For the fourth quarter of fiscal 2010, the Company incurred an operating loss of $1.6 million compared with operating income of $1.1 million reported in the same period of the prior year. For fiscal year 2010, operating income was $14.4 million, or 36.8% of revenue compared with fiscal 2009 operating income of $3.5 million, or 17.1% of revenue.

Mr. Tusa noted, "We believe there are substantial opportunities available to Sharps in what we estimate as a $2 billion market for used syringes and unused medical waste generated outside of hospital and large healthcare settings. In order for us to expand our customer base and ultimately land major deals, we must have the infrastructure and related personnel in place; so we continued our investment in those areas in the fourth quarter, knowing the near-term impact it would have on our margins and earnings. One of those investments, the PELLA-DRX?„? Waste Conversion Process?„?, has the potential to accelerate the many sales opportunities that exist."

The decline in net income in the fourth quarter was primarily a result of the negative impact on leverage from lower sales volumes and increased investments in operations infrastructure, the Company's new Waste Conversion Process?„? and sales and marketing activities. Net income for the fiscal 2009 fourth quarter was negatively impacted $0.02 per diluted share by the previously noted special charge.

The increase in net income in fiscal 2010 was the result of significant sales volume growth. Fiscal 2009 net income was positively impacted by a $1.8 million, or $0.13 per diluted share, income tax benefit recorded in the quarter ended December 31, 2008, which more than offset the special charge recorded in the fourth quarter of fiscal 2009.

Outlook

The Company remains confident of the many growth opportunities in its markets served including Retail, Professional and Government. While the Company's unused medication line of TakeAway solutions generated about $400,000 of billings in fiscal year 2010, the contribution to fiscal year 2011 billings could be significant when considering the impact of potential sales to the Veterans Administration and pharmacy chains, including the majors.

Mr. Tusa stated, "We added  two (2) inside sales personnel in the fourth quarter and now have a group of eight (8) calling on targeted professional offices and more recently, smaller, independent home healthcare and assisted living facilities. New sales from this initiative are now in excess of $25 thousand a month. It is our plan to continue to grow this team, and expect to add as many as four (4) inside sales personnel by the end of the calendar year."

Dr. Kunik added, "Although we are still in discussion with many pharmaceutical manufacturers regarding our Patient Support Program ("PSP"), we are ultimately disappointed with the sales cycle and their response to the recent California legislation. We believe our PSP addresses the legislative requirements that went into effect in July of this year, but also helps to improve patient experience and compliance."

The Company expects to recognize approximately $0.8 million in the first half of fiscal year 2011 and $1.5 million in the second half for the maintenance component of the U.S. Government contract. The maintenance portion of the contract includes options to extend through January 2014 at an estimated $3.0 million per year.

Liquidity and Balance Sheet

Cash and cash equivalents were $18.1 million at June 30, 2010 compared with $19.8 million at March 31, 2010 and $4.8 million at the end of fiscal 2009. The significant increase in cash and cash equivalents from the prior year was driven by cash generated from operations of $9.3 million combined with the net proceeds of $4.8 million from the public offering completed in the second quarter of 2010, and proceeds from stock option exercises of $1.1 million, less capital expenditures of $3.0 million. The $1.7 million decrease in cash from the sequential quarter was primarily the result of $1.3 million capital expenditures and the loss from operations of about $0.9 million. Working capital was $21.6 million at June 30, 2010, an increase over the fiscal 2009 year end level of $4.6 million, but down from $22.7 million at March 31, 2010.

The Company received a federal income tax refund of $2.0 million in July of 2010.

At June 30, 2010, stockholders' equity and total assets were $26.9 million and $31.6 million, respectively, up from stockholders' equity of $9.6 million and total assets of $15.2 million at June 30, 2009.

At June 30, 2010, the Company had no debt outstanding. On July 19, 2010, Sharps announced a new $5.0 million, two-year revolving line of credit with Wells Fargo Bank, NA. The line replaces the Company's prior $2.5 million line of credit with JPMorgan Chase Bank. The line of credit is available to finance working capital as well as organic expansion opportunities or potential acquisitions.