 100.0 | % | ||||||
GAAP adjustment (2) | 198 | 282 | ||||||||||||
Revenue reported | $ | 30,229 | $ | 27,826 |
(1) | The Company’s other products include IV poles, accessories, containers, asset return boxes and other miscellaneous items. |
(2) | Represents the net impact of the revenue recognition adjustment required to arrive at reported generally accepted accounting principles (“GAAP”) revenue. Customer billings include all invoiced amounts associated with products shipped or services rendered during the period reported. GAAP revenue includes customer billings as well as numerous adjustments necessary to reflect, (i) the deferral of a portion of current period sales and (ii) recognition of certain revenue associated with products returned for treatment and destruction. The difference between customer billings and GAAP revenue is reflected in the Company’s balance sheet as deferred revenue. |
• | A large professional market that consists of dentists, veterinarians, clinics, private practice physicians, urgent care facilities, ambulatory surgical centers and other healthcare facilities. This regulated market consists of small to medium quantity generators of medical, pharmaceutical and hazardous waste where we can offer a lower cost to service with solutions to match individual facility needs. The Company addresses this market from two directions: (i) field sales which focus on larger-dollar and nationwide opportunities where we can integrate the route-based pickup service along with our mailback solutions to create a comprehensive medical waste management offering and (ii) inside and online sales which focus on the individual or small group professional offices, government agencies, smaller retail pharmacies and clinics and assisted living/long-term care facilities. The Company is able to compete more aggressively in the medium quantity generator market with the addition of route-based services where the mailback may not be as cost effective. The Company’s route-based business provides direct service to areas encompassing about 155 million people or 48% of the U.S. population. |
• | In July 2015 and December 2015, the Company augmented its network of medical and hazardous waste service providers with acquisitions of route-based pickup services in the Northeast serving Pennsylvania, Maryland, Ohio and other neighboring states. In July 2016, the Company acquired another route-based pickup service which expanded service to New York and New Jersey and strengthened the Company’s position in the Northeast. Through a combination of acquisition and organic growth, the Company now offers route-based pickup services in a twenty-three (23) state region of the South, Southeast and Northeast portions of the United States. The Company directly serves more than 10,300 customer locations with route-based pickup services. With the addition of these route-based pickup regions and the network of medical and hazardous waste service providers servicing the entire U.S., the Company offers customers a blended product portfolio to effectively manage multi-site and multi-sized locations, including those that generate larger quantities of waste. The network has had a significant positive impact on our pipeline of sales opportunities - over 60% of this pipeline is attributable to opportunities providing comprehensive waste management service offerings where both the mailback and pickup service are integrated into the offering. |
• | The changing demographics of the U.S. population – according to the U.S. Census Bureau, 2012 Population Estimates and National Projections, one out of five Americans will be 65 years or older by 2030, which will increase the need for cost-effective medical waste management solutions, especially in the long-term care and home healthcare markets. With multiple solutions for managing regulated healthcare-related waste, the Company delivers value as a single-source provider with blended mailback and route-based pickup services matched to the waste volumes of each facility. |
• | The shift of healthcare from traditional settings to the retail pharmacy and clinic markets, where the Company focuses |
• | The passage of regulations for ultimate user medication disposal allows the Company to offer new solutions (MedSafe and TakeAway Medication Recovery System envelopes) that meet the regulations for ultimate user controlled substances disposal (Schedules II-V) to retail pharmacies. Additionally, with the new regulations, the Company is able to provide the MedSafe and TakeAway Medication Recovery Systems to assisted living and hospice to address a long standing issue within long-term care. |
• | Local, state and federal agencies have growing needs for solutions to manage medical and pharmaceutical waste — the Company's Sharps Recovery System is ideal for as-needed disposal of sharps and other small quantities of medical waste generated within government buildings, schools and communities. The Company also provides TakeAway Medication Recovery System envelopes and MedSafe solutions to government agencies in need of proper and regulatory compliant medication disposal. |
• | With an increased number of self-injectable medication treatments and local regulations, the Company believes its flagship product, the Sharps Recovery System, continues to offer the best option for proper sharps disposal at an affordable price. The Company delivers comprehensive services to pharmaceutical manufacturers that sell high-dollar, self-injectable medications, which include data management, compliance reporting, fulfillment, proper containment with disposal, branding and conformity with applicable regulations. In addition, the Company provides self-injectors with online and retail purchase options of sharps mailback systems, such as the Sharp Recovery System and Complete Needle Collection & Disposal System, respectively. |
