0000898770-20-000065 | 10-K | XBRL Viewer

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2020	Jun. 30, 2019
CURRENT ASSETS
Cash	$ 5,416	$ 4,512
Accounts receivable, net	11,789	9,289
Inventory	5,638	3,770
Contract asset	156	260
Prepaid and other current assets	1,287	922
TOTAL CURRENT ASSETS	24,286	18,753
PROPERTY, PLANT AND EQUIPMENT, net	9,127	5,867
OPERATING LEASE RIGHT OF USE ASSET	8,747	0
INVENTORY, net of current portion	1,064	1,046
OTHER ASSETS	154	443
GOODWILL	6,735	6,735
INTANGIBLE ASSETS, net	2,771	3,196
DEFERRED TAX ASSET	1,252	0
TOTAL ASSETS	54,136	36,040
CURRENT LIABILITIES
Accounts payable	3,291	2,946
Accrued liabilities	2,833	2,213
Operating lease liability	2,192	0
Current maturities of long-term debt	1,658	517
Contract liability	3,262	2,502
TOTAL CURRENT LIABILITIES	13,236	8,178
CONTRACT LIABILITY, net of current portion	705	503
OPERATING LEASE LIABILITY, net of current portion	6,671	0
OTHER LIABILITIES	441	42
DEFERRED TAX LIABILITY	0	243
LONG-TERM DEBT, net of current portion	3,505	948
TOTAL LIABILITIES	24,558	9,914
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value per share; 40,000,000 shares authorized; 16,667,572 and 16,433,128 shares issued, respectively and 16,371,957 and 16,137,513 shares outstanding, respectively	168	165
Treasury stock, at cost, 295,615 shares repurchased	(1,554)	(1,554)
Additional paid-in capital	30,203	29,020
Retained earnings (accumulated deficit)	761	(1,505)
TOTAL STOCKHOLDERS’ EQUITY	29,578	26,126
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 54,136	$ 36,040

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2020	Jun. 30, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	16,667,572	16,433,128
Common stock, shares outstanding (in shares)	16,371,957	16,137,513
Treasury stock, shares repurchased (in shares)	295,615	295,615

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
REVENUES	$ 51,146	$ 44,312	$ 40,141
Cost of revenues	35,384	31,042	28,739
GROSS PROFIT	15,762	13,270	11,402
Selling, general and administrative	14,046	12,003	11,168
Depreciation and amortization	806	820	811
OPERATING INCOME (LOSS)	910	447	(577)
OTHER INCOME (EXPENSE)
Interest income	14	24	20
Interest expense	(127)	(87)	(94)
Loss associated with derivative instrument	(113)	0	0
TOTAL OTHER EXPENSE	(226)	(63)	(74)
INCOME (LOSS) BEFORE INCOME TAXES	684	384	(651)
INCOME TAX EXPENSE (BENEFIT)
Current	(87)	(81)	29
Deferred	(1,495)	251	(8)
TOTAL INCOME TAX EXPENSE (BENEFIT)	(1,582)	170	21
NET INCOME (LOSS)	$ 2,266	$ 214	$ (672)
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted (in dollars per share)	$ 0.14	$ 0.01	$ (0.04)
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME (LOSS) PER COMMON SHARE:
Basic (in shares)	16,249	16,116	16,055
Diluted (in shares)	16,431	16,123	16,055

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Cumulative effect, period of adoption, adjustment	Common Stock	Treasury Stock	Additional Paid- in Capital	Retained Earnings (Accumulated Deficit)	Retained Earnings (Accumulated Deficit) Cumulative effect, period of adoption, adjustment
Balances (in shares) at Jun. 30, 2017			16,304,027	295,615
Balances at Jun. 30, 2017	$ 25,287		$ 163	$ (1,554)	$ 28,063	$ (1,385)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)	0
Exercise of stock options	$ 0
Stock-based compensation	$ 476				476
Issuance of common shares for lease (in shares)	20,617		20,617
Issuance of common shares for lease	$ 83				83
Issuance of restricted stock (in shares)			52,992
Issuance of restricted stock	0		$ 1		(1)
Net income (loss)	(672)					(672)
Balances (in shares) at Jun. 30, 2018			16,377,636	295,615
Balances at Jun. 30, 2018	$ 25,174		$ 164	$ (1,554)	28,621	(2,057)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)	0
Exercise of stock options	$ 0
Stock-based compensation	400				400
Issuance of restricted stock (in shares)			55,492
Issuance of restricted stock	0		$ 1		(1)
Net income (loss)	214					214
Balances (in shares) at Jun. 30, 2019			16,433,128	295,615
Balances at Jun. 30, 2019	$ 26,126	$ 338	$ 165	$ (1,554)	29,020	(1,505)	$ 338
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options (in shares)	154,000		154,444
Exercise of stock options	$ 668		$ 2		666
Stock-based compensation	518				518
Issuance of restricted stock (in shares)			80,000
Issuance of restricted stock	0		$ 1		(1)
Net income (loss)	2,266					2,266
Balances (in shares) at Jun. 30, 2020			16,667,572	295,615
Balances at Jun. 30, 2020	$ 29,578		$ 168	$ (1,554)	$ 30,203	$ 761

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ 2,266	$ 214	$ (672)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1,606	1,663	1,561
Bad debt expense	111	81	62
Non-cash lease expense	0	46	37
Inventory write-offs	29	55	0
Loss on disposal of property, plant and equipment	16	21	13
Stock-based compensation expense	518	400	476
Loss on derivative instrument	113	0	0
Deferred tax expense (benefit)	(1,495)	251	(8)
Vendor receivable write-off	657	0	0
Changes in operating assets and liabilities:
Accounts receivable	(2,971)	(3,000)	1,121
Inventory	(1,887)	(492)	305
Prepaid and other assets	(373)	(531)	(20)
Accounts payable and accrued liabilities	1,036	1,498	29
Contract asset and contract liability	1,066	719	(535)
NET CASH PROVIDED BY OPERATING ACTIVITIES	692	925	2,369
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	(3,969)	(749)	(1,212)
Cash proceeds from sale of property, plant and equipment	3	0	10
Additions to intangible assets	(188)	(282)	(86)
NET CASH USED IN INVESTING ACTIVITIES	(4,154)	(1,031)	(1,288)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	668	0	0
Repayments of long-term debt	(517)	(537)	(601)
Payments of debt issuance costs	(50)	0	0
Proceeds from long-term debt	4,265	0	0
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	4,366	(537)	(601)
NET INCREASE (DECREASE) IN CASH	904	(643)	480
CASH, beginning of year	4,512	5,155	4,675
CASH, end of year	5,416	4,512	5,155
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid	99	37	3
Interest paid on long-term debt	127	89	87
NON-CASH INVESTING ACTIVITIES:
Issuance of common stock for lease	0	0	83
Transfer of equipment to inventory	28	393	193
Property, plant and equipment financed through accounts payable	$ 331	$ 12	$ (13)

