INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains certain forward-looking statements and information relating to Sharps that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate" and "intend" and words or phrases of similar import, as they relate to Sharps or Company management, are intended to identify forward-looking statements. Such statements reflect the current risks, uncertainties and assumptions related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in industry practices, onetime events and other factors described herein. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

GENERAL

Sharps is a leading provider of cost-effective disposal solutions for medical and pharmaceutical waste generated outside the hospital setting. The Company's flagship product, the Sharps Disposal by Mail System®, is a cost-effective and easy-to-use solution to dispose of medical waste such as hypodermic needles, lancets and any other medical device or objects used to puncture or lacerate the skin (referred to as "sharps").

The Sharps®MWMS™, a Medical Waste Management System, is a comprehensive medical waste solution which includes an array of services and products necessary to effectively collect, store and dispose of medical waste outside of the hospital setting. The System, which is designed for rapid deployment, features the Sharps Disposal By Mail System® products combined with warehousing, inventory management, training, data and other services necessary to provide a comprehensive solution. The Sharps®MWMS™ is designed to be an integral part of governmental and commercial emergency preparedness programs.

RESULTS OF OPERATIONS

The following analyzes changes in the consolidated operating results of the
Company during the three and nine months ended March 31, 2009 and 2008.

The following table sets forth, for the periods indicated, certain items from
the Company's Condensed Consolidated Statements of Operations, expressed as a
percentage of revenue (unaudited):

                                                             Three Months                    Nine Months
                                                           Ended March 31,                 Ended March 31,
                                                          2009             2008           2009             2008
                                                       (Unaudited)                     (Unaudited)

Net revenues                                                    100 %        100 %              100 %        100 %
Costs and expenses
  Cost of revenues                                              (41 %)       (61 %)             (51 %)       (59 %)
  Selling, general and administrative                           (24 %)       (41 %)             (30 %)       (35 %)
  Depreciation and amortization                                  (2 %)        (2 %)              (2 %)        (2 %)
Total operating expenses                                        (67 %)      (104 %)             (83 %)       (96 %)
  Income (loss) from operations                                  33 %         (4 %)              17 %          4 %
Total other income (expense)                                      0 %          1 %                0 %          1 %
  Income tax expense (benefit)                                   11 %          0 %               (9 %)         0 %
Net income                                                       22 %         (3 %)              26 %          5 %

THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
2008

Total revenues for the three months ended March 31, 2009 of $5,970,534 increase
by $3,042,834, or 104%, from the total revenues for the three months ended March
31, 2008 of $2,927,700. Customer billings by market are as follows:

                                          Three-Months Ended March 31,
                                     2009             2008           Variance
                                 (unaudited)      (unaudited)      (unaudited)
           BILLINGS BY MARKET:
           Government            $  2,972,696     $     17,759     $  2,954,937
           Health Care              1,824,398        1,734,401           89,997
           Hospitality                275,455          244,377           31,078
           Professional               214,585          190,433           24,152
           Non-Mailable               160,945          106,920           54,025
           Agriculture                 92,303           96,848           (4,545 )
           Commercial                  92,256          136,796          (44,540 )
           Pharmaceutical              66,592          413,296         (346,704 )
           Retail                      60,273           43,951           16,322
           Other                       37,668           22,863           14,805
           Subtotal                 5,797,171        3,007,644        2,789,527
           GAAP Adjustment *          173,363          (79,944 )        253,307
           Revenue Reported      $  5,970,534     $  2,927,700     $  3,042,834

*Represents the net impact of the revenue recognition adjustment required to arrive at reported GAAP revenue. Customer billings includes all invoiced amounts associated with products shipped during the period reported. GAAP revenue includes customer billings as well as numerous adjustments necessary to reflect,
(i) the deferral of a portion of current period sales and (ii) recognition of certain revenue associated with product returned for treatment and destruction. The difference between customer billings and GAAP revenue is reflected in the Company's balance sheet as deferred revenue. See Note 3 "Revenue Recognition" in Part I, "Notes to Consolidated Financial Statements".

Cost of revenues for the three months ended March 31, 2009 of $2,436,131 was 40.8% of revenues. Cost of revenues for the three months ended March 31, 2008 of $1,786,892 was 61% of revenue. The gross margin of 59.2% for the three months ended March 31, 2009 was positively impacted by (i) the higher revenue (i.e. higher coverage of fixed cost components in COGS) and (ii) the effect of the recently announced U. S. Government project. Gross margin was 39% for the three months ended March 31, 2008.