• | A heightened interest by many commercial companies who are looking to improve workplace safety with proper sharps disposal and unused medication disposal solutions — the Company offers a variety of services to meet these needs, including the Sharps Secure Needle Disposal System, Sharps Recovery System, Spill Kits and TakeAway Medication Recovery System envelopes. |
• | The Company continually develops new solution offerings such as ultimate user medication disposal (MedSafe and TakeAway Medication Recovery System), mailback services for DEA registrant expired inventory of controlled substances (TakeAway Medication Recovery System DEA Reverse Distribution for Registrants) and shipback services for collection and recycling of single-use medical devices from surgical centers and other healthcare facilities (TakeAway Recycle System). |
• | The Company’s strong financial position with a cash balance of $5.5 million, debt of $2.2 million and additional availability under the Credit Agreement as of March 31, 2018. |
• | Cash Flows from Operating Activities - Working capital decreased by $0.1 million to $10.4 million at March 31, 2018 from $10.5 million at June 30, 2017. The decrease in working capital is primarily attributed to an increase in cash and cash equivalents offset by: |
• | a decrease in accounts receivable of $1.5 million to $6.1 million at March 31, 2018 from $7.6 million at June 30, 2017 due to timing of billings and collections. |
• | a decrease in current deferred revenue of $0.3 million to $2.1 million at March 31, 2018 from $2.4 million at June 30, 2017. |
• | Cash Flows used in Investing Activities - Investing activities include capital expenditures of $0.8 million for normal plant and equipment additions. |
• | Cash Flows used in Financing Activities - Financing activities include repayments of debt of $0.5 million. |
(a) | Exhibits: |
101.INS | XBRL Instance Document (filed herewith) |
101.SCH | XBRL Taxonomy Extension Schema Document (filed herewith) |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) |
101.DEF | XBRL Taxonomy Extension Linkbase Document (filed herewith) |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document (filed herewith) |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) |
REGISTRANT: | |
SHARPS COMPLIANCE CORP. | |
Dated: May 3, 2018 | By: /s/ DAVID P. TUSA |
David P. Tusa | |
Chief Executive Officer and President | |
(Principal Executive Officer) |
Dated: May 3, 2018 | By: /s/ DIANA P. DIAZ |
Diana P. Diaz | |
Vice President and Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Sharps Compliance Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: May 3, 2018 | /s/David P. Tusa |
Chief Executive Officer and President | |
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Sharps Compliance Corp.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
Date: May 3, 2018 | /s/Diana P. Diaz |
Vice President and Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
(1) | The Form 10-Q report for the period ended March 31, 2018, filed with the Securities and Exchange Commission on May 3, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Form 10-Q report for the period ended March 31, 2018 fairly presents, in all material respects, the financial condition and results of operations of Sharps Compliance Corp. |
Date: May 3, 2018 | /s/David P. Tusa |
Chief Executive Officer and President | |
(1) | The Form 10-Q report for the period ended March 31, 2018, filed with the Securities and Exchange Commission on May 3, 2018 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Form 10-Q report for the period ended March 31, 2018 fairly presents, in all material respects, the financial condition and results of operations of Sharps Compliance Corp. |
Date: May 3, 2018 | /s/Diana P. Diaz |
Vice President and Chief Financial Officer | |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 01, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | SHARPS COMPLIANCE CORP | |
Entity Central Index Key | 0000898770 | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 16,082,021 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Jun. 30, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 95 | $ 78 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 16,377,636 | 16,304,027 |
Common stock, shares outstanding (in shares) | 16,082,021 | 16,008,412 |
Treasury stock, shares repurchased (in shares) | 295,615 | 295,615 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Statement [Abstract] | ||||
REVENUES | $ 9,427,000 | $ 8,588,000 | $ 30,229,000 | $ 27,826,000 |
Cost of revenues | 7,131,000 | 6,236,000 | 21,774,000 | 19,620,000 |
GROSS PROFIT | 2,296,000 | 2,352,000 | 8,455,000 | 8,206,000 |
Selling, general and administrative | 2,800,000 | 2,790,000 | 8,346,000 | 9,388,000 |
Depreciation and amortization | 203,000 | 200,000 | 608,000 | 600,000 |
OPERATING LOSS | (707,000) | (638,000) | (499,000) | (1,782,000) |
OTHER INCOME (EXPENSE) | ||||
Interest income | 5,000 | 4,000 | 15,000 | 12,000 |
Interest expense | (23,000) | (34,000) | (70,000) | (92,000) |
TOTAL OTHER EXPENSE | (18,000) | (30,000) | (55,000) | (80,000) |
LOSS BEFORE INCOME TAXES | (725,000) | (668,000) | (554,000) | (1,862,000) |
INCOME TAX EXPENSE | 32,000 | 0 | (28,000) | 0 |
NET LOSS | $ (757,000) | $ (668,000) | $ (526,000) | $ (1,862,000) |
NET LOSS PER COMMON SHARE - Basic and Diluted | ||||
Basic and Diluted (in dollars per share) | $ (0.05) | $ (0.04) | $ (0.03) | $ (0.12) |
WEIGHTED AVERAGE SHARES USED IN COMPUTING LOSS PER COMMON SHARE: | ||||
Basic and diluted (in shares) | 16,082 | 15,994 | 16,046 | 15,930 |