ORGANIZATION AND BACKGROUND	12 Months Ended
ORGANIZATION AND BACKGROUND	Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
ORGANIZATION AND BACKGROUND	ORGANIZATION AND BACKGROUND Organization: The accompanying 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", the “Company”, "we" or "our"). All significant intercompany accounts and transactions have been eliminated upon consolidation. Business: Sharps is a 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 Recovery System, TakeAway Medication Recovery System™, MedSafe^®, TakeAway Recycle System™,ComplianceTRAC^SM, 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 Recovery System. The Company also offers route-based pickup services in a thirty-two (32) state region of the South, Southeast, Midwest and Northeast portions of the United States. A novel strain of coronavirus ("COVID-19") was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations and in servicing customers. The Company has implemented some and may take additional precautionary measures intended to help ensure the well-being of its employees, facilitate continued uninterrupted servicing of customers and minimize business disruptions. The full extent of the future impacts of COVID-19 on the Company's operations is uncertain. A prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company. To date, the Company has not identified any material adverse impact of COVID-19 on its financial position and results of operations. Concentration of Customers and Service Providers: There is an inherent concentration of credit risk associated with accounts receivable arising from sales to major customers. For the fiscal year ended June 30, 2020, two customers represented approximately 35% of revenues. Two of these customers also represented approximately 44%, or $5.2 million, of the total accounts receivable balance as of June 30, 2020. For the fiscal year ended June 30, 2019, two customers represented approximately 27% of revenues and one of these customers also represented approximately 19%, or $1.7 million, of the total accounts receivable balance as of June 30, 2019. For the fiscal year ended June 30, 2018, one customer represented approximately 17% of revenues. In the event a major customer is lost, the Company may be adversely affected by its dependence on a limited number of high volume customers. The Company currently transports (from the patient or user to the Company's facility or subcontracted treatment facilities) many of its mailback and unused medication solution offerings using the United States Postal Service ("USPS"). The Company also has an arrangement with United Parcel Service Inc. (“UPS”) whereby UPS transports certain other mailback and unused medication solution offerings. Sharps maintains relationships with multiple raw materials suppliers and vendors in order to meet customer demands and assure availability of our products and solutions. With respect to the Sharps Recovery System solutions, the Company owns proprietary molds and dies and utilizes several contract manufacturers for the production of the primary raw materials. Sharps believes that alternative suitable contract manufacturers are readily available to meet the production specifications of our products and solutions. The Company utilizes national suppliers for the majority of the raw materials used in our other products and solutions and international suppliers for Pitch-It IV Poles.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESRevenue Recognition: In May 2014 and as subsequently amended, guidance for revenue recognition was issued which supersedes the revenue recognition requirements previously followed by the Company. The 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 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. The Company adopted the standard on July 1, 2018 using the modified retrospective approach, which involves retrospectively adopting the standard by recording a cumulative effect adjustment for all uncompleted contracts at July 1, 2018. This cumulative effect was $0.3 million which decreased accumulated deficit (and increased stockholders' equity) and increased contract assets by $0.3 million. The impact that the accounting guidance had on its consolidated financial statements and related disclosures included the following:

•The transportation and treatment performance obligations related to the mail back and unused medication solutions, which were historically accounted for as separate performance obligations, will be accounted for as a single performance obligation under the revenue recognition guidance. The impact of this was not material.

•Certain costs associated with obtaining long-term contracts with customers will be capitalized and amortized over the expected economic life of the contract in future periods. The impact of this was not material.

•The guidance changed the timing of revenue recognition on certain of the Company’s vendor managed inventory contracts. This constituted a material portion of the cumulative effect noted above as under the guidance, revenue recognition is no longer limited to the amounts that may be billed to the customer at the point in time in which performance obligations are satisfied.

•The Company made a number of practical expedient elections related to the accounting guidance, including: (i) right to invoice practical expedient that allows revenue for route-based pickup services to be recognized in the amount to which the Company has a right to invoice over time; (ii) sales and use taxes have been excluded from the transaction price; (iii) for incremental costs to obtain a contract that would be recognized over one year or less, the Company expenses those costs as incurred; and (iv) at the implementation date, guidance was applied only to contracts that were not completed as of the date of initial application.

The impact of adopting the accounting guidance on the Company's consolidated statement of operations for the year ended June 30, 2019 was as follows (in thousands):


	Year Ended June 30, 2019
	As Reported		Adjustments		Balance Without Adoption
Revenues	$	44,312	$	267	$	44,579
Cost of revenues	31,042		162		31,204
Gross profits	13,270		105		13,375
Selling, general and administrative	12,003		49		12,052
Operating income	447		56		503
Net income	$	214	$	56	$	270

The components of revenues by solution which reflect a disaggregation of revenue by contract type are as follows (dollar amounts in thousands):


	Year Ended June 30,
	2020		% Total		2019		% Total		2018		% Total
REVENUES BY SOLUTION:
Mailbacks	$	26,578	52.0	%	$	24,501	55.2	%	$	22,272	55.5	%
Route-based pickup services	10,390		20.3	%	9,029		20.4	%	7,492		18.7	%
Unused medications	9,163		17.9	%	6,936		15.7	%	5,907		14.7	%
Third party treatment services	247		0.5	%	290		0.7	%	891		2.2	%
Other ⁽¹⁾	4,768		9.3	%	3,556		8.0	%	3,579		8.9	%
Total revenues	$	51,146	100.0	%	$	44,312	100.0	%	$	40,141	100.0	%

(1)The Company’s other products include IV poles, accessories, containers, asset return boxes and other miscellaneous items with single performance obligations.

The Company recognizes revenue, net of applicable sales tax, when performance obligations are satisfied through the transfer of control of promised goods or services to the Company’s customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the promised goods or services. Outbound shipping and handling activities to customers are considered fulfillment activities with the exception of mailbacks sold as part of the vendor managed inventory ("VMI") program. Shipping and handling are considered separate performance obligations for mailbacks sold under the VMI program. For performance obligations satisfied at a point in time, which applies to all contracts except for route-based

pickup services, revenue recognition occurs when there is a transfer of control or completion of service. For performance obligations satisfied over time, which applies to the route-based pickup services, revenue is recognized in the amount to which the Company has a right to invoice pursuant to the right to invoice practical expedient. Provisions for certain rebates, product returns and discounts to customers are estimated at the inception of the contract, updated as needed throughout the contract term, and 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.

Other than the Company’s mailbacks and unused medication solutions, the Company’s solutions have a single performance obligation. The Company's mailbacks and unused medication solutions have revenue producing components that are recognized over multiple delivery points (Sharps Recovery System and various other solutions like the MedSafe and TakeAway Medication Recovery Systems referred to as “mailbacks” or "unused medications") and can consist of up to two performance obligations, or units of measure, as follows: (1) the sale of the compliance and container system, and (2) return transportation and treatment service. For mailbacks that are part of the VMI program, there is an additional element, or unit of measure, for outbound transportation. For contracts with multiple performance obligations, an estimated stand-alone selling price is determined for all performance obligations. The consideration is then allocated to the performance obligations based on their relative stand-alone selling price. The selling price for performance obligations for transportation and treatment utilizes third party evidence. The Company estimates the selling price of the compliance and container system based on the product and services provided, including the expected cost plus a margin.

The allocated transaction price for the sale of the compliance and container system is recognized upon delivery to the customer, at which time the customer has control. The allocated transaction price for the return transportation and treatment 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 at which point the destruction or conversion and proof of receipt and treatment are performed on the container. Consideration received and allocated to the transportation and treatment performance obligation is recorded as a contract liability until the services are performed. 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 return transportation and treatment element is recognized at the point of sale. Furthermore, the current and long-term portions of amounts historically referred to as deferred revenues (shown as Contract Liability on the condensed consolidated balance sheets) are determined through regression analysis and historical trends.

The VMI program includes terms that meet the “bill and hold” criteria and as such are recognized when the order is placed, title has transferred, there are no acceptance provisions and amounts are segregated in the Company’s warehouse for the customer. For the fiscal years ended June 30, 2020 and 2019, the Company recorded billings from inventory builds that are held in vendor managed inventory under these service agreements of $3.5 million and $2.7 million, respectively. As of both June 30, 2020 and 2019, $2.8 million 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.

The contract asset is related to VMI service agreements within the mailbacks contract type category when the revenue recognition exceeds the amount of consideration the Company was entitled to at the point in time of satisfying the performance obligation associated with the sale of the compliance and container system. The contract liability is related to the mailbacks and unused medications contract type categories in which cash consideration exceeds the transaction price allocated to completed performance obligations. The estimated timing of recognition of amounts included at June 30, 2020 are as follows: for the twelve months ended June 30, 2020 - contract asset of $0.2 million and contract liability of $3.3 million and for the twelve months ending June 30, 2022 - contract liability of $0.7 million. Incremental costs to obtain contracts that are deemed to be recoverable, primarily related to the payment of sales incentives for contracts in the route-based pickup service category, are capitalized as contract costs and included in prepaids and other current assets in the amount of $0.1 million as of both June 30, 2020 and 2019. The amortization of capitalized sales incentives, which is included in selling, general and administrative expense, totaled less than $0.1 million for each of the years ended June 30, 2020 and 2019.

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 a valuation allowance 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.