Selling, general and administrative ("S, G & A") expenses for the three months ended March 31, 2009 of $1,442,113, increased by $267,664, from S, G & A expenses for the three months ended March 31, 2008. The increase in S, G & A expense was primarily due to higher (i) non-cash 123(R) stock-based compensation expense of $125,631, (ii) compensation expense of $101,784, (iii) offsite server hosted facility which facilitates higher security and disaster recovery, server backup services and enhanced internet service of $35,700, (iv) housing-related costs for the Company's former President and COO of $31,679 and (v) recruiting fees of $21,218. The increase in non-cash 123(R) stock-based award expense was primarily due to the expense associated with the award of restricted stock in October 2008 to the Company's former President and COO and the award of options in November 2008 to the Chief Financial Officer and the Senior Vice President of Sales. The increase in compensation expense is due primarily to the hiring of the former President and COO in October 2008 and timing of other positions that have been replaced at higher salaries. The increased recruiting fees were associated to the hiring of one accounting professional. The increase in expense was offset by decrease in commission expense ($26,662) and travel and entertainment expenses ($25,091).

The Company generated operating income of $1,984,260 for the three months ended March 31, 2009 compared to operating loss of ($103,325) for the three months ended March 31, 2008. The operating margin was 33.2% for the three months ended March 31, 2009 compared to (3.5%) for the three months ended March 31, 2008. The increase in operating income and corresponding margin is a result of the above mentioned increase in revenue and operating leverage inherent in the Company's business model.

The Company generated a pre-tax income of $1,984,091 for the three months ended March 31, 2009 versus a pre-tax loss of ($82,260) for the three months ended March 31, 2008. The increase in pre-tax income is a result of higher operating income (discussed above).

The Company recorded a provision for income taxes of $653,742 during the quarter ended March 31, 2009, representing an effective rate of 32.9%, compared with a provision for income taxes of $1,329 during the quarter ended March 31, 2008. The increase in the provision for income taxes is primarily due to the increase in pre-tax income. The Company generated net income of $1,330,349 for the three months ended March 31, 2009 compared to net loss of ($83,589) for the three months ended March 31, 2008. The increase in net income is a result of higher operating income (discussed above).

The Company reported diluted earnings per share of $0.09 for the three months ended March 31, 2009 versus diluted earnings per share of ($0.01) for the three months ended March 31, 2008. The increase in diluted earnings per share is a result of higher net income (discussed above).

NINE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 2008

Total revenues for the nine months ended March 31, 2009 of $13,609,716 increased
by $3,540,102, or 35%, over the total revenues for the nine months ended March
31, 2008 of $10,069,614. Customer billings by market are as follows:

                                          Nine-Months Ended March 31,
                                     2009             2008           Variance
                                 (unaudited)      (unaudited)      (unaudited)
           BILLINGS BY MARKET:
           Health Care           $  5,440,095     $  5,629,418     $   (189,323 )
           Government               3,093,493          158,910        2,934,583
           Retail                   1,356,112        1,044,502          311,610
           Pharmaceutical           1,085,717          869,579          216,138
           Professional               776,183          529,934          246,249
           Hospitality                706,699          914,391         (207,692 )
           Commercial                 386,967          413,044          (26,077 )
           Non-Mailable               384,269          348,443           35,826
           Agriculture                358,931          363,846           (4,915 )
           Other                      112,460          107,136            5,324
           Subtotal                13,700,926       10,379,203        3,321,723
           GAAP Adjustment *          (91,210 )       (309,589 )        218,379
           Revenue Reported      $ 13,609,716     $ 10,069,614     $  3,540,102

*Represents the net impact of the revenue recognition adjustment required to arrive at reported GAAP revenue. Customer billings includes all invoiced amounts associated with products shipped during the period reported. GAAP revenue includes customer billings as well as numerous adjustments necessary to reflect,
(i) the deferral of a portion of current period sales and (ii) recognition of certain revenue associated with product returned for treatment and destruction. The difference between customer billings and GAAP revenue is reflected in the Company's balance sheet as deferred revenue. See Note 3 "Revenue Recognition" in Part I, "Notes to Consolidated Financial Statements".

The increase in revenues is primarily attributable to increased billings in the Government ($2,934,583), Retail ($311,610), Professional ($246,249), Pharmaceutical ($216,138), Non-Mailable ($35,826) and Other ($5,324) markets. These increases were partially offset by decreased billings in the Hospitality ($207,692), Health Care ($189,323), Commercial ($26,077) and Agriculture ($4,915) markets. The increase in the Government market is a result of $2.9 million in billings related to the sale of the Company's Sharps Medical Waste Management System ("Sharps®MWMS™) to an agency of the United States Government under the contract announced in February 2009. The increase in the Retail market is a result of the strong flu shot business whereby the Company's flagship Sharps Disposal By Mail System® products are used in the retail setting to collect and properly dispose of syringes used to administer flu shots. The increase in the Professional market billings is being driven by higher demand for the Company's products (including its newly introduced 18 Gallon Medical Professional Sharps Disposal By Mail System®) as dentists, doctors, veterinarians and other professions more aware of cost-effective alternatives to traditional medical waste pick-up services. The increase in the Pharmaceutical market is a result of billings to two major pharmaceutical manufacturers and billings to a major mail order pharmacy, all of which total $294,355 for the nine months ended March 31, 2009. The decrease in the Hospitality market is primarily attributable to a large order of Biohazard Spill Clean-Up Kits in the nine months ended March 31, 2008 with lower billings in the corresponding period ended March 31, 2009. The decrease in the Health Care market billings is related to the consolidation of two key home healthcare companies and resulting purchasing efficiencies.