ORGANIZATION AND BACKGROUND |
9 Months Ended |
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Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BACKGROUND | ORGANIZATION AND BACKGROUND Organization: The accompanying unaudited condensed consolidated financial statements include the financial transactions and accounts of Sharps Compliance Corp. and its wholly owned subsidiaries, Sharps Compliance, Inc. of Texas (dba Sharps Compliance, Inc.), Sharps e-Tools.com Inc. (“Sharps e-Tools”), Sharps Manufacturing, Inc., Sharps Environmental Services, Inc. (dba Sharps Environmental Services of Texas, Inc.), Sharps Safety, Inc., Alpha Bio/Med Services LLC, Bio-Team Mobile LLC and Citiwaste, LLC (collectively, “Sharps” or the “Company”). All significant intercompany accounts and transactions have been eliminated upon consolidation. Business: Sharps is a leading full-service national provider of comprehensive waste management services including medical, pharmaceutical and hazardous for small and medium quantity generators. The Company’s solutions include Sharps Recovery System™ (formerly Sharps Disposal by Mail System®), TakeAway Medication Recovery System™, MedSafe®, TakeAway Recycle System™, ComplianceTRACSM, SharpsTracer®, Sharps Secure® Needle Disposal System, Complete Needle™ Collection & Disposal System, TakeAway Environmental Return System™, Pitch-It IV™ Poles, Asset Return System and Spill Kit and Recovery System. The Company also offers its route-based pick-up service in a twenty-three (23) state region of the South, Southeast and Northeast portions of the United States. |
BASIS OF PRESENTATION |
9 Months Ended |
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Mar. 31, 2018 | |
BASIS OF PRESENTATION [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information and with instructions to Form 10-Q and, accordingly, do not include all information and footnotes required under generally accepted accounting principles in the United States of America ("GAAP") for complete financial statements. Additionally, the preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts. 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, 2018, the results of its operations for the three and nine months ended March 31, 2018 and 2017, cash flows for the nine months ended March 31, 2018 and 2017 and stockholders’ equity for the nine months ended March 31, 2018. The results of operations for the three and nine months ended March 31, 2018 are not necessarily indicative of the results to be expected for the entire fiscal year ending June 30, 2018. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended June 30, 2017. |
SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
---|---|
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition: The Company recognizes revenue when services are provided and from product sales when (i) goods are shipped or delivered, and title and risk of loss pass to the customer, (ii) the price is substantially fixed or determinable and (iii) collectability is reasonably assured except for those sales via multiple-deliverable revenue arrangements. Provisions for certain rebates, product returns and discounts to customers are accounted for as reductions in sales in the same period the related sales are recorded. Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including prices charged by competitors. Rebates are estimated based on contractual terms, historical experience, trend analysis and projected market conditions in the various markets served. Service agreements which include a vendor managed inventory program include terms that meet the “bill and hold” criteria and as such are recognized when the order is completed, at which point title has transferred, there are no acceptance provisions and amounts are segregated in the Company’s warehouse. During the three and nine months ended March 31, 2018, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $0.5 million and $2.4 million, respectively. During the three and nine months ended March 31, 2017, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $0.7 million and $2.7 million, respectively. As of March 31, 2018 and June 30, 2017, $2.8 million and $2.7 million, respectively, of solutions sold through that date were held in vendor managed inventory pending fulfillment or shipment to patients of pharmaceutical manufacturers who offer these solutions to patients in an ongoing patient support program. Certain products offered by the Company have revenue producing components that are recognized over multiple delivery points (Sharps Recovery System and various other solutions like the TakeAway Medication Recovery Systems referred to as “Mailbacks” and Sharps Pump and Asset Return Systems, referred to as “Pump Returns”) and can consist of up to three separate elements, or units of measure, as follows: (1) the sale of the compliance and container system, (2) return transportation and (3) treatment service. In accordance with the relative selling price methodology, an estimated selling price is determined for all deliverables that qualify for separate units of accounting. The actual consideration received in a multiple-deliverable arrangement is then allocated to the units based on their relative sales price. The selling price for the transportation revenue and the treatment revenue utilizes third party evidence. The Company estimates the selling price of the compliance and container system based on the product and services provided, including compliance with local, state and federal laws, adherence to stringent manufacturing and testing requirements, safety to the patient and the community, as well as storage and containment capabilities. Revenue for the sale of the