The Company is subject to income taxes in the United States and in numerous state tax jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company accounts for uncertain tax positions in accordance with FASB ASC 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. The Company has not recognized any material uncertain tax positions for the years ended June 30, 2020, 2019 and 2018. Tax return filings which are subject to review by federal and state tax authorities by jurisdiction are as follows:

•United States – fiscal years ended June 30, 2017 and after

•State of Texas – fiscal years ended June 30, 2015 and after

•State of Georgia – fiscal years ended June 30, 2017 and after

•State of Pennsylvania – fiscal years ended June 30, 2017 and after

•Other States – fiscal years ended June 30, 2016 and after

None of the Company’s federal or state tax returns are currently under examination. The Company records income tax related interest and penalties, if applicable, as a component of the provision for income tax expense. However, there were no such amounts recognized in the consolidated statements of operations in the years ended June 30, 2020, 2019 and 2018.

Leases: In February 2016, guidance for leases was issued, which supersedes the lease requirements previously followed by the Company. The new guidance requires balance sheet recognition of lease assets and lease liabilities for all leases. The new guidance also requires additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The Company adopted the standard on July 1, 2019 using the modified retrospective approach and recognized a cumulative effect adjustment to assets and liabilities for existing leases as of July 1, 2019. The Company recognized an additional operating lease liability of $4.6 million, with a corresponding right of use (“ROU”) asset of the same amount based on the present value of the payment amounts the Company expects to make over the expected term of the underlying leases, including renewal periods the Company is reasonably certain to exercise. The impact that the new accounting guidance had on its consolidated financial statements and related disclosures included the following:

•Approximately 50 leases have been identified, substantially all of which are classified as operating leases. For these real estate, equipment and vehicle operating leases, we recognized new right of use (“ROU”) assets and lease liabilities on our balance sheet.

•The Company applied the package of practical expedients to not reassess prior conclusions related to (i) contracts containing leases, (ii) lease classification and (iii) initial direct costs. The Company did not adopt the practical expediency surrounding the use of hindsight to determine lease term, termination and purchase options, or in assessing impairment of ROU assets.

•The Company also made the accounting policy election for short-term leases, or leases with terms of twelve months or less, therefore the lease payments are recorded as an expense on a straight-line basis over the lease term with no ROU asset or lease liability recorded.

•The Company has elected to exclude non-lease components of a lease arrangement from the ROU asset and lease liability for certain asset classes such as real estate and field equipment leases but includes non-lease components of a lease arrangement in the ROU asset and lease liability for office equipment and automobiles. Non-lease components for field equipment, which include vehicle maintenance costs which the Company estimates based on third party evidence, are excluded from the ROU asset and lease liability and are expensed each month.

Operating leases are included in Operating Lease Right of Use Asset and Operating Lease Liability on our Consolidated Balance Sheets. Operating lease asset and liability amounts are measured and recognized based on payment amounts the Company expects to make over the expected term of the underlying leases, including renewal periods the Company is reasonably certain to exercise. The lease liability for leases expected to be settled in twelve-months or less are classified as current liabilities. The general terms of the Company’s lease agreements require monthly payments. Some of the Company’s leases escalate either by a fixed or variable amount. Certain of the Company’s leases, which provide for variable lease payments based on index-based (i.e., the US Consumer Price Index) adjustments to lease payments over the term of the lease, are measured at the lease rate effective at the commencement of the lease or upon adoption, as applicable. Because the Company

does not generally have access to the rate implicit in its leases, the Company utilizes its incremental borrowing rate as the discount rate for measuring the lease liability. At commencement, the operating lease ROU asset and lease liability are the same, with adjustments to the ROU asset for lease incentives and initial direct costs incurred. The Company reviews all options to extend, terminate or purchase its ROU assets at the commencement of the lease and on an ongoing basis and accounts for these options when they are reasonably certain of being exercised. The Company has determined that one lease arrangement's renewal option to extend lease terms from the original maturity of August 2021 to August 2031 is reasonably certain to be exercised due to the costs associated with relocating the lease to another location (including permitting cost as well as specialized equipment). The Company evaluates lease modifications as they occur and records such as a separate lease or an adjustment to the existing ROU asset and lease liability as appropriate.

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. See rollforward of allowance activity below:


Allowance for Doubtful Accounts	Balance Beginning of Year		Charges to Expense		Write-offs /Recoveries		Balance End of Year

2020	$	132	$	111	$	(81)	$	162
2019	$	102	$	81	$	(51)	$	132
2018	$	78	$	62	$	(38)	$	102

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). Total stock-based compensation expense for the fiscal years ended June 30, 2020, 2019 and 2018 are as follows:


	Year Ended June 30,
	2020		2019		2018
Stock-based compensation expense included in:
Cost of revenue	$	4	$	9	$	43
Selling, general and administrative	514		391		433
Total	$	518	$	400	$	476

The Company estimates the fair value of restricted stock awards based on the closing price of the Company’s common stock on the date of the grant. The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk free interest rate over the option’s expected term and the Company’s expected annual dividend yield. The risk free interest rate is derived using the U.S. Treasury yield curve in effect at date of grant. Volatility, expected life and dividend yield are based on historical experience and activity.

The fair value of the Company’s stock options was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:


	Year Ended June 30,
	2020		2019		2018
Weighted average risk-free interest rate	0.3	%	2.6	%	1.2	%
Weighted average expected volatility	49	%	44	%	48	%
Weighted average expected life (in years)	3.13		3.08		3.03
Dividend yield	—		—		—

The Company considers an estimated forfeiture rate for stock options based on historical experience and the anticipated forfeiture rates during the future contract life.

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 years ended June 30, 2020, 2019 and 2018.

Intangible Assets: Intangible assets consist of (i) acquired customer relationships, (ii) permit costs related to the Company’s treatment facilities and transfer stations, (iii) twelve patents and (iv) defense costs related to certain existing patents.

Cash: The Company maintains funds in bank accounts that, at times, may exceed the limit insured by the Federal Deposit Insurance Corporation (“FDIC”). The risk of loss attributable to these uninsured balances is mitigated by depositing funds only in high credit quality financial institutions. The Company has not experienced any losses in such accounts.

Inventory: Inventory consists primarily of raw materials and finished goods held for sale and are stated at the lower of cost or net realizable value using the average cost method. The Company periodically reviews the value and classification of items in inventory and provides write-downs or write-offs of inventory based on its assessment of physical deterioration, obsolescence, changes in price levels and other causes. Write-offs totaled less than $0.1 million for each of the fiscal years ended June 30, 2020, 2019 and 2018. The components of inventory are as follows (in thousands):


	As of June 30,
	2020		2019
Raw materials	$	1,402	$	1,273
Finished goods	5,300		3,543
Total inventory	6,702		4,816
Less: current portion	5,638		3,770
Inventory, net of current portion	$	1,064	$	1,046

The current portion of inventory includes amounts which the Company expects to sell in the next twelve month period based on historical sales.

Property, Plant and Equipment: Property, plant and equipment, including third party software and implementation costs, is stated at cost, or fair value if acquired in a business combination, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. Additions, improvements and renewals significantly adding to the asset value or extending the life of the asset are capitalized. Ordinary maintenance and repairs, which do not extend the physical or economic life of the property or equipment, are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the results of operations for the period.

Computer and software development costs, which include costs of computer software developed or obtained for internal use, all programming, implementation and costs incurred with developing internal-use software, are capitalized during the development project stage. External direct costs of materials and services consumed in developing or obtaining internal-use computer software are capitalized.

The Company expenses costs associated with developing or obtaining internal-use software during the preliminary project stage. Training and maintenance costs associated with system changes or internal-use software are expensed as incurred.

Additionally, the costs of data cleansing, reconciliation, balancing of old data to the new system, creation of new/additional data and data conversion costs are expensed as incurred.

Impairment of Long-lived Assets: The Company evaluates the recoverability of property, plant and equipment and intangible or other assets if facts and circumstances indicate that any of those assets might be impaired. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if a write-down to fair value is necessary. No impairment loss was recognized during the years ended June 30, 2020, 2019 and 2018.

