UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant To Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the fiscal year ended March 31, 1997.
UROPLASTY, INC.
(Name of Small Business Issuer in its Charter.)
Minnesota, U.S.A. 41-1719250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2718 Summer Street NE,
Minneapolis, Minnesota 55413
(Address of principal executive offices)
Issuer's telephone number, including area code:
(612) 378-1180
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
YES [X] NO [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year........$3,334,563....
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within
the past 60 days. (See definition of affiliate I Rule 12b-2 of the Exchange
Act.) $_not applicable_, as of June 24, 1997. However see Item 5, hereof.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate
market value of the common equity held by non- affiliates on the basis of
reasonable assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the Issuer filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
YES [ ] NO [ ] Not subject to Exchange Act at time [X]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,649,525 shares on
June 24, 1997
DOCUMENTS INCORPORATED BY REFERENCE
None of the type referenced.
Transitional Small Business Disclosure Format
YES [ ] NO [X]
PART I
Introduction
Uroplasty, Inc. is referred to in this Report as "Uroplasty" or the
"Registrant".
Item 1. Description of business:
(a) Business development
Uroplasty was incorporated on January 21, 1992, as a wholly-owned
subsidiary of Bioplasty, Inc., which was a public reporting company at the
time. In April 1993, Bioplasty, Inc. and Uroplasty, Inc. filed for
protection from creditors under Chapter 11 of the Federal Bankruptcy Code in
Federal District Court in Minneapolis, Minnesota. As of January 31, 1994 the
Federal Bankruptcy Court confirmed the joint plan of reorganization of the
two companies, pursuant to which all equity interest held by Bioplasty, Inc.
in Uroplasty, Inc. was canceled and new shares of Uroplasty, Inc. were
issued to creditors, claimants and new investors, who became the shareholders
of Uroplasty, Inc.
Effective January 1995, Bioplasty, Inc. transferred to
Uroplasty, Inc. in a tax-free exchange all its remaining operating assets
and liabilities, including the stock of the foreign subsidiaries, in
satisfaction of obligations due Uroplasty, Inc. generated in the normal
course of business subsequent to confirmation of the joint plan of
reorganization of the two companies. At the time of the transfer of the
remaining operating assets and liabilities, Uroplasty, Inc. and
Bioplasty, Inc. had the same shareholders who owned stock in each company
in the same percentage ownership.
(b) Business of issuer.
The business of Uroplasty, Inc. is the manufacture, distribution and
sale of an injectable medical device implant used to treat certain forms of
urinary incontinence.
The following paragraphs provide information about specific aspects
of the Registrant's business.
1. Principal products or services and their markets.
The Registrant's urology business is currently
composed of a product called Macroplastique(R) Implants, an injectable
medical device implant designed to treat certain forms of urinary incontinence
in a minimally invasive procedure involving injection of the product material
through a needle into the soft tissue at the bladder neck to act as a tissue
bulking agent. Macroplastique also treats vesicoureteral reflux, a condition
of backflow of urine from the bladder to the kidney, in a minimally invasive
procedure. Uroplasty also sells certain other products ancillary to the
Macroplastique injection procedure, such as needles, instrument lubricants
and instruments for injection.
Macroplastique is subject to manufacturing and marketing regulation by
governmental agencies, including the Food and Drug Administration ("FDA") in
the United States, European Medical Device Directives within the European
Community, as well as medical regulations in other foreign countries.
Macroplastique Implants contain particles of heat vulcanized
polydimethylsiloxane (solid silicone) suspended in a biocompatible
polyvinylpyrrolidone gel carrier solution. Macroplastique Implants are
shelf-storable, sterile, injectable and chemically inert.
Patents covering the materials, process and applications have been issued to
Uroplasty, Inc. by the United States, United Kingdom and German Patent and
Trademark Offices. Applications are also currently pending in various other
countries, including Canada, Asia and other European countries. In January
1996, Uroplasty, Inc. received a Certificate of Registration for quality
system compliance with the requirements of ISO 9001 and EN46001. In June
1996, the company received a Certificate of Authorization for affixing the
CE mark on Macroplastique Implants.
Uroplasty manufactures the particle component of the product in its
Minneapolis, Minnesota facility, then ships the component to a contract
manufacturer in the Netherlands for further processing, formulation,
packaging and sterilization. New manufacturing capabilities have become
necessary and Uroplasty expects to open its own manufacturing facility in
the Netherlands in mid 1997. The agreement with the contract manufacturer
was cancelled effective May 31, 1997.
Sales in the United States cannot commence until Investigational Device
Exemption ("IDE") and subsequent Pre-Market Approval ("PMA")authorization for
the Macroplastique Implants are received from the FDA. As of the date of this
document Uroplasty had not submitted an IDE application to the FDA to
request authority to commence human clinical studies in the United States.
Macroplastique sales continued to show substantial growth in fiscal 1997. The
product is well accepted as a safe, cost-effective treatment for adult
incontinence and reflux in children. The Company is continuing to explore
other medical applications for Macroplastique, as well as new products for
the treatment of female incontinence.