Cost of revenues for the nine months ended March 31, 2009 of $6,937,914 was 51% of revenues. Cost of revenues for the nine months ended March 31, 2008 of $5,890,095 was 58% of revenue. Gross margin of 49% for the nine months ended March 31, 2009 was positively impacted by (i) the higher revenue (i.e. higher coverage of fixed cost components in COGS) and (ii) the effect of the recently announced U. S. Government project. Gross margin was 41.5% for the nine months ended March 31, 2008.

Selling, general and administrative ("S, G & A") expenses for the nine months ended March 31, 2009 of $4,043,084, increased by $528,208 from S, G & A expenses for the nine months ended March 31, 2008. The increase in S, G & A expense was primarily due to higher (i) non-cash 123(R) stock based compensation expense of $231,101, (ii) compensation and benefit expense of $194,360, (iii) professional fees of $63,861 (iv) housing-related costs for the Company's former President and COO of $50,860, (v) recruiting fees of $44,000, (vi) offsite server hosted facility which facilitates higher security and disaster recovery, server backup services and enhanced internet service of $43,000, (vi) payroll taxes of $29,810, (vii) property and casualty insurance of $14,900 and (viii) increase in marketing costs of $14,163. The increase in non-cash 123(R) stock-based award expense was primarily due to the expense associated with the award of restricted stock in October 2008 to the Company's former President and COO and the award of options in November to the Chief Financial Officer and the Senior Vice President of Sales. The increase in compensation expense is due primarily to the hiring of the former President and COO in October 2008 and the timing of other positions that have been replaced at higher salaries. The increase in professional fees was a result of expenses associated with, (i) various regulatory filings, (ii) outside consultation related to the recent U.S. Government contract award, (iii) S-8 (Sharps Compliance 1993 Stock Plan) preparation and related filing expenses, and (iv) legal fees associated with general corporate matters. Payroll taxes increased resulting from (i) increased compensation expense and corresponding Company paid portion of payroll tax, (ii) the Company portion of payroll taxes generated from the imputed income related to the October 2008 restricted stock award to the Company's former President and COO and (iii) the Company portion of payroll taxes generated by the imputed income related to the exercise of employee stock options. The increase in expenses was offset by decrease in commission expense ($60,844) and travel and entertainment expenses ($107,745).

The Company generated income before tax of $2,393,650 (17.6% of revenue) for the nine months ended March 31, 2009 versus a pre-tax income of $544,803 (5.4% of revenue) for the nine months ended March 31, 2008. The increase in pre-tax income is a result of higher operating income (discussed above).

The Company generated net income of $3,520,562 for the nine months ended March 31, 2009 compared to net income of $537,919 for the nine months ended March 31, 2008. The increase in net income is a result of higher operating income (discussed above) and the reduction in the deferred tax valuation allowance of $1,806,292 and corresponding credit to tax expense recorded in the quarter ending December 31, 2008.

The Company reported diluted earnings per share of $0.25 for the nine months ended March 31, 2009 versus diluted earnings per share of $0.04 for the nine months ended March 31, 2008. The increase in diluted earnings per share is a result of higher net income (discussed above).

PROSPECTS FOR THE FUTURE

The Company continues to take advantage of the many opportunities in the markets served as communities, consumers and industries become more aware of the proper disposal of medical sharps (syringes, lancets, etc.). This education process was enhanced in March 2004 when the U. S. Environmental Protection Agency ("EPA") issued its new guidelines for the proper disposal of medical sharps (see www.epa.gov/epaoswer/other/medical/sharps.htm). Additionally, in July 2006 both the states of California and Massachusetts passed legislation designed to mandate appropriate disposal of sharps waste necessary to protect the general public and workers from potential exposure to contagious diseases and health and safety risks. In August 2008, the U.S. House of Representatives and U.S. Senate introduced bills 3251 and 1909, respectively, which would provide for Medicare reimbursement, under part D, for the safe and effective disposal of used needles and syringes. Among the methods of disposal recommended as part of the above noted regulatory actions are mail-back programs such as those marketed by the Company. The Company estimates that there are an estimated 2 - 3 billion used syringes disposed of in the United States outside of the hospital setting. Additionally, the Company estimates that it would require 30 - 40 million Sharps Disposal by Mail System® products to properly dispose of all such syringes, which would equate to a $1 billion small quantity generator market opportunity. Based upon the current level of sales, the Company estimates that this $1 billion market has only been penetrated by approximately 1% or less.