compliance and container is recognized upon delivery to the customer, at which time the customer takes title and assumes risk of ownership. Transportation revenue is recognized when the customer returns the compliance and container system and the container has been received at the Company’s owned or contracted facilities. The compliance and container system is mailed or delivered by an alternative logistics provider to the Company’s owned or contracted facilities. Treatment revenue is recognized upon the destruction or conversion and proof of receipt and treatment having been performed on the container. Since the transportation element and the treatment elements are undelivered services at the point of initial sale of the compliance and container, transportation and treatment revenue is deferred until the services are performed. The current and long-term portions of deferred revenues are determined through regression analysis and historical trends. Furthermore, through regression analysis of historical data, the Company has determined that a certain percentage of all compliance and container systems sold may not be returned. Accordingly, a portion of the transportation and treatment elements are recognized at the point of sale. Income Taxes: Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of valuation allowances and development of projected annual effective tax rates requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Under GAAP, the valuation allowance has been recorded to reduce the Company’s deferred tax assets to an amount that is more likely than not to be realized and is based upon the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes. Goodwill and Other Identifiable Intangible Assets: Finite-lived intangible assets are amortized over their respective estimated useful lives and evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. Goodwill is assessed for impairment at least annually. The Company generally performs its annual goodwill impairment analysis using a quantitative approach. The quantitative goodwill impairment test identifies the existence of potential impairment by comparing the fair value of our single reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to that excess. The impairment charge recognized is limited to the amount of goodwill present in our single reporting unit. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the amount of any such charge. The Company performs its annual impairment assessment of goodwill during the fourth quarter of each fiscal year. The Company determined that there was no impairment during the prior year ended June 30, 2017 and there have been no triggering events since that date that would warrant further impairment testing. Accounts Receivable: Accounts receivable consist primarily of amounts due to the Company from normal business activities. Accounts receivable balances are determined to be delinquent when the amount is past due based on the contractual terms with the customer. The Company maintains an allowance for doubtful accounts to reflect the likelihood of not collecting certain accounts receivable based on past collection history and specific risks identified among uncollected accounts. Accounts receivable are charged to the allowance for doubtful accounts when the Company determines that the receivable will not be collected and/or when the account has been referred to a third party collection agency. The Company has a history of minimal uncollectible accounts. Stock-Based Compensation: Stock-based compensation cost for options and restricted stock awarded to employees and directors is measured at the grant date, based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). Fair Value of Financial Instruments: The Company considers the fair value of all financial instruments, including cash and cash equivalents, accounts receivable and accounts payable to approximate their carrying values at March 31, 2018 and June 30, 2017 due to their short-term nature. The carrying value of the Company’s debt approximates fair value due to the market rates of interest. |
RECENTLY ISSUED ACCOUNTING STANDARDS |
9 Months Ended |
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Mar. 31, 2018 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
RECENTLY ISSUED ACCOUNTING STANDARDS | RECENTLY ISSUED ACCOUNTING STANDARDS In May 2014, and as subsequently amended, guidance for revenue recognition was issued which supersedes the revenue recognition requirements currently followed by the Company. The new guidance provides for a single five-step model to be applied in determining the amount and timing of the recognition of revenue related to contracts with customers. The new standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a full retrospective approach or a modified retrospective approach to implement the standard. The guidance is effective for annual reporting periods beginning after December 15, 2017 (effective July 1, 2018 for the Company). The Company initiated a project to evaluate the impact that the new accounting guidance will have on its consolidated financial statements and related disclosures, which included identifying the material revenues streams and reviewing a representative sample of contracts. The Company is still in process of finalizing its evaluation, but has identified that for mailback and unused medication solutions, under the new guidance, the Company will recognize revenue over two performance obligations rather than the three separate elements under the current guidance. The Company is still evaluating the quantitative impact to the amount and timing of revenue recognition for the change to the identified performance obligations for the mailback