The Company will continue to work aggressively to support existing
distribution, develop distribution in new markets and develop new and
improved methods for the treatment of incontinence. Uroplasty is committed
to providing high-quality, cost effective health care for the incontinence
market.
2. Distribution methods.
Uroplasty sells Macroplastique Implants and the
related ancillary products used in the injection procedure in countries
outside the United States using a direct sales force of four persons in the
United Kingdom and three persons in the Netherlands, and through a network
of about twenty distributors in other countries, primarily in Europe.
3. Status of any publicly announced new product or
service.
Other than Macroplastique and items ancillary to
the urological application of the device, Uroplasty has not introduced any
new products in the urology market.
However, management believes other medical
applications for the augmentation of soft tissue using the Macroplastique
material as a bulking agent potentially exist and may warrant future
investigational research and development by the Registrant to evaluate
commercial viability. As an example, management has recently begun
considering use of the material for use in repairing the function of damaged
vocal cords. Uroplasty is actively working to develop new products in the
field of urinary incontinence (see item 10 Research and development).
4. Competition.
There are no reliable statistics on the number
of patients treated for urinary incontinence. What can be inferred from
the very large patient population and adult diaper market is that the vast
majority of people suffering from incontinence are either not treated or not
treated effectively. Due to the very large potential market size, the
treatment of incontinence attracts many competing products and technologies.
Still by far the most common strategy for
afflicted individuals is mere maintenance or management of their incontinence.
Since it is estimated that vast numbers of patients have not seen a
physician to specifically address their conditions, the methods of maintenance
tend to be lower technology in nature, i.e., disposable and reusable diapers
and pads. Larger companies like Proctor and Gamble, Inc. have entered the
adult diaper market and are bringing increasing numbers of patients towards
these manufactured products away from "homemade" aids, and through their mass
advertising increasing public consciousness about urinary incontinence.
It has also been estimated that a significant
percentage of all sanitary napkin sales are in fact the result of the products
being used to manage urinary incontinence.
It is the Company's position that the treatment
of stress urinary incontinence should proceed from the least invasive to the
most invasive therapy. Thus, if a patient can benefit from non-invasive
procedures such as pessaries, or pelvic floor exercises and biofeedback
training to strengthen the pelvic floor muscles, this should be attempted
first. Weighted vaginal cones are available to enhance these exercises.
Pharmacologic therapies can beneficially affect the patient by restoring a
more youthful muscle tone and mucosal bladder lining.
Urethral inserts are used to block or obstruct the bladder neck and urethra,
therby stopping or slowing the flow of urine. Potential adverse side effects
of these devices include urinary tract infection, pain, and tissue reactions
and dilation of the urthra over time.
The gyneacologist is usually the first point of
contact for the patient with primary urinary stress incontinence. Patients
with complex secondary incontinence following failed surgical intervention
are more often seen by the urologist, these patients are usually treated
with various procedures designed to reposition the uro-genital organs thus
restoring urinary continence. These procedures are generally surgically
invasive, complex and costly and are associated with a higher complication
rate for the patient.
Macroplastique is also designed to be implanted at the ureteral orifice which
which may result in sufficient occlusive pressure to eliminate vesicoureteral
reflux, primarily a pediatric condition tradionally treated with antibiotic
therapy or surgery. Vesicoureteral reflux refers to the reflux of urine from
the bladder into the ureter or the renal pelvis under static conditions or
during voiding. It is due to an incompetent ureteric closing mechanism caused
by a congenital malformation or as a result of other sisease processes.
Macroplastique is a simple outpatient, endoscopic procedure which does not
preclude further surgery and therefore can be the ideal first line treatment
in the management of vesicoureteral reflux.
Although the market is not nearly as large as that for urinary incontinence,
its impact is great due to the threat of permanent renal damage if left
untreated. The only other injectable product competitor for Macroplastique in
the treatment of this disease is a Teflon(TM) based paste, which is available
in Europe.
Competition in the sale of urological medical
devices and products is intense. However, due to the less invasive and cost
effective nature of injectable soft tissue bulking agents for the treatment
of certain forms of incontinence, and vesicoureteral reflux, management
believes significantly increased market penetration of Macroplastique is
possible. The current determining factor of competition in regards to
injectable incontinence materials is product performance and price.
There are currently two injectable soft tissue
bulking agent products that compete directly with Macroplastique for urinary
incontinence, both of which are supplied by companies with considerably
larger financial and other resources than Uroplasty. These products are
Urethrin(R), manufactured by Mentor, Inc. and Contigen(R), manufactured by
Collagen Corp., which is available for sale in both the United States and in
foreign markets. Management believes that other devices produced by other
companies will be made available for treating urinary incontinence by means
of soft tissue injection therapy in the relatively near future. Management
believes other soft tissue bulking agent products will eventually enter the
market to compete with currently used products and that competition will
continue to intensify.