Accrued Liabilities: The components of Accrued Liabilities on the balance sheet as of June 30, 2020 and 2019 are as follows:


	As of June 30,
	2020		2019 ⁽¹⁾
Accrued payroll	$	509	$	376
Customer-related payables	1,108		834


Other	1,216		1,003
Total	$	2,833	$	2,213

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

Shipping and Handling Fees and Costs: The Company records amounts billed to customers for shipping and handling as revenue. Costs incurred by the Company for shipping and handling have been classified as cost of revenues.

Advertising Costs: Advertising costs are charged to expenses when incurred and totaled $0.9 million, $0.9 million and $0.7 million for the fiscal years ended June 30, 2020, 2019 and 2018, respectively.

Research and Development Costs: Research and development costs are charged to expense when incurred. Research activities represent an important part of the Company’s business and include both internal labor costs and payments to third parties related to the processes of discovering, testing and developing new products, improving existing products, as well as demonstrating product efficacy and regulatory compliance prior to launch of new products and services. Research and development expenses paid to third parties totaled less than $0.1 million for each of the fiscal years ended June 30, 2020, 2019 and 2018.

Employee Benefit Plans: In addition to group health-related benefits, the Company maintains a 401(k) employee savings plan available to all full-time employees. The Company matches a portion of employee contributions with cash (25% of employee contribution up to 6%). Company contributions to the 401(k) plan were less than $0.1 million in each of the fiscal years ended June 30, 2020, 2019 and 2018, respectively and are included in selling, general and administrative expenses. For purposes of the group health benefit plan, the Company self-insures an amount equal to the excess of the employees’ deductible (range from $2,500 for each individual and family member covered) up to the amount by which the third-party insurance coverage begins (ranges from $2,500 for individual up to $10,000 for family coverage). The amount of liability at June 30, 2020 and 2019 was less than $0.1 million and is included in accrued liabilities. The Company also has an incentive plan for executives of the Company, which provides for performance based cash and stock-based compensation awards. No expense was recognized during the years ended June 30, 2020, 2019 and 2018 for cash awards pursuant to the plan.

Net Income (Loss) Per Share: Basic earnings per share excludes dilution and is determined by dividing net income (loss) by the weighted average number of common shares outstanding including participating securities during the period. Diluted EPS reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock.

Fair Value of Financial Instruments: The Company considers the fair value of all financial instruments, including cash, accounts receivable and accounts payable to approximate their carrying values at year-end due to their short-term nature. The carrying value of the Company’s debt approximates fair value due to the market rates of interest. The fair value of the Company's interest rate swap related to a portion of its long-term debt is included in other long-term liabilities in the amount of $0.1 million as of June 30, 2020.

Fair Value Measurements: The Company employs a hierarchy which prioritizes the inputs used to measure recurring fair value into three distinct categories based on the lowest level of input that is significant to the fair value measurement. The methodology for categorizing assets and liabilities that are measured at fair value pursuant to this hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest levels to unobservable inputs, summarized as follows:

•Level 1 – Quoted prices in active markets for identical assets or liabilities.

•Level 2 – Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities).

•Level 3 – Significant unobservable inputs (including our own assumptions in determining fair value).

We use the cost, income or market valuation approaches to estimate the fair value of our assets and liabilities when insufficient market-observable data is available to support our valuation assumptions. We determine the fair value of our interest rate swap executed during the year ended June 30, 2020 using third-party pricing information that is derived from observable market inputs, which we classify as level 2 with respect to the fair value hierarchy.

Segment Reporting: The Company operates in a single segment, focusing on developing cost-effective management solutions for medical waste and unused dispensed medications generated by small and medium quantity generators.

Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. The Company uses estimates to determine many reported amounts, including but not limited to allowance for doubtful accounts, recoverability of long-lived assets and intangibles, useful lives used in depreciation and amortization, income taxes and valuation allowances, stock-based compensation, fair values of assets and liabilities acquired in business combinations, selling price used in multiple-deliverable arrangements and return rates used to estimate the percentage of container systems sold that will not be returned. Actual results could differ from these estimates.

Business Combinations: The Company includes the results of operations of the businesses that are acquired as of the respective dates of acquisition. The Company allocates the fair value of the purchase price of acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The Company estimates and records the fair value of purchased intangible assets, which primarily consists of customer relationships, trade-names, and non-competes. The excess of the fair value of the purchase price over the fair values of these identifiable assets, both tangible and intangible, and liabilities is recorded as goodwill.

Recently Issued Accounting Standards:

In March 2020, guidance for applying optional expedients and exceptions to ease the potential burden in accounting for reference rate reform on financial reporting was issued. It is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform on financial reporting. The provisions of the new guidance are effective for interim periods beginning as of March 12, 2020 through December 31, 2022. There has been no impact on the Company's consolidated financial statements and related disclosures as none of its arrangements have been modified as of June 30, 2020. The Company will continue to evaluate the standard as well as additional changes, modifications or interpretations which may impact the Company.

In June 2016, guidance for credit losses of financial instruments was issued, which requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses rather than incurred losses. The provisions of the new guidance are effective for annual periods beginning after December 15, 2022 (effective July 1, 2023 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.

PROPERTY, PLANT AND EQUIPMENT

12 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

At June 30, 2020 and 2019, property, plant and equipment consisted of the following (in thousands):


		June 30,
	Useful Life	2020		2019
Furniture and fixtures	3 to 5 years	$	245	$	245
Plant and equipment	3 to 17 years	9,053		8,683
Manufacturing	15 years	169		169
Computers and software	3 to 5 years	2,132		2,179
Leasehold improvements	Life of Lease	3,192		2,792
Land		19		19
Construction-in-progress		3,507		275
		18,317		14,362
Less: accumulated depreciation		9,190		8,495
Net property, plant and equipment		$	9,127	$	5,867

Total depreciation expense in the fiscal years ended June 30, 2020, 2019 and 2018 was $1.0 million, $1.1 million and $1.0 million, respectively. Depreciation expense included in cost of revenues for each of the fiscal years ended 2020, 2019 and 2018 was $0.8 million.

INCOME TAXES

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

The components of income tax expense (benefit) are as follows (in thousands):


	Year ended June 30,
	2020		2019		2018
Current:
Federal	$	(122)	$	(123)	$	—
State	35		42		29
Total current	$	(87)	$	(81)	$	29

Deferred:
Federal	$	(1,406)	$	217	$	(8)
State	(89)		34		—
Total deferred	(1,495)		251		(8)
Net income tax expense (benefit)	$	(1,582)	$	170	$	21

The reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the fiscal years ended June 30, 2020, 2019 and 2018 is as follows:


	Year Ended June 30,
	2020		2019		2018
Statutory rate	21.0	%	21.0	%	27.6	%
State income taxes, net	(1.0)	%	22.9	%	(3.7)	%
Impact of 2017 tax reform	—	%	—	%	(107.0)	%
Meals and entertainment	1.6	%	2.7	%	(1.8)	%
Stock-based compensation	0.7	%	16.1	%	22.6	%
Research and development credits	(5.3)	%	7.3	%	22.4	%

Other	(1.5)	%	1.5	%	(2.0)	%
Effective rate before valuation allowance	15.5	%	71.5	%	(41.9)	%
Change in valuation allowance	(247.1)	%	(27.2)	%	38.7	%
Effective tax rate	(231.6)	%	44.3	%	(3.2)	%

The statutory rate for the year ended June 30, 2018 is a blended rate which was calculated based on the Company's fiscal year and the date that the tax rate changes were effective.

The Company has historically recorded a valuation allowance to reduce its deferred tax assets to an amount that is more likely than not to be realized. However, as of the year ended June 30, 2020, the Company released the full amount of the valuation allowance against its deferred tax assets on the basis of the Company's reassessment of the recoverability of its deferred tax assets. The non-cash benefit to income tax expense resulting from the release of the valuation allowance is approximately $1.7 million.

At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of the year ended June 30, 2020, the Company achieved a cumulative positive amount of pretax income over a period of three years. Given the Company’s average pretax income for the past three years, adjusted for non-recurring items and for modest increases in new and recurring business, the Company expects to generate income before taxes in future periods which will be sufficient to fully utilize all U.S. federal and state net operating loss carryforward balances and available credits.