solution. The Company is still evaluating the impact of the new standard on route-based pick up solution. No material changes to the amount and timing of revenue recognition over the third party treatment and other solutions are expected. The Company expects to adopt the standard using the modified retrospective approach, which involves retrospectively adopting the standard by recording a cumulative effect adjustment to all uncompleted contracts at July 1, 2018. The Company will continue to evaluate the standard as well as additional changes, modifications or interpretations which may impact the Company. In February 2016, guidance for leases was issued, which requires balance sheet recognition for rights and obligations of all leases with terms in excess of twelve months. The new guidance also requires additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of the new guidance are effective for annual periods beginning after December 15, 2018 (effective July 1, 2019 for the Company), including interim periods within the reporting period, and early application is permitted. The Company is in the initial stages of evaluating the impact of the new guidance on its consolidated financial statements and related disclosures as well as evaluating the available transition methods. The Company will continue to evaluate the standard as well as additional changes, modifications or interpretations which may impact the Company. |
INCOME TAXES |
9 Months Ended |
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Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company’s effective tax rate for the nine months ended March 31, 2018 was (5.1)% reflecting the impact of the 2017 tax law change discussed below, net of estimated state income taxes. For the nine months ended March 31, 2018, the Company recorded a net income tax benefit of approximately $38,000, which was offset by estimated state income tax expense of $10,000. The Company’s effective tax rate for the three months ended March 31, 2018 was 4.4% due primarily to income tax expense related to the tax deductibility of goodwill amortization. No income tax expense was recorded for the nine months ended March 31, 2017 as it was not material due to the valuation allowance and net operating losses. The Tax Cuts and Jobs Act of 2017, enacted on December 22, 2017, contains significant changes to U.S. tax law, including lowering the U.S. corporate income tax rate to 21%. During the nine months ended March 31, 2018, the Company recorded a $38,000 deferred tax asset in Other Assets on the balance sheet, representing the net benefit of remeasuring its deferred tax assets for recoverable alternative minimum tax credits offset by deferred tax liabilities related to indefinite lived assets, such as goodwill, which cannot be used as a source of future taxable income in evaluating the need for a valuation allowance against deferred tax assets. The Company's remaining net deferred tax assets continue to be fully offset by a valuation allowance. The Company's gross deferred tax assets and the offsetting valuation allowance decreased by approximately $0.8 million as a result of the reduction of the U.S. tax rate to 21%. |
NOTES PAYABLE AND LONG-TERM DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE AND LONG-TERM DEBT | NOTES PAYABLE AND LONG-TERM DEBT On March 29, 2017, the Company entered into to a credit agreement with a commercial bank (“Credit Agreement”). The Credit Agreement, which replaced the Company’s prior credit agreement, provides for a $14.0 million credit facility, the proceeds of which may be utilized as follows: (i) $6.0 million for working capital, letters of credit (up to $2.0 million) and general corporate purposes and (ii) $8.0 million for acquisitions. Indebtedness under the Credit Agreement is secured by substantially all of the Company’s assets with advances outstanding under the working capital portion of the credit facility at any time limited to a Borrowing Base (as defined in the Credit Agreement) equal to 80% of eligible accounts receivable plus the lesser of 50% of eligible inventory and $3.0 million and was $2.1 million at March 31, 2018. Advances under the acquisition portion of the credit facility are limited to 75% of the purchase price of an acquired company and convert to a five-year term note at the time of the borrowing. Borrowings bear interest at the greater of (a) zero percent or (b) the One Month ICE LIBOR plus a LIBOR Margin of 2.5%. The LIBOR Margin may increase to as high as 3.0% depending on the Company’s cash flow leverage ratio. The interest rate as of March 31, 2018 was approximately 4.25%. The Company pays a fee of 0.25% per annum on the unused amount of the line of credit. At March 31, 2018, long-term debt consisted of the following (in thousands):
The Company has availability under the Credit Agreement of $11.8 million ($6.0 million for the working capital and $5.8 million for the acquisitions) as of March 31, 2018. The Company also has $40,000 in letters of credit outstanding as of March 31, 2018. The Credit Agreement contains affirmative and negative covenants that, among other things, require the Company to maintain a maximum cash flow leverage ratio of no more than 3.0 to 1.0 and a minimum debt service coverage ratio of not less than 1.15 to 1.00. The Credit Agreement, which expires on March 29, 2019 for the working capital portion of the Credit Agreement, also contains customary events of default which, if uncured, may terminate the Credit Agreement and require immediate repayment of all indebtedness to the lenders. The leverage ratio covenant may limit the amount available under the Credit Agreement. Payments due on long-term debt during each of the five years subsequent to March 31, 2018 are as follows (in thousands):