5. Raw materials.
Macroplastique Implants are composed of particles
of heat vulcanized polydimethylsiloxane (solid silicone) suspended in a
biocompatible polyvinylpyrrolidone gel carrier solution. The Registrant has
one sole source of supply for the PVP and silicone material used in
Macroplastique, but a limited number of other suppliers of silicone and PVP
exist and management believes those suppliers would likely supply it with
materials if existing suppliers discontinued shipments. The Registrant has
not experienced any shortage of either silicone or PVP; however, no
assurance can be made that shortages of these or other materials will not be
experienced in the future.
6. Dependence on one or a few major customers.
Approximately 14% of the Registrant's total sales
during the fiscal year period ended March 31, 1997 were made to ABS, the
distributor covering France. ABS holds 100,000 shares of Uroplasty common
stock.
7. Patents, trademarks, licenses, franchises,
concessions, royalty agreements, and labor
contracts.
Multiple patents covering the Macroplastique
Implants material, process and applications have been issued to
Uroplasty, Inc. by the United States, United Kingdom and German Patent and
Trademark Offices, and applications are also currently pending in various
other countries, including Canada, certain Asian countries and other
European countries.
Although Uroplasty intends to pursue additional
patents and vigorously defend issued patents, management believes that its
success as a business will depend primarily upon its development and
marketing skills, and the quality and economic value of its products, rather
than on its ability to obtain and defend patents.
The Registrant has a royalty agreement with three
individuals, two of whom are former officers and directors. Under such
agreement, the Registrant pays royalties, in the aggregate, of three to five
percent of net sales of Macroplastique. The royalties payable under this
agreement will continue for the longer of the term of the patent, which was
issued on November 2, 1993, or ten years from November, 1993, the date of
the royalty agreement.
The Registrant has a royalty agreement with
Collagen Corp. pursuant to which a royalty of 5% of net sales of certain
products in the United States is payable, with a minimum of $50,000 per year.
8. Government approval of principal products or
services.
The Registrant needs authorization from the U.S.
Food and Drug Administration ("FDA") before it can sell its products in the
United States.
The Registrant's products are also subject to the
rules and jurisdiction of other foreign countries in which it sells its
products. In June 1996, the Registrant received its CE Mark on Macroplastique.
This has the effect of granting authorization to sell the product in the
countries belonging to the European Community, which currently are the primary
countries in which the Registrant sells its products. In addition, the
Registrant is subject to the rules and regulations of other countries not
belonging to the EC where it may also sell its products. The Registrant is
subject to periodic review by its "notified body" to maintain the CE Mark on
Macroplastique.
9. Effect of existing or probable governmental
regulations on the business.
The Registrant's business is subject to laws
governing medical devices (CE-Mark) in the European Community and in most
other countries where the Registrant does business (See section 8 Government
approval of principle products or services). The Registrant's products are
also subject to reimbursement issues in most countries with a national
health care system. No portion of the Registrants business is subject to
renegotiations of profits or termination of contracts at the election of the
government.
10. Research and development.
The Registrant has an active Research and
Development program. The Registrant is continally working on new methods and
devices for the implantation of Macroplastique and on new applications for
this material. The Registrant is also working to develop new products in the
field of incontinence. Expenditures for research and development totaled
$611,000 and $387,000 for the fiscal years ended March 31, 1997, and
March 31, 1996, respectively. None of these costs were borne directly by
customers.
11. Costs and effects of compliance with environmental
laws.
Compliance by the Registrant with applicable
environmental requirements has not during its fiscal years ended
March 31, 1997 and 1996 had a material effect upon the capital expenditures,
earnings or competitive position of the Registrant, and is not expected to
have a material effect during fiscal year 1998.
12. Employees.
As of March 31, 1997, the Registrant had
twenty-five employees, of which twenty-two on a full time basis. None of such
employees has a collective bargaining agreement with the Registrant.
Item 2. Description of Property:
Uroplasty and its subsidiaries do not own any real estate. Uroplasty
and its subsidiaries lease office, warehouse and production space at 2718
Summer Street NE, Minneapolis Minnesota 55413-2820, USA, and office and
warehouse space at Hertogsingel 54, 6214 AE Maastricht, The Netherlands, and
at Unit 3, Woodside business Park, Whitley Wood Lane, Reading, Berkshire
RG2 8LW, United Kingdom. Additionally, Uroplasty BV utilizes contract
manufacturing services and rents office space from an unrelated third party
contract manufacturer in Nijmegen, The Netherlands. Subsequent to
May 31, 1997 the Registrant will lease and set up its own manufacturing
facility in the Netherlands in an attempt to increase manufacturing capacity
and reduce costs. The Registrant considers its future facilities will be
adequate for its foreseeable needs.
Item 3. Legal proceedings.
(a) The Registrant is not, as of the date hereof, a party to any
material pending legal proceedings, nor is its property the subject of any
such proceedings.
(b) The Registrant is not, as of the date hereof, aware of any
material proceeding contemplated by a governmental authority.
Item 4. Submission of matters to a vote of security holders.
No matter was submitted to a vote of the Registrant's security
holders during its fourth fiscal quarter ended March 31, 1997.