At June 30, 2020 and 2019, the significant components of deferred tax assets and liabilities are as follows (in thousands):


	June 30,
	2020		2019 ⁽¹⁾
Deferred tax assets relating to:
Stock-based compensation	$	211	$	261
AMT and research and development credits	490		517

Inventory	98		158
Professional fees	175		124





Deferred tax assets related to other items	140		109
Net operating loss carryforwards	1,016		1,067
Total deferred tax assets	2,130		2,236
Deferred tax liabilities related to depreciable and amortizable assets	(836)		(728)
Deferred tax liabilities related to other items	(42)		(63)
Net deferred tax assets before valuation allowance	1,252		1,445
Valuation allowance	—		(1,688)
Net deferred tax (liability) asset	$	1,252	$	(243)

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

At June 30, 2020, the Company had net operating loss carryforwards of $4.8 million, which will expire, if unused, between June 30, 2032 and June 30, 2038. At June 30, 2020, the Company had various tax credit carryforwards of $0.5 million which will expire beginning on June 30, 2030.

Given the release of the valuation allowance, a net deferred tax asset was recorded for $1.3 million as of June 30, 2020. A deferred tax liability of $0.2 million was recorded as of June 30, 2019 for deferred tax liabilities related to indefinite lived assets which cannot be used as a source of future taxable income, such as goodwill, in the amount of $0.3 million offset by the alternative minimum tax credit carryforward of $0.1 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, accelerates the Company’s ability to recover refundable AMT credits to 2018 and 2019. As such, the Company has recorded the remaining balance of its AMT credits as a current income tax receivable at June 30, 2020. The CARES Act did not have a material impact on the Company's income taxes.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

NOTES PAYABLE AND LONG-TERM DEBT

12 Months Ended

Jun. 30, 2020

Debt Disclosure [Abstract]

NOTES PAYABLE AND LONG-TERM DEBT

NOTES PAYABLE AND LONG-TERM DEBTOn March 29, 2017, the Company entered into to a credit agreement with a commercial bank which was subsequently amended on June 29, 2018 to extend the maturity date by two years to March 29, 2021 for the working capital portion of the Credit Agreement (“the Credit Agreement”). The Company expects the Credit Agreement will be renewed and extended prior to the maturity date. The 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 (i) 50% of eligible inventory and (ii) $3.0 million. 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 June 30, 2020 was approximately 2.79%. The Company pays a fee of 0.25% per annum on the unused amount of the credit facility.

On August 21, 2019, certain subsidiaries of the Company entered into a Construction and Term Loan Agreement and a Master Equipment Finance Agreement with its existing commercial bank (collectively, the “Loan Agreement”). The Loan Agreement provides for a five-year, $3.2 million facility, the proceeds of which are to be utilized for expenditures to facilitate future growth at the Company’s treatment facility in Carthage, Texas (the “Texas Treatment Facility”) as follows: (i) $2.0 million for planned improvements and (ii) $1.2 million for equipment. Indebtedness under the Loan Agreement is secured by the Company’s real estate investment and equipment at the Texas Treatment Facility. Advances under the Loan Agreement mature five years from the Closing Date ("August 21, 2019") with monthly payments beginning in the month after the advancing period ends based on a 20-year amortization for the real estate portion and on a 6-year amortization for the equipment portion of the Loan Agreement. The advancing period extends through October 2020 and August 2020 for the real estate portion and the equipment portion of the Loan Agreement, respectively. Borrowings during the advancing period for the real estate portion and for the entire term of the equipment portion of the Loan Agreement bear interest computed at the One Month ICE LIBOR, plus two-hundred and fifty (250) basis points which was a rate of 2.79% on June 30, 2020. The Company has entered into a forward rate lock to fix the rate on the real estate portion of the Loan Agreement at the expiration of the advancing period at 4.15%.

On April 20, 2020, the Company received loan proceeds of $2.2 million under the Paycheck Protection Program (“PPP”) under a promissory note from its existing commercial bank (the “PPP Loan”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The loans and accrued interest may be forgivable after eight to twenty-four weeks providing that the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. Some of the uncertainties related to the Company’s operations that are directly related to COVID-19 include, but are not limited to, the severity of the virus, the duration of the outbreak, governmental, business or other actions (which could include limitations on operations or mandates to provide products or services), impacts on the supply chain, and the effect on customer demand or changes to operations. In addition, the health of the Company’s workforce, and its ability to meet staffing needs in its route-based, treatment and distribution operations and other critical functions are uncertain and is vital to its operations.

The PPP Loan certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. While the Company does have availability under its Credit Agreement, $8.0 million of such availability can only be used for acquisitions and the $6.0 million that is available is in place to support working capital needs, along with current cash on hand. Further, the Company has a limited market capitalization and lack of history of being able to access the capital markets and as a result, the Company believes it meets the certification requirements.

The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria. The term of the Company’s PPP Loan is two years. The Company is in the process of applying for forgiveness of the PPP Loan via its existing commercial bank under the guidelines provided by the Small Business Administration ("SBA") and the Department of Treasury. The annual interest rate on the PPP Loan is 1% and no payments of principal or interest are due during at least the six-month period beginning on the date of the PPP Loan. The PPP Loan is subject to any new guidance and new requirements released by the Department of the Treasury who has indicated that all companies that have received funds in excess of $2.0 million will be subject to a government (SBA) audit to further ensure PPP loans are limited to eligible borrowers in need.

At June 30, 2020 and 2019, long-term debt consisted of the following (in thousands):


	June 30,
	2020		2019
Acquisition loan, monthly payments of $43; maturing March 2022.	$	948	$	1,465
Equipment loan, monthly principal payments begin upon completion of the advancing period, net of debt issuance costs of $50 thousand.	929		—
Real estate loan, monthly principal payments begin upon completion of the advancing period.	1,103		—
Paycheck Protection Program loan	2,183		—
Total long-term debt	5,163		1,465
Less: current portion	1,658		517
Long-term debt, net of current portion	$	3,505	$	948

The Company has availability under the Credit Agreement of $13.0 million ($5.9 million for the working capital portion and $7.1 million for the acquisitions) as of June 30, 2020. The Company has availability under the Loan Agreement of $1.2 million ($0.9 million for the real estate and $0.3 million for the equipment) as of June 30, 2020. The Company also has $0.1 million in letters of credit outstanding as of June 30, 2020.

The Credit and Loan Agreements contain 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 and Loan Agreements also contain customary events of default which, if uncured, may terminate the agreements and require immediate repayment of all indebtedness to the lenders. The leverage ratio covenant may limit the amount available under the Credit Agreement. The Company was in compliance with all the financial covenants under the Credit and Loan Agreements as of June 30, 2020.

Payments due on long-term debt subsequent to June 30, 2020 are as follows (in thousands):


Twelve Months Ending June 30,
2021	$	1,658
2022	1,851
2023	220
2024	220
2025	1,264

	$	5,213

EQUITY TRANSACTIONS

12 Months Ended

Jun. 30, 2020

Equity [Abstract]

EQUITY TRANSACTIONS

During the year ended June 30, 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. This issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act. Non-cash expense recorded during the years ended June 30, 2020, 2019, and 2018 was $0, $46,000 and $37,000, respectively.

On November 15, 2018, the Company's stockholders approved an amendment to the Company's certificate of incorporation to increase the authorized shares of common stock from 20,000,000 to 40,000,000 shares.

During the years ended June 30, 2020, 2019, and 2018, stock options to purchase shares of the Company's common stock were exercised as follows (in thousands except per share amounts):


	Year ended June 30,
	2020		2019		2018

Options exercised	154		—		—
Proceeds	$	668	$	—	$	—
Average exercise price per share	$	4.32	$	—	$	—

STOCK BASED COMPENSATION

12 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK BASED COMPENSATION

The Company sponsors the Sharps Compliance Corp. 2010 Stock Plan (the “2010 Plan”) covering employees, consultants and non-employee directors. The 2010 Plan provides for the granting of stock-based compensation (stock options or restricted stock) of up to 3,000,000 shares of the Company’s common stock of which 1,166,756 options and restricted shares are outstanding as of June 30, 2020. Options granted generally vest over a period of four years and expire seven years after the date of grant. Restricted stock generally vests over one year. As of June 30, 2020, there were 938,862 options available for grant under the 2010 Plan.