The Company utilizes performance bonds to support operations based on certain state requirements. At March 31, 2018, the Company had performance bonds outstanding covering financial assurance up to $0.6 million. |
STOCK-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock-based compensation cost for options and restricted stock awarded to employees and directors is measured at the grant date, based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). During the three and nine months ended March 31, 2018 and 2017, stock-based compensation amounts are as follows (in thousands):
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EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings 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 and restricted stock. In computing diluted earnings per share, the outstanding common stock options are considered dilutive using the treasury stock method. The Company’s restricted stock awards are treated as outstanding for earnings per share calculations since these shares have full voting rights and are entitled to participate in dividends declared on common shares, if any, and undistributed earnings. As participating securities, the shares of restricted stock are included in the calculation of basic EPS using the two-class method. For the periods presented, the amount of earnings allocated to the participating securities was not material. The following information is necessary to calculate earnings per share for the periods presented (in thousands, except per-share data):
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EQUITY TRANSACTIONS |
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY TRANSACTIONS | EQUITY TRANSACTIONS During the three and nine months ended March 31, 2018 and 2017, stock options to purchase shares of the Company’s common stock were exercised as follows:
As of March 31, 2018, there was $0.4 million of stock compensation expense related to non-vested awards which is expected to be recognized over a weighted average period of 2.2 years. During the nine months ended March 31, 2018, the Company issued 20,617 shares of common stock as a portion of consideration for a third-party lease agreement. The shares were issued at $4.00 per share based on the closing price on the date of grant. Non-cash expense recorded during the nine months ended March 31, 2018 was $25,000. The remaining cost will be amortized over the life of the lease and is included in Prepaid and Other Current Assets or Other Assets on the balance sheet. |
GOODWILL AND INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS At March 31, 2018 and June 30, 2017, intangible assets consisted of the following (in thousands):
During both the nine months ended March 31, 2018 and 2017, amortization expense was $0.5 million. There have been no changes in the carrying amount of goodwill since June 30, 2017. As of March 31, 2018, future amortization of intangible assets is as follows (in thousands):
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INVENTORY |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORY | INVENTORY The components of inventory are as follows (in thousands):
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REVENUES BY SOLUTION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUES BY SOLUTION | REVENUES BY SOLUTION The components of revenues by solution are as follows (in thousands):
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SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Revenue Recognition | Revenue Recognition: The Company recognizes revenue when services are provided and from product sales when (i) goods are shipped or delivered, and title and risk of loss pass to the customer, (ii) the price is substantially fixed or determinable and (iii) collectability is reasonably assured except for those sales via multiple-deliverable revenue arrangements. Provisions for certain rebates, product returns and discounts to customers are accounted for as reductions in sales in the same period the related sales are recorded. Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including prices charged by competitors. Rebates are estimated based on contractual terms, historical experience, trend analysis and projected market conditions in the various markets served. Service agreements which include a vendor managed inventory program include terms that meet the “bill and hold” criteria and as such are recognized when the order is completed, at which point title has transferred, there are no acceptance provisions and amounts are segregated in the Company’s warehouse. During the three and nine months ended March 31, 2018, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $0.5 million and $2.4 million, respectively. During the three and nine months ended March 31, 2017, the Company recorded revenue from inventory builds that are held in vendor managed inventory under these service agreements of $0.7 million and $2.7 million, respectively. As of March 31, 2018 and June 30, 2017, $2.8 million and $2.7 million, respectively, of solutions sold through that date were held in vendor managed inventory pending fulfillment or shipment to patients of pharmaceutical manufacturers who offer these solutions to patients in an ongoing patient support program. Certain products offered by the Company have revenue producing components that are recognized over multiple delivery points (Sharps Recovery System and various other solutions like the TakeAway Medication Recovery Systems referred to as “Mailbacks” and Sharps Pump and Asset Return Systems, referred to as “Pump Returns”) and can consist of up to three separate elements, or units of measure, as