PART II
Item 5. Market price for common equity and related stockholder matters.
(a) Market information.
As of the date hereof, there is no public trading market for the Registrant's
common stock.
Although one broker dealer published bid and ask quotations for the
Registrant's common stock on an irregular basis during the period March
through June, 1997, the Registrant is not aware of any shares that were
either purchased or sold through such broker dealer. The Registrant will
continue to encourage broker dealers to trade its stock. Since the
Registrant's shares are "designated securities", broker dealers are not as
willing to make a market as they might otherwise be.
(b) Holders.
As of June 24, 1997, the Registrant had approximately 400 shareholders.
(c) Dividends.
No cash or non cash dividends have been paid.
(d) Recent sales of unregistered securities.
Since April 1, 1994, the Registrant has sold securities in the amounts, at
the times and for the consideration listed below.
May 1994 Shares sold in private placement 472,000 $ 236,000(1)
transaction
Aug. 1995 Shares issued pursuant to Option Plan 10,000 $ 5,000(2)
Dec. 1995 Shares sold in private placement 1,000,000 $ 500,000(1)
transaction
Aug. 1996 Shares sold in private placement 100,000 $ 100,000(1)
transaction
Sep. 1996 Shares sold in private placement
transaction 30,000 $ 30,000(1)
Oct. 1996 Conversion of note payable 30,000 $ 15,000(4)
Feb. 1997 Shares issued pursuant to Option Plan 17,000 $ 8,500(3)
Notes to the Stock Issuance table:
(1) Securities sold in private sale transactions and exempt from
registration under the Securities Act of 1933, as amended, by
virtue of the provisions of Section 4 (2) thereof, in that
such sales were made to a limited number of individuals for
investment purposes only.
(2) Securities issued pursuant to acceptance by the Registrant of
a note receivable to exercise stock option of retiring
employee.
(3) Securities issued pursuant to the exercise of stock options.
(4) Securities issued pursuant to conversion of note payable.
There were no underwriters involved and no underwriting discounts or
commissions paid by the Registrant as part of any such transactions.
All securities transactions listed for this Item 5(d) were made in reliance
upon the exemptions from registration provided by Rule 504 under
Section 3(b) and by Section 4(2) of the Securities Act of 1933, as amended
(in that sales were made for an aggregate of less than $1,000,000 in any 12
month period to a small number of persons, many of whom were accredited
investors, and all of whom were considered sophisticated and were required
to purchase for investment purposes only, and each of the instruments recited
that they were issued for investment purposes only).
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Liquidity and Capital Resources.
Uroplasty and its wholly-owned subsidiaries' capital resources are
derived from existing sales of the Company's products. As of March 31, 1997,
the Company had approximately $815,000 in cash and cash equivalents.
Management believes the success being experienced with Macroplastique will
continue to have an increasing effect on the monthly sales level, however,
in the event sales do not increase, management believes that operating
expenses can be reduced in order to limit the use of its cash resources
without significantly impairing its ability to develop the Macroplastique
Implant market, which obviously would be slowed under such circumstances.
There is currently no financing arrangement in place for Uroplasty's
working capital needs, and the Registrant has no material unused sources of
liquidity other than its cash reserves and its accounts receivable balances
and inventory. The company is establishing a new manufacturing facility in
the Netherlands. Management's intention is to finance its capital equipment
needs with lease financing.
Management believes there are equity financing opportunities
available from a number of sources. Management believes the development
of the market for Macroplastique in various sales territories outside the
United States and the completion of an IDE and subsequent PMA for introduction
of Macroplastique into the US market would proceed more rapidly with an
increase in capital. The Company is currently considering the cost benefit of
new equity financing.
Financing other than cash generated by product sales
will be necessary to pursue an Investigational Device Exemption (IDE)
application and Premarket Approval Application (PMA) for Macroplastique with
the United States Food and Drug Administration (FDA).
Results of Operations.
This discussion of results of operations is based on the financial
information and history of the company set forth in the financial
statements in Part F/S and in Items 2 and 15 hereof. The following is a
discussion of the results of operations for the twelve months ended
March 31, 1997 and 1996.
The total net sales increased for the twelve months ended
March 31, 1997 from $2,297,166 to $3,334,563, a 45% increase. This increase
is primarily attributed to Sales of Macroplastique , which increased 72%
from $1,690,517 in fiscal 1996 to $2,899,282 for fiscal 1997. The sales
growth resulted from increased market penetration by existing
distribution outlets.
It is expected that Macroplastique sales will continue to grow
through further market penetration by existing distribution outlets,
expansion of its distribution network and the introduction of innovations
in Macroplastique implantation for fiscal 1998.
There were moderate increases in the operating expenses in fiscal
1997, caused by increased sales and marketing efforts and research and
development projects. Selling and marketing costs increased from $866,000
in fiscal 1996 to $908,000 in fiscal 1997. Research and development expenses
increased from $390,000 in fiscal 1996 to $611,000 in fiscal 1997, an
increase of 57 percent. General and administrative costs were reduced from
$768,000 in fiscal 1996 to $685,000 in fiscal 1997 as a result of
reorganization efforts.