The summary of activity for all restricted stock during the fiscal years ended June 30, 2020, 2019 and 2018 is presented in the table below (in thousands):


	Year ended June 30,
	2020	2019	2018

Unvested at beginning of the year	13	13	13
Granted	80	63	53
Vested	(71)	(55)	(53)
Forfeited	—	(8)	—
Unvested at end of the year	22	13	13

The weighted average fair value per share of restricted stock granted during the fiscal years ended June 30, 2020, 2019 and 2018 was $4.31, $3.53 and $4.17, respectively. The weighted average fair value per share of restricted stock which vested during the fiscal years ended June 30, 2020, 2019 and 2018 was $4.12, $3.69 and $4.22, respectively.

The summary of activity for all stock options during the fiscal years ended June 30, 2020, 2019 and 2018 is presented in the table below (in thousands except per share amounts):


	Options Outstanding	Weighted Average Exercise Price
Options Outstanding at June 30, 2017	865	$	4.53
Granted	137	$	4.79

Forfeited or canceled	(82)	$	4.50

Options Outstanding at June 30, 2018	920	$	4.57
Granted	578	$	3.73

Forfeited or canceled	(218)	$	4.16

Options Outstanding at June 30, 2019	1,280	$	4.26
Granted	82	$	6.74
Exercised	(154)	$	4.32
Forfeited or canceled	(63)	$	3.95

Options Outstanding at June 30, 2020	1,145	$	4.45

Options Exercisable at June 30, 2020	591	$	4.59

The following table summarizes information about stock options outstanding as of June 30, 2020 (in thousands except per share amounts):


	Options Outstanding
Range of Exercise Price	Outstanding as of June 30, 2020	Weighted Average Remaining Life (in Years)	Weighted Average Exercise Price

$2.51 - $3.75	58	4.72	$	3.18
$3.76 - $5.00	882	4.14	$	4.10
$5.01 - $7.50	205	3.78	$	6.29

	1,145		$	4.45

The following table summarizes information about stock options exercisable as of June 30, 2020 (in thousands except per share amounts):


	Options Exercisable
Range of Exercise Price	Exercisable as of June 30, 2020	Weighted Average Remaining Life (in Years)	Weighted Average Exercise Price

$2.51 - $3.75	20	3.42	$	3.02
$3.76 - $5.00	444	2.86	$	4.27
$5.01 - $7.50	127	1.81	$	5.95

	591		$	4.59

As of June 30, 2020, there was $0.6 million of stock option and restricted stock compensation expense related to non-vested awards. This expense is expected to be recognized over a weighted average period of 2.7 years.

LEASES

12 Months Ended

Jun. 30, 2020

Leases [Abstract]

LEASES

The Company has operating leases for real estate, field equipment, office equipment and vehicles. Operating leases are included in Operating Lease ROU Asset and Operating Lease Liability on our Consolidated Balance Sheets.

During the twelve months ended June 30, 2020, lease cost amounts, which reflect the fixed rent expense associated with operating leases, are as follows (in thousands):


	Year Ended June 30, 2020
Lease cost ⁽¹⁾-operating lease cost - fixed rent expense included in:
Cost of revenues	$	1,851
Selling, general and administrative	451
Total	$	2,302

⁽¹⁾ Finance lease cost, short-term lease cost and variable lease cost were not significant during the period.

During the twelve months ended June 30, 2020, the Company modified several of its leases to extend the terms of the leases. This resulted in a non-cash change to the ROU asset and lease liability upon remeasurement of $4.4 million which is included in the non-cash changes to ROU asset and lease liability shown below. The leases remain operating leases upon re-evaluation by the Company and there were no material direct costs incurred in any of the lease modifications or in any of the leases acquired during the period. During the twelve months ended June 30, 2020, the Company had the following cash and non-cash activities associated with leases (in thousands):


	Year Ended June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,274
Non-cash changes to the Operating ROU Asset and Operating Lease Liability
Additions and modifications to ROU asset obtained from new operating lease liabilities	$	6,214
Additions to ROU asset obtained from operating lease liabilities upon adoption of new guidance	$	4,591

As of June 30, 2020, the weighted average remaining lease term for all operating leases is 5.0 years. The weighted average discount rate associated with operating leases as of June 30, 2020 is 4.7%.

The future payments due under operating leases as of June 30, 2020 is as follows (in thousands):


Future payments due in the year ended June 30,
2021	$	2,790
2022	2,420
2023	1,976
2024	1,793
2025	1,444
Thereafter	1,114
Total undiscounted lease payments	11,537
Less effects of discounting	(2,674)
Lease liability recognized	$	8,863

As of June 30, 2019, future lease payments under non-cancelable operating leases were $4.1 million in the aggregate, which consisted of the following: $2.1 million in 2020, $1.3 million in 2021, $0.5 million in 2022, $0.2 million in 2023, and $38 thousand in 2024.

COMMITMENTS AND CONTINGENCIES	12 Months Ended
COMMITMENTS AND CONTINGENCIES	Jun. 30, 2020
Leases [Abstract]
COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES Performance bonds: The Company utilizes performance bonds to support operations based on certain state requirements. At June 30, 2020, the Company had performance bonds outstanding covering financial assurance up to $1.0 million Other: From time to time, the Company is involved in legal proceedings and litigation in the ordinary course of business. In the opinion of management, the outcome of such matters is not anticipated to have a material adverse effect on the Company’s consolidated financial position or consolidated results of operations.

EARNINGS PER SHARE

12 Months Ended

Jun. 30, 2020

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHAREBasic 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 and diluted 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 amounts):


	Year Ended June 30,
	2020		2019		2018

Net income (loss), as reported	$	2,266	$	214	$	(672)

Weighted average common shares outstanding	16,249		16,116		16,055
Effect of dilutive stock options	182		7		—
Weighted average diluted common shares outstanding	16,431		16,123		16,055

Net income (loss) per common share
Basic and diluted	$	0.14	$	0.01	$	(0.04)

Employee stock options excluded from computation of diluted income per share amounts because their effect would be anti-dilutive	206		1,173		402

GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

At June 30, 2020 and 2019, intangible assets consisted of the following (in thousands):


		June 30,
		2020										2019
	Estimated Useful Lives	Original Amount		Accumulated Amortization		Net Amount		Original Amount		Accumulated Amortization		Net Amount

Customer relationships	7 years	$	3,007	$	(1,780)	$	1,227	$	3,007	$	(1,348)	$	1,659
Permits	6 - 15 years	1,892		(596)		1,296		1,704		(492)		1,212
Patents	5 - 17 years	420		(311)		109		420		(296)		124
Tradename	7 years	270		(154)		116		270		(116)		154
Non-compete	5 years	117		(94)		23		117		(70)		47
Total intangible assets, net		$	5,706	$	(2,935)	$	2,771	$	5,518	$	(2,322)	$	3,196

Amortization expense was $0.6 million for each of the fiscal years ended June 30, 2020, 2019 and 2018.

As of June 30, 2020, future amortization of intangible assets is as follows (in thousands):


Year Ended June 30,
2021	$	639
2022	622
2023	562
2024	151
2025	150
Thereafter	647
	$	2,771

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Jun. 30, 2020

Quarterly Financial Information Disclosure [Abstract]

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables show quarterly financial information for the years ended June 30, 2020 and 2019. The Company believes that all necessary adjustments have been included in the amounts below to present fairly the results of such periods (in thousands expect per share amounts).