follows: (1) the sale of the compliance and container system, (2) return transportation and (3) treatment service. In accordance with the relative selling price methodology, an estimated selling price is determined for all deliverables that qualify for separate units of accounting. The actual consideration received in a multiple-deliverable arrangement is then allocated to the units based on their relative sales price. The selling price for the transportation revenue and the treatment revenue utilizes third party evidence. The Company estimates the selling price of the compliance and container system based on the product and services provided, including compliance with local, state and federal laws, adherence to stringent manufacturing and testing requirements, safety to the patient and the community, as well as storage and containment capabilities. Revenue for the sale of the compliance and container is recognized upon delivery to the customer, at which time the customer takes title and assumes risk of ownership. Transportation revenue is recognized when the customer returns the compliance and container system and the container has been received at the Company’s owned or contracted facilities. The compliance and container system is mailed or delivered by an alternative logistics provider to the Company’s owned or contracted facilities. Treatment revenue is recognized upon the destruction or conversion and proof of receipt and treatment having been performed on the container. Since the transportation element and the treatment elements are undelivered services at the point of initial sale of the compliance and container, transportation and treatment revenue is deferred until the services are performed. The current and long-term portions of deferred revenues are determined through regression analysis and historical trends. Furthermore, through regression analysis of historical data, the Company has determined that a certain percentage of all compliance and container systems sold may not be returned. Accordingly, a portion of the transportation and treatment elements are recognized at the point of sale. |
Income Taxes | Income Taxes: Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of valuation allowances and development of projected annual effective tax rates requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. Under GAAP, the valuation allowance has been recorded to reduce the Company’s deferred tax assets to an amount that is more likely than not to be realized and is based upon the uncertainty of the realization of certain federal and state deferred tax assets related to net operating loss carryforwards and other tax attributes. |
Goodwill and Other Identifiable Intangible Assets | Goodwill and Other Identifiable Intangible Assets: Finite-lived intangible assets are amortized over their respective estimated useful lives and evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. Goodwill is assessed for impairment at least annually. The Company generally performs its annual goodwill impairment analysis using a quantitative approach. The quantitative goodwill impairment test identifies the existence of potential impairment by comparing the fair value of our single reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to that excess. The impairment charge recognized is limited to the amount of goodwill present in our single reporting unit. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the amount of any such charge. The Company performs its annual impairment assessment of goodwill during the fourth quarter of each fiscal year. |
Accounts Receivable | Accounts Receivable: Accounts receivable consist primarily of amounts due to the Company from normal business activities. Accounts receivable balances are determined to be delinquent when the amount is past due based on the contractual terms with the customer. The Company maintains an allowance for doubtful accounts to reflect the likelihood of not collecting certain accounts receivable based on past collection history and specific risks identified among uncollected accounts. Accounts receivable are charged to the allowance for doubtful accounts when the Company determines that the receivable will not be collected and/or when the account has been referred to a third party collection agency. The Company has a history of minimal uncollectible accounts. |
Stock-Based Compensation | Stock-Based Compensation: Stock-based compensation cost for options and restricted stock awarded to employees and directors is measured at the grant date, based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: The Company considers the fair value of all financial instruments, including cash and cash equivalents, accounts receivable and accounts payable to approximate their carrying values at March 31, 2018 and June 30, 2017 due to their short-term nature. The carrying value of the Company’s debt approximates fair value due to the market rates of interest. |
New Accounting Pronouncement | In February 2016, guidance for leases was issued, which requires balance sheet recognition for rights and obligations of all leases with terms in excess of twelve months. The new guidance also requires additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The provisions of the new guidance are effective for annual periods beginning after December 15, 2018 (effective July 1, 2019 for the Company), including interim periods within the reporting period, and early application is permitted. The Company is in the initial stages of evaluating the impact of the new guidance on its consolidated financial statements and related disclosures as well as evaluating the available transition methods. The Company will continue to evaluate the standard as well as additional changes, modifications or interpretations which may impact the Company. |