Management believes there will be upward pressure on selling,
general and administrative expenses as efforts continue to increase awareness
and acceptance of Macroplastique. Additionally, management anticipates
increased funds for research and development projects for fiscal 1998.
The Registrant sells Macroplastique and its related ancillary
products, and Bioplastique(TM)Implants for use in augmenting other soft
tissues. Management's current objectives are to focus on growth in sales and
market penetration of the Macroplastique Implant line for incontinence and
Vesicoureteric reflux treatment.
Item 7. Financial Statements.
The Registrant has provided audited consolidated balance sheets as
of March 31, 1997, and 1996, and audited consolidated statements of
operations, cash flows and stockholders' equity for the fiscal years ended
March 31, 1997, and 1996.
The following Financial Statements have been included at the end of
this Registration Statement:
Uroplasty, Inc. and Subsidiaries Consolidated Balance Sheets as of
March 31, 1997, and 1996.
Uroplasty, Inc. and Subsidiaries Consolidated Statement of Operations
for the years ended March 31, 1997 and 1996.
Uroplasty, Inc. and Subsidiaries Consolidated Statements of
Shareholders' Equity for the years ended March 31, 1997 and
1996.
Uroplasty, Inc. and Subsidiaries Consolidated Statements of Cash
Flows for the years ended March 31, 1997 and 1996.
Uroplasty, Inc. and Subsidiaries Notes to Consolidated Financial
Statements.
Independent Auditors' Report re: Uroplasty, Inc. and Subsidiaries
Consolidated financial statements.
Financial schedules of the Registrant have been omitted because they
are not required or not applicable or because the required information is
shown in the Financial Statements or Notes thereto.
Item 8. Changes in and disagreements with accountants.
During the most recent two fiscal years, the Registrant's
independent accountant did not resign and was not dismissed, and there were
no disagreements with such accountant regarding accounting and financial
disclosure matters of the type required to be reported herein.
PART III
Item 9. Directors, executive officers, promoters, and control persons;
Compliance with Section 16(a) of the Exchange Act.
(a) Directors and Executive Officers.
Uroplasty's Directors and Executive Officers as of March 31,
1997, the last day of its 1997 fiscal year were as follows:
Name Age Position
---- --- --------
Daniel G. Holman 51 Chairman, President, CEO
Joel R. Pitlor 58 Director
R. Patrick Maxwell 52 Director
Susan Hartjes-Doherty 43 Vice President of Operations and
Regulatory Affairs
Germain E. Willem 50 Vice President of Sales and
Marketing
Chris Harris 38 Vice President of Corporate
Development
Mr. Holman and Mr. Pitlor have served as directors of Uroplasty, Inc.
since February 1994, and Mr. Maxwell has served as a director since
April, 1994.
The business experience of each director and officer follows:
Daniel G. Holman has served as Chairman of the Board, President and
Chief Executive Officer of Uroplasty since February 1994.
Mr. Holman served Bioplasty as its Executive Vice President from 1973
to 1985, its President from 1985 to 1987, and Secretary from 1986 to March,
1992. Mr. Holman has served as Chairman of the Bioplasty Board since March,
1992, and President and CEO since February 22, 1993. Mr. Holman served as
Chairman of the Board and Chief Executive Officer of Bio-Vascular, Inc. from
June, 1988, to September, 1991, served as director of Genetic Laboratories
Wound Care, Inc. from January, 1988 until April 1993, and as Vice
President from January 1988 through January 19, 1993.
Mr. Holman holds a Bachelor of Arts degree from the University of
Minnesota.
Joel R. Pitlor has been a director since February 1994. Mr. Pitlor
served as a director of Bioplasty from January, 1989 until May 1996. For over
sixteen years, he has been the owner and manager of a management consulting
firm. He previously served as Director of HTC, Inc., and Julius Koch USA,
Inc., privately held firms, and Mountain High, Inc., United Medical, Inc.
and Bio-Vascular, Inc., which are publicly held. Mr. Pitlor is presently a
Director of Precision Optics Corporation, which is publicly-held.
Mr. Pitlor holds a Bachelor of Science degree from MIT and serves as
Personal Advisor to several CEOs.
R. Patrick Maxwell was appointed a Director of Uroplasty in April
1994. Mr. Maxwell has been an attorney since 1969 and an Officer/Director and
owner of Templeton and Associates, a legal personnel temporary employment
firm based in Minneapolis, Minnesota, since 1983. Mr. Maxwell also holds
ownership and board positions in various other private company ventures.
Susan Hartjes-Doherty joined Bioplasty, Inc. in September 1991 as
Director of Operations and was appointed the officer position of Vice
President of Operations in April 1993. Prior to commencement of her
employment with the companies, Ms. Doherty was Director of Operations at
Bio-Vascular, Inc. in St. Paul, Minnesota from November 1989 to September
1991. Prior to that time, she served at various other pharmaceutical and
medical device companies in management-oriented positions in production,
quality assurance and research.