	Quarter Ended
	September 30, 2019		December 31, 2019		March 31, 2020		June 30, 2020
Total revenues	$	13,599	$	14,565	$	10,414	$	12,568
Gross profit	$	4,484	$	4,872	$	2,223	$	4,183
Operating income (loss)	$	768	$	1,069	$	(1,578)	$	651
Net income (loss)	$	686	$	970	$	(1,556)	$	2,166
Net income (loss) per share - basic and diluted	$	0.04	$	0.06	$	(0.10)	$	0.13
Weighted average shares - diluted	16,168		16,303		16,264		16,791


	Quarter Ended
	September 30, 2018		December 31, 2018		March 31, 2019		June 30, 2019
Total revenues	$	10,293	$	12,394	$	9,451	$	12,174
Gross profit	$	3,352	$	3,991	$	2,035	$	3,892
Operating income (loss)	$	125	$	827	$	(1,073)	$	568
Net income (loss)	$	70	$	779	$	(1,125)	$	490
Net income (loss) per share - basic and diluted	$	0.00	$	0.05	$	(0.07)	$	0.03
Weighted average shares - diluted	16,089		16,106		16,138		16,150

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	Jun. 30, 2020
Accounting Policies [Abstract]
Revenue Recognition	Revenue Recognition: In May 2014 and as subsequently amended, guidance for revenue recognition was issued which supersedes the revenue recognition requirements previously followed by the Company. The 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 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. The Company adopted the standard on July 1, 2018 using the modified retrospective approach, which involves retrospectively adopting the standard by recording a cumulative effect adjustment for all uncompleted contracts at July 1, 2018. This cumulative effect was $0.3 million which decreased accumulated deficit (and increased stockholders' equity) and increased contract assets by $0.3 million. The impact that the accounting guidance had on its consolidated financial statements and related disclosures included the following: •The transportation and treatment performance obligations related to the mail back and unused medication solutions, which were historically accounted for as separate performance obligations, will be accounted for as a single performance obligation under the revenue recognition guidance. The impact of this was not material. •Certain costs associated with obtaining long-term contracts with customers will be capitalized and amortized over the expected economic life of the contract in future periods. The impact of this was not material. •The guidance changed the timing of revenue recognition on certain of the Company’s vendor managed inventory contracts. This constituted a material portion of the cumulative effect noted above as under the guidance, revenue recognition is no longer limited to the amounts that may be billed to the customer at the point in time in which performance obligations are satisfied. •The Company made a number of practical expedient elections related to the accounting guidance, including: (i) right to invoice practical expedient that allows revenue for route-based pickup services to be recognized in the amount to which the Company has a right to invoice over time; (ii) sales and use taxes have been excluded from the transaction price; (iii) for incremental costs to obtain a contract that would be recognized over one year or less, the Company expenses those costs as incurred; and (iv) at the implementation date, guidance was applied only to contracts that were not completed as of the date of initial application. The Company recognizes revenue, net of applicable sales tax, when performance obligations are satisfied through the transfer of control of promised goods or services to the Company’s customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the promised goods or services. Outbound shipping and handling activities to customers are considered fulfillment activities with the exception of mailbacks sold as part of the vendor managed inventory ("VMI") program. Shipping and handling are considered separate performance obligations for mailbacks sold under the VMI program. For performance obligations satisfied at a point in time, which applies to all contracts except for route-based pickup services, revenue recognition occurs when there is a transfer of control or completion of service. For performance obligations satisfied over time, which applies to the route-based pickup services, revenue is recognized in the amount to which the Company has a right to invoice pursuant to the right to invoice practical expedient. Provisions for certain rebates, product returns and discounts to customers are estimated at the inception of the contract, updated as needed throughout the contract term, and 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. Other than the Company’s mailbacks and unused medication solutions, the Company’s solutions have a single performance obligation. The Company's mailbacks and unused medication solutions have revenue producing components that are recognized over multiple delivery points (Sharps Recovery System and various other solutions like the MedSafe and TakeAway Medication Recovery Systems referred to as “mailbacks” or "unused medications") and can consist of up to two performance obligations, or units of measure, as follows: (1) the sale of the compliance and container system, and (2) return transportation and treatment service. For mailbacks that are part of the VMI program, there is an additional element, or unit of measure, for outbound transportation. For contracts with multiple performance obligations, an estimated stand-alone selling price is determined for all performance obligations. The consideration is then allocated to the performance obligations based on their relative stand-alone selling price. The selling price for performance obligations for transportation and treatment utilizes third party evidence. The Company estimates the selling price of the compliance and container system based on the product and services provided, including the expected cost plus a margin. The allocated transaction price for the sale of the compliance and container system is recognized upon delivery to the customer, at which time the customer has control. The allocated transaction price for the return transportation and treatment 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 at which point the destruction or conversion and proof of receipt and treatment are performed on the container. Consideration received and allocated to the transportation and treatment performance obligation is recorded as a contract liability until the services are performed. 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 return transportation and treatment element is recognized at the point of sale. Furthermore, the current and long-term portions of amounts historically referred to as deferred revenues (shown as Contract Liability on the condensed consolidated balance sheets) are determined through regression analysis and historical trends. The VMI program includes terms that meet the “bill and hold” criteria and as such are recognized when the order is placed, title has transferred, there are no acceptance provisions and amounts are segregated in the Company’s warehouse for the customer.Shipping and Handling Fees and Costs: The Company records amounts billed to customers for shipping and handling as revenue. Costs incurred by the Company for shipping and handling have been classified as cost of revenues.
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 a valuation allowance 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. The Company is subject to income taxes in the United States and in numerous state tax jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company accounts for uncertain tax positions in accordance with FASB ASC 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. The Company has not recognized any material uncertain tax positions for the years ended June 30, 2020, 2019 and 2018. Tax return filings which are subject to review by federal and state tax authorities by jurisdiction are as follows: •United States – fiscal years ended June 30, 2017 and after •State of Texas – fiscal years ended June 30, 2015 and after •State of Georgia – fiscal years ended June 30, 2017 and after •State of Pennsylvania – fiscal years ended June 30, 2017 and after •Other States – fiscal years ended June 30, 2016 and after None of the Company’s federal or state tax returns are currently under examination. The Company records income tax related interest and penalties, if applicable, as a component of the provision for income tax expense.
Leases	Leases: In February 2016, guidance for leases was issued, which supersedes the lease requirements previously followed by the Company. The new guidance requires balance sheet recognition of lease assets and lease liabilities for all leases. The new guidance also requires additional disclosures about the amount, timing and uncertainty of cash flows arising from leases. The Company adopted the standard on July 1, 2019 using the modified retrospective approach and recognized a cumulative effect adjustment to assets and liabilities for existing leases as of July 1, 2019. The Company recognized an additional operating lease liability of $4.6 million, with a corresponding right of use (“ROU”) asset of the same amount based on the present value of the payment amounts the Company expects to make over the expected term of the underlying leases, including renewal periods the Company is reasonably certain to exercise. The impact that the new accounting guidance had on its consolidated financial statements and related disclosures included the following: •Approximately 50 leases have been identified, substantially all of which are classified as operating leases. For these real estate, equipment and vehicle operating leases, we recognized new right of use (“ROU”) assets and lease liabilities on our balance sheet. •The Company applied the package of practical expedients to not reassess prior conclusions related to (i) contracts containing leases, (ii) lease classification and (iii) initial direct costs. The Company did not adopt the practical expediency surrounding the use of hindsight to determine lease term, termination and purchase options, or in assessing impairment of ROU assets. •The Company also made the accounting policy election for short-term leases, or leases with terms of twelve months or less, therefore the lease payments are recorded as an expense on a straight-line basis over the lease term with no ROU asset or lease liability recorded. •The Company has elected to exclude non-lease components of a lease arrangement from the ROU asset and lease liability for certain asset classes such as real estate and field equipment leases but includes non-lease components of a lease arrangement in the ROU asset and lease liability for office equipment and automobiles. Non-lease components for field equipment, which include vehicle maintenance costs which the Company estimates based on third party evidence, are excluded from the ROU asset and lease liability and are expensed each month. Operating leases are included in Operating Lease Right of Use Asset and Operating Lease Liability on our Consolidated Balance Sheets. Operating lease asset and liability amounts are measured and recognized based on payment amounts the Company expects to make over the expected term of the underlying leases, including renewal periods the Company is reasonably certain to exercise. The lease liability for leases expected to be settled in twelve-months or less are classified as current liabilities. The general terms of the Company’s lease agreements require monthly payments. Some of the Company’s leases escalate either by a fixed or variable amount. Certain of the Company’s leases, which provide for variable lease payments based on index-based (i.e., the US Consumer Price Index) adjustments to lease payments over the term of the lease, are measured at the lease rate effective at the commencement of the lease or upon adoption, as applicable. Because the Company does not generally have access to the rate implicit in its leases, the Company utilizes its incremental borrowing rate as the discount rate for measuring the lease liability. At commencement, the operating lease ROU asset and lease liability are the same, with adjustments to the ROU asset for lease incentives and initial direct costs incurred. The Company reviews all options to extend, terminate or purchase its ROU assets at the commencement of the lease and on an ongoing basis and accounts for these options when they are reasonably certain of being exercised. The Company has determined that one lease arrangement's renewal option to extend lease terms from the original maturity of August 2021 to August 2031 is reasonably certain to be exercised due to the costs associated with relocating the lease to another location (including permitting cost as well as specialized equipment). The Company evaluates lease modifications as they occur and records such as a separate lease or an adjustment to the existing ROU asset and lease liability as appropriate.