The Company continues to develop new products for its Sharps Disposal by Mail System®, including the new RxTakeAway™ and 18 gallon Medical Professional Sharps Disposal by Mail System®, and Sharps SureTemp Tote® product lines. The Company has developed products designed to facilitate the proper and cost effective disposal of unused medications. The Company believes its future growth will be driven by, among other items, (i) the positive impact and awareness created by the existing and above noted regulatory actions as well as additional potential future legislation, (ii) the effects of the Company's extensive direct marketing efforts and (iii) the Company's leadership position in the development and sale of products designed to properly and cost effectively dispose of small quantities of medical waste.

Demand for the Company's primary product, the Sharps Disposal by Mail System®, which facilitates the proper and cost-effective disposal of medical waste including hypodermic needles, lancets and other devices or objects used to puncture or lacerate the skin (referred to as "sharps"), has been growing rapidly because of its mail-back convenience and unique data tracking feature. In addition, targeted opportunities continue to expand as a result of ,
(i) legislation mandating the proper disposal of sharps, (ii) the growing awareness of the need to properly handle sharps medical waste for safety and environmental concerns, (iii) the significant increase in self-injectable medications and (iv) the changing paradigm in the healthcare industry.

The Company generated approximately $919,500 in billings during the quarters ended June and September 30, 2008 related to sales of the Company's flagship Sharps Disposal By Mail System® products which were sold in the retail setting (retail clinics, grocery stores, etc.) to collect and properly dispose of syringes used to administer flu shots. These billings are included in the Retail market. The Company anticipates a strong flu shot business in light of the recent H1N1 flu virus which would have a positive impact of the Company's Retail market billings for the quarters ended June and September 30, 2009.

The Sharps®MWMS™, a Medical Waste Management System, is a comprehensive medical waste solution which includes an array of services and products necessary to effectively collect, store and dispose of medical waste in the alternate site market (i.e., outside of the hospital or large healthcare facility setting) . The System, which is designed for rapid deployment, features the Sharps Disposal By Mail System® products combined with warehousing, inventory management, training, data and other services necessary to provide a comprehensive solution. The Sharps®MWMS™ is designed to be an integral part of governmental and commercial emergency preparedness programs.

The Company is actively marketing its Sharps®MWMS™ to federal, state and local agencies as well as to large corporations.

The Company recognized $3 million from the above mentioned contract in the quarter ended March 31, 2009. The Company expects to recognize an additional $3 million during the quarter ending June 30, 2009 of fiscal year 2009. Based upon the current production schedule, the Company expects to recognize revenue of about $11.5 million in the first fiscal year 2010 quarter ending September 30, 2009 and an additional $11 million of revenue in the second fiscal year 2010 quarter ending December 31, 2009. The remaining $11.5 million is expected to be earned over the fiscal years 2011 through 2014.

The above amounts are estimates only and are subject to change. Although the Company believes the amounts above to be reasonable based upon its current project plan, it makes no assurances regarding the actual recognition of revenue by fiscal year which could vary significantly from that noted above.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents decreased by $1,445,718 to $589,501 at March 31, 2009 from $2,035,219 at June 30, 2008. The decrease in cash and cash equivalents is primarily a result of cash used in operations of $235,814 and additions to property and equipment and intangible assets of $1,520,366, partially offset by the proceeds from the exercise of stock options of $289,720.

Accounts receivable increased by $2,966,897 to $4,150,872 at March 31, 2009 from $1,183,975 at June 30, 2008. The increase was primarily due to the $2.9 million in billings to the U.S. Government in March of 2009 (such amount was collected on April 7, 2009).

Inventory increased by $556,707 to $1,137,568 at March 31, 2009 from $580,861 at June 30, 2008. The increase in inventory is attributable to the (i) build up of inventory for the U.S. Government contract and (ii) bulk purchases of Sharps Secure® and Pitch-It™ IV Poles manufactured overseas.

Deferred income tax benefits of $3,123,742 were booked in the quarter ended December 31, 2008 due to the Company's decision to reduce the deferred tax valuation allowance to zero. The decision was made after evaluation of the following circumstances (i) recent $40 million U.S. Government contract award to the Company and the corresponding anticipated taxable income, (ii) the . . .