Ms. Doherty has Bachelor of Science degrees in Microbiology and
BioMedical Science from the University of Minnesota, and has done
post-graduate work in biological science. Ms. Doherty is a Certified Quality
Auditor and a senior member of the American Society for Quality Control and
served several years on its Executive Committee and a member of the American
Society of Microbiology, Minnesota Inner Laboratory Microbiology Association,
and the Henrici Society for Microbiologists. She has served on several
national and international standards committees.
Mr. Willem joined Uroplasty in November 1994 as a Director of
International Sales and Marketing and was appointed the officer position of
Vice President of Sales and Marketing in January 1997. With more than 20
years of experience in sales and marketing of medical devices, Mr. Willem
has launched the direct operations of several internationally active medical
companies. After opening the Dutch subsidiary of a leading French manufacturer
of medical devices, he spent the following two years at the company's
headquarters in Paris. In 1986, Mr. Willem launched the first direct
operation on the European continent for AMS, a subsidiary of Pfizer Product
Group.
Mr. Willem has a degree in engineering from the 'Industriele Hogeschool West
Vlaanderen' in Belgium. He has been active in standarisation organisations for
medical devices both in Belgium and The Netherlands.
Mr. Harris joined Bioplasty in October 1989 as Area Sales Manager in
the United Kingdom. Since September 1994, Mr. Harris acts as the Managing
Director of the subsidiary in the United Kingdom. In February 1996,
Mr. Harris was appointed as Director of Corporate Development and in January
1997 he was appointed as an officer of Uroplasty in the capacity of Vice
President of Corporate Development.
Mr. Harris is a qualified nurse, certified by the United Kingdom Central
Council for Nursing, Midwifery and Health Visiting. Post basic training was
practiced in general surgery nursing for two years and for nine years prior
to joining Bioplasty, Mr. Harris specialized in operating department nursing
covering general surgery, orthopedics, opthalmics, gynecology and ear, nose
and throat surgery.
(b) Significant Employees. Not applicable.
(c) Family Relationships.
There are no family relationships between or among any of
Uroplasty's directors and officers.
(d) Involvement in Certain Legal Proceedings. Not applicable.
(e) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Exchange Act requires the Company's
directors and officers, and persons who own more than 10% of a registered
class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
Dealers ("NASD"). Such persons are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based upon a review of Form 3,4 and 5 filings made by the
Company's officers and directors during the fiscal year ended March 31, 1997
under Section 16(a) of the Exchange Act, the Company believes that:
(i)Germain E. Willem, Vice President of Sales and Marketing, failed to
timely file the initial report of ownership on Form 3; (ii) Chris Harris,
Vice President of Corporate Development, failed to timely file the initial
report of ownership on Form 3. All such report will now be filed. Except as
set forth herein, the Company believes that its current officers and
directors have made all requisite filings under Section 16(a) of the '34 Act
on a timely basis.
Item 10. Executive Compensation:
(a) General.
(b) Summary Compensation Table.
The following table sets forth, in summary form, (1) the compensation
paid for the years shown in the table, to Daniel G. Holman, the Registrant's
Chairman and CEO; (2) the stock options and stock appreciation rights granted
to such individual for the years shown; and (3) long-term payouts and other
compensation for the years shown:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation (1)
--------------------------
Annual Compensation Awards
- - ------------------------------------------------------------------- -----------------------
(a) (b) (c) (d) (e) (f) (g)
Other Securities
Name Annual Restricted Under-
and Compen- Stock lying
Principal sation Awards Options
Position Year Salary($) Bonus($) ($) ($) SARs(#)
- - -------- ---- --------- -------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Daniel G. Holman 1997 154,162 -- 28,818 -- 0
CEO 1996 146,534 -- 18,016 -- 15,000
1995 160,961 -- 14,000 -- 15,000
All Executive Officers
For Fiscal Year 1997:
(Four Persons) 421,820
</TABLE>
(1) There were no payouts under a "long-term incentive plan" (called "LTIP")
for the years shown, nor was any other form of compensation paid or awarded
(hence, columns (h) and (i) of the table are omitted).
(c) Option/SAR Grants Table.
<TABLE>
<CAPTION>
Aggregated
Option Grants in Fiscal Year Ended March 31, 1997 Unexercised Options (1)
- - -------------------------------------------------------------------------------- -----------------------
(a) (b) (c) (d) (e)
Number of Percent of
Securities Total Op-
Underlying tions/SARS Total No. Of
Options Granted to Exercise or Securities Underlying
/SARS Employees in Base Price Expiration Unexercised Options
Name Granted(#) Fiscal Year ($/Share) Date /SARs at 3/31/96
- - ---- ---------- ----------- --------- ---- ----------------
<S> <C> <C> <C> <C> <C>
</TABLE>
(1) During the fiscal year ended March 31, 1997, no options were
exercised. Registrant does not consider any of the outstanding options to be
"in the money."
(2) No options were granted to any of the officers or directors
during the fiscal year ended March 31, 1997.