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.
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).The Company estimates the fair value of restricted stock awards based on the closing price of the Company’s common stock on the date of the grant. The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk free interest rate over the option’s expected term and the Company’s expected annual dividend yield. The risk free interest rate is derived using the U.S. Treasury yield curve in effect at date of grant. Volatility, expected life and dividend yield are based on historical experience and activity.The Company considers an estimated forfeiture rate for stock options based on historical experience and the anticipated forfeiture rates during the future contract life.
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.
Intangible Assets	Intangible Assets: Intangible assets consist of (i) acquired customer relationships, (ii) permit costs related to the Company’s treatment facilities and transfer stations, (iii) twelve patents and (iv) defense costs related to certain existing patents.
Cash	Cash: The Company maintains funds in bank accounts that, at times, may exceed the limit insured by the Federal Deposit Insurance Corporation (“FDIC”). The risk of loss attributable to these uninsured balances is mitigated by depositing funds only in high credit quality financial institutions. The Company has not experienced any losses in such accounts.
Inventory	Inventory: Inventory consists primarily of raw materials and finished goods held for sale and are stated at the lower of cost or net realizable value using the average cost method. The Company periodically reviews the value and classification of items in inventory and provides write-downs or write-offs of inventory based on its assessment of physical deterioration, obsolescence, changes in price levels and other causes. The current portion of inventory includes amounts which the Company expects to sell in the next twelve month period based on historical sales.
Property, Plant and Equipment	Property, Plant and Equipment: Property, plant and equipment, including third party software and implementation costs, is stated at cost, or fair value if acquired in a business combination, less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets. Additions, improvements and renewals significantly adding to the asset value or extending the life of the asset are capitalized. Ordinary maintenance and repairs, which do not extend the physical or economic life of the property or equipment, are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the results of operations for the period. Computer and software development costs, which include costs of computer software developed or obtained for internal use, all programming, implementation and costs incurred with developing internal-use software, are capitalized during the development project stage. External direct costs of materials and services consumed in developing or obtaining internal-use computer software are capitalized. The Company expenses costs associated with developing or obtaining internal-use software during the preliminary project stage. Training and maintenance costs associated with system changes or internal-use software are expensed as incurred. Additionally, the costs of data cleansing, reconciliation, balancing of old data to the new system, creation of new/additional data and data conversion costs are expensed as incurred.
Impairment of Long-lived Assets	Impairment of Long-lived Assets: The Company evaluates the recoverability of property, plant and equipment and intangible or other assets if facts and circumstances indicate that any of those assets might be impaired. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if a write-down to fair value is necessary.
Advertising Costs	Advertising Costs: Advertising costs are charged to expenses when incurred and totaled $0.9 million, $0.9 million and $0.7 million for the fiscal years ended June 30, 2020, 2019 and 2018, respectively.
Research and Development Costs	Research and Development Costs: Research and development costs are charged to expense when incurred. Research activities represent an important part of the Company’s business and include both internal labor costs and payments to third parties related to the processes of discovering, testing and developing new products, improving existing products, as well as demonstrating product efficacy and regulatory compliance prior to launch of new products and services.
Employee Benefit Plans	Employee Benefit Plans: In addition to group health-related benefits, the Company maintains a 401(k) employee savings plan available to all full-time employees. The Company matches a portion of employee contributions with cash (25% of employee contribution up to 6%). Company contributions to the 401(k) plan were less than $0.1 million in each of the fiscal years ended June 30, 2020, 2019 and 2018, respectively and are included in selling, general and administrative expenses. For purposes of the group health benefit plan, the Company self-insures an amount equal to the excess of the employees’ deductible (range from $2,500 for each individual and family member covered) up to the amount by which the third-party insurance coverage begins (ranges from $2,500 for individual up to $10,000 for family coverage). The amount of liability at June 30, 2020 and 2019 was less than $0.1 million and is included in accrued liabilities. The Company also has an incentive plan for executives of the Company, which provides for performance based cash and stock-based compensation awards.
Net Income (Loss) Per Share	Net Income (Loss) Per Share: Basic earnings per share excludes dilution and is determined by dividing net income (loss) by the weighted average number of common shares outstanding including participating securities during the period. Diluted EPS reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock.
Fair Value of Financial Instruments	Fair Value of Financial Instruments: The Company considers the fair value of all financial instruments, including cash, accounts receivable and accounts payable to approximate their carrying values at year-end due to their short-term nature. The carrying value of the Company’s debt approximates fair value due to the market rates of interest.
Fair Value Measurements	Fair Value Measurements: The Company employs a hierarchy which prioritizes the inputs used to measure recurring fair value into three distinct categories based on the lowest level of input that is significant to the fair value measurement. The methodology for categorizing assets and liabilities that are measured at fair value pursuant to this hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest levels to unobservable inputs, summarized as follows: •Level 1 – Quoted prices in active markets for identical assets or liabilities. •Level 2 – Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities). •Level 3 – Significant unobservable inputs (including our own assumptions in determining fair value). We use the cost, income or market valuation approaches to estimate the fair value of our assets and liabilities when insufficient market-observable data is available to support our valuation assumptions. We determine the fair value of our interest rate swap executed during the year ended June 30, 2020 using third-party pricing information that is derived from observable market inputs, which we classify as level 2 with respect to the fair value hierarchy.
Segment Reporting	Segment Reporting: The Company operates in a single segment, focusing on developing cost-effective management solutions for medical waste and unused dispensed medications generated by small and medium quantity generators.
Use of Estimates	Use of Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. The Company uses estimates to determine many reported amounts, including but not limited to allowance for doubtful accounts, recoverability of long-lived assets and intangibles, useful lives used in depreciation and amortization, income taxes and valuation allowances, stock-based compensation, fair values of assets and liabilities acquired in business combinations, selling price used in multiple-deliverable arrangements and return rates used to estimate the percentage of container systems sold that will not be returned. Actual results could differ from these estimates.
Business Combinations	Business Combinations: The Company includes the results of operations of the businesses that are acquired as of the respective dates of acquisition. The Company allocates the fair value of the purchase price of acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The Company estimates and records the fair value of purchased intangible assets, which primarily consists of customer relationships, trade-names, and non-competes. The excess of the fair value of the purchase price over the fair values of these identifiable assets, both tangible and intangible, and liabilities is recorded as goodwill.
Recently Issued Accounting Standards	Recently Issued Accounting Standards: In March 2020, guidance for applying optional expedients and exceptions to ease the potential burden in accounting for reference rate reform on financial reporting was issued. It is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform on financial reporting. The provisions of the new guidance are effective for interim periods beginning as of March 12, 2020 through December 31, 2022. There has been no impact on the Company's consolidated financial statements and related disclosures as none of its arrangements have been modified as of June 30, 2020. The Company will continue to evaluate the standard as well as additional changes, modifications or interpretations which may impact the Company. In June 2016, guidance for credit losses of financial instruments was issued, which requires entities to measure credit losses for financial assets measured at amortized cost based on expected losses rather than incurred losses. The provisions of the new guidance are effective for annual periods beginning after December 15, 2022 (effective July 1, 2023 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.