NOTES PAYABLE AND LONG-TERM DEBT (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | At March 31, 2018, long-term debt consisted of the following (in thousands):
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Schedule of payments due on long-term debt | Payments due on long-term debt during each of the five years subsequent to March 31, 2018 are as follows (in thousands):
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STOCK-BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock-Based Compensation | During the three and nine months ended March 31, 2018 and 2017, stock-based compensation amounts are as follows (in thousands):
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share | The following information is necessary to calculate earnings per share for the periods presented (in thousands, except per-share data):
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EQUITY TRANSACTIONS (Tables) |
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Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised to purchase common stock | During the three and nine months ended March 31, 2018 and 2017, stock options to purchase shares of the Company’s common stock were exercised as follows:
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets | At March 31, 2018 and June 30, 2017, intangible assets consisted of the following (in thousands):
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Schedule of future amortization of intangible assets | As of March 31, 2018, future amortization of intangible assets is as follows (in thousands):
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INVENTORY (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | The components of inventory are as follows (in thousands):
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REVENUES BY SOLUTION (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of billings by solution | The components of revenues by solution are as follows (in thousands):
|
ORGANIZATION AND BACKGROUND (Details) |
9 Months Ended |
---|---|
Mar. 31, 2018
state_region
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of route-based pick-up service in state region | 23 |
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
Jun. 30, 2017 |
|
Revenue Recognition [Abstract] | |||||
Revenue recorded from inventory builds | $ 0.5 | $ 0.7 | $ 2.4 | $ 2.7 | |
Solutions sold that were held in vendor managed inventory | $ 2.8 | $ 2.8 | $ 2.7 |
INCOME TAXES (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 4.40% | (5.10%) | ||
Income tax benefit | $ 38,000 | |||
State income tax expense | 10,000 | |||
Income tax expense | $ 32,000 | $ 0 | (28,000) | $ 0 |
Decrease of deferred tax assets and offsetting valuation allowance | $ 800,000 |
NOTES PAYABLE AND LONG-TERM DEBT - Schedule of debt instruments (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Jun. 30, 2017 |
|
Long-term Debt, Unclassified [Abstract] | ||
Total long-term debt | $ 2,152 | |
Less: current portion | 558 | $ 601 |
Long-term debt, net of current portion | 1,594 | $ 2,002 |
Unsecured Note Payable | ||
Long-term Debt, Unclassified [Abstract] | ||
Monthly payments | 7 | |
Total long-term debt | 41 | |
Term Loan | ||
Long-term Debt, Unclassified [Abstract] | ||
Monthly payments | $ 43 | |
Interest rate | 4.25% | |
Total long-term debt | $ 2,111 |
NOTES PAYABLE AND LONG-TERM DEBT - Schedule of payments due on long-term debt (Details) $ in Thousands |
Mar. 31, 2018
USD ($)
|
---|---|
Long-term Debt, Fiscal Year Maturity [Abstract] | |
2019 | $ 558 |
2020 | 517 |
2021 | 517 |
2022 | 517 |
2023 | 43 |
Total long-term debt | $ 2,152 |
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Stock-based compensation expense | $ 114 | $ 116 | $ 375 | $ 389 |
Cost of revenues | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Stock-based compensation expense | 6 | 8 | 33 | 33 |
Selling, general and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||||
Stock-based compensation expense | $ 108 | $ 108 | $ 342 | $ 356 |
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
Jun. 30, 2017 |
|
Earnings Per Share [Abstract] | |||||
Net loss, as reported | $ (757) | $ (668) | $ (526) | $ (1,862) | $ (1,293) |
Weighted average common shares outstanding (in shares) | 16,082 | 15,994 | 16,046 | 15,930 | |
Effect of dilutive stock options (in shares) | 0 | 0 | 0 | 0 | |
Weighted average diluted common shares outstanding (in shares) | 16,082 | 15,994 | 16,046 | 15,930 | |
Net loss per common share | |||||
Basic and Diluted (in dollars per share) | $ (0.05) | $ (0.04) | $ (0.03) | $ (0.12) | |
Employee stock options excluded from computation of dilutive loss per share amounts because their effect would be anti-dilutive (in shares) | 401 | 269 | 401 | 304 |
EQUITY TRANSACTIONS (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Stock options exercised [Abstract] | ||||
Options exercised (in shares) | 0 | 19,300 | 0 | 95,050 |
Proceeds | $ 0 | $ 84 | $ 0 | $ 342 |
Average exercise price per share (in dollars per share) | $ 0.00 | $ 4.34 | $ 0.00 | $ 3.60 |
Compensation expense related to non-vested awards | $ 400 | $ 400 | ||
Weighted average period | 2 years 2 months 27 days | |||
Shares of common stock issued for third-party lease agreement (in shares) | 20,617 | |||
Price per share (in dollars per share) | $ 4 | $ 4 | ||
Noncash expense | $ 25 |
INVENTORY (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Jun. 30, 2017 |
---|---|---|
Components of inventory [Abstract] | ||
Raw materials | $ 1,374 | $ 1,272 |
Finished goods | 2,789 | 2,826 |
Total | $ 4,163 | $ 4,098 |
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