Uroplasty, Inc. established an Incentive Stock Option Plan for the
benefit of all employees in May 1995. Options to purchase common stock are
granted to employees by the board of directors based on performance. Currently
no formal performance criteria have been established for the determination of
the number of options to be granted to employees. The plan allows for the
granting of options to purchase 350,000 shares of stock. At March 31, 1997
there were approximately 223,200 options granted and outstanding under the
plan. Options are granted with exercise prices equal to or greater than the
fair market value of the stock at the time of the grant. At March 31, 1997
all options have been granted at either $.50 or $.55 or $1.00 per share.
(d) Aggregated Option/SAR Exercises and Fiscal Year-End
Option/SAR Value Table.
No options were exercised by any of the officers or directors
during the fiscal year ended March 31, 1997.
There was no public trading market in the Registrant's Common Stock at
March 31, 1997. See subparagraph (c) above as to the total number of securities
underlying unexercised options as of March 31, 1997.
(e) Long Term Incentive Plan Awards Table.
None.
(f) Compensation of Directors.
Mr. Pitlor receives $2,000 per month consulting fee from the
Registrant under a month to month agreement. Additionally, non employee board
members who do not receive any other form of compensation from the
Registrant receive $500 per board meeting attended. Other than these
arrangements, there currently exists no compensation plans for the benefit
of Uroplasty, Inc. Board of Director members.
(g) Employment Contracts and Termination of Employment and
Change in Control Arrangements.
Not applicable.
(h) Report on Repricing of Options/SARs.
Not applicable.
Item 11. Security Ownership of Certain Beneficial Owners and Management:
(a) Security Ownership of Certain Beneficial Owners.
At March 31, 1997, Uroplasty had 3,649,525 shares of common
stock outstanding and had granted options to employees and directors to
purchase 223,200 additional shares of Uroplasty's common stock.
The following table sets forth the number of shares of
Uroplasty's Common Stock beneficially owned, as of March 31, 1997, by each
person known to Uroplasty to be the beneficial owner of more than five percent
of Uroplasty's common stock:
Name and Address of Number of Shares
Beneficial Owner Beneficially Owned (1) Percent of Class
Bruce P. Mindich 1,100,000 30.1%
555 White Plains Road
Tarrytown, NY 10591
Bioplasty Product Claimants' 640,000 17.5% (2)
Trust
c/o Linquist & Vennum
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Daniel G. Holman 267,981 7.3% (3)
2718 Summer Street NE
Minneapolis, MN 55413
Arthur A. Beisang and Shirley F. Beisang 227,988 6.2%
5009 Lake Avenue, Unit 304
White Bear Lake, MN 55110
Continental Intervest 200,000 5.5%
630 West 34th Street, Suite 200
Austin, TX 78205
(1) To the Registrant's knowledge, the persons named have
both voting and investment power over the shares listed, except as indicated
in note (2).
(2) To the Registrant's knowledge, (a) the duration of this
Trust is indefinite until its assets are distributed, (b) the names and
addresses of the voting trustees at this time are Charles Zimmerman, c/o
Zimmerman, Reed, 5200 Norwest Center, Minneapolis, MN 55402; Sybil Goldrich,
same address as the Trust; and F.G. "Bud" Hamilton, same address as the Trust;
and (c) shares of the Registrant's Common Stock are voted according to the
discretion and judgment of the Trustees. The Registrant does not have a copy
of the trust document, and does not know to what extent the trustees have
investment power over the shares.
(3) Includes 45,000 shares held under options to buy common
stock.
(b) Security Ownership of Management.
The following table sets forth the number of shares, as of
March 31, 1997, of Uroplasty Common Stock beneficially owned by each director,
each executive officer of the Registrant who is named in Item 10(b) above, and
by all directors and executive officers as a group:
Name and Address Number of Shares
of Beneficial Owners Beneficially Owned Percent of Class
Daniel G. Holman 267,981 7.3%(1)
2718 Summer St. N.E.
Minneapolis, MN 55413
Joel R. Pitlor 134,723 3.7%(2)
19 Chalk Street
Cambridge, MA 02139
R. Patrick Maxwell 15,307 0.4%(2)
Templeton & Associates
10 South Fifth Street, Suite 990
Minneapolis, MN 55402
Directors and Executive 555,641 15.2%(3)(4)
Officers as a Group (6 persons)
(1) Includes 45,000 shares held under options to purchase Common Stock.
(2) Includes 15,000 shares held under options to purchase Common Stock.
(3) Includes 132,000 shares held under options to purchase Common Stock.
(4) To the Registrant's knowledge, the persons named have both voting
and investment power over the shares listed.
(c) Changes in Control.
The Registrant is not aware of any arrangements which may result in a
change in control of the Registrant.
Item 12. Certain Relationships and Related Transactions:
(a) Transactions with Management and Others.
The Registrant has a royalty agreement with three individuals,
namely Arthur A. Beisang, Jr., Robert A. Ersek, M.D., and Arthur A. Beisang,
III, M.D. Mr. Beisang and Dr. Ersek are former officers and directors of the
Registrant (See Item 1(b)7, above). Mr. Beisang and Dr. Ersek each hold more
than 5% of the Registrant's outstanding stock. The aggregate amount of royalty
payments made by the Registrant to the three individuals during the past two
fiscal years were as follows.
Fiscal Year ended 3/31/97 Uroplasty, Inc. $102,847
=======
Fiscal Year ended 3/31/96 Bioplasty, Inc. $ 1,000
Uroplasty, Inc. 64,695
-------
Total $65,695
=======
(b) Certain Business Relationships.
Not applicable.
(c) Parents of Registrant.
Not applicable.
(d) Transactions with Promoters.
Not applicable.
Item 13. Exhibits and report on Form 8-K.
(a) Exhibits incorporated by reference (Rule 12b-23).
The following Exhibits are incorporated by reference to the Registrant's
Registration Statement on Form 10SB, filed July 10, 1996:
Number Description
2.1 First Amended Joint Plan of Reorganization (Modified), of the
Registrant, dated January 31, 1994. (Filed as Exhibit 8.1 to Form
10SB)
3.1 Articles of Incorporation of Uroplasty, Inc. (Filed as Exhibit 2.1
to Form 10SB)
3.2 Bylaws of Uroplasty, Inc. (Filed as Exhibit 2.2 to Form 10SB)
4.1 Form of Stock Certificate of the Registrant, representing
shares of the Registrant's common stock. (Filed as Exhibit 3.1 to
Form 10SB)
10.1 Settlement Agreement and Release dated November 30,
1993 by and between Bioplasty, Inc., Bio-Manufacturing,
Inc., Uroplasty, Inc., Arthur A. Beisang, Arthur A.
Beisang, III, MD and Robert A. Ersek, MD.
(Filed as Exhibit 6.1 to Form 10SB)
10.2 Purchase and Sale Agreement dated December 1, 1995 by
and among Bio-Vascular, Inc., Bioplasty, Inc. and Uroplasty,
Inc. (Filed as Exhibit 6.2 to Form 10SB)
10.3 License Agreement dated December 1, 1995 by and among
Bio-Vascular, Inc. and Uroplasty, Inc. (Filed as Exhibit 6.3 to Form
10SB)
10.4 Lease Agreement dated January 10, 1995 between Summer
Business Center Partnership and Uroplasty, Inc. (Filed as Exhibit
6.4 to Form 10SB)
10.5 Unsecured $640,000 Promissory Note dated March 30,
1994 by and between Bioplasty, Inc., Uroplasty, Inc. and
Bioplasty Product Claimants' Trust. (Filed as Exhibit 6.5 to Form
10SB)
10.6 Agreement and Satisfaction dated January 30, 1995 by and between
Bioplasty Product Claimants' Trust and Bioplasty, Inc. (Filed as
Exhibit 6.6 to Form 10SB)
10.7 Asset Sale and Satisfaction of Debt Agreement dated
June 23, 1995 by and between Bioplasty, Inc. and
Uroplasty, Inc. (Filed as Exhibit 6.7 to Form 10SB)
10.8 Executory Contract Assumption Stipulation dated
December 28, 1993 by and between Bioplasty, Inc.,
Uroplasty, Inc. and Collagen Corporation. (Filed as Exhibit 6.8 to
Form 10SB)
10.9 Settlement and License Agreement dated July 23,
1992 by and between Collagen Corporation, Bioplasty,
Inc. and Uroplasty, Inc. (Filed as Exhibit 6.9 to Form 10SB)
(b) The following exhibits are filed as part of this report:
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
UROPLASTY, INC.
Dated: June 24, 1997 By /s/ DANIEL G. HOLMAN
Daniel G. Holman
Chairman, President and CEO
In accordance with the Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Name Title/Capacity Date
/s/ DANIEL G. HOLMAN President, Chief Executive Officer June 24, 1997
Daniel G. Holman Chief Financial Officer,
Director (Principal Executive Officer,
Principal Financial Officer, Principal
Accounting Officer)
/s/ JOEL R. PITLOR Director June 24, 1997
Joel R. Pitlor
/s/ R. PATRICK MAXWELL Director June 24, 1997
R. Patrick Maxwell
UROPLASTY, INC. and Subsidiaries
Consolidated Financial Statements
March 31, 1997 and 1996
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and 1996
1997 1996
_________________ ______________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 814,603 $ 718,630
Accounts receivable trade, less allowance
for doubtful accounts of $124,000 in 1997
and $144,000 in 1996 502,744 336,148
Inventories 387,373 256,655
Prepaid expenses 105,625 93,563
Notes receivable 0 22,595
_________ _________
Total Current Assets 1,810,345 1,427,591
--------- ---------
Property, plant and equipment 241,075 200,799
Less accumulated depreciation
and amortization 92,745 44,772
_________ _________
148,330 156,027
--------- ---------
Intangible assets, net of accumulated
amortization of $44,500 in 1997 and
$28,500 in 1996 80,030 88,768
_________ _________
TOTAL ASSETS $ 2,038,705 $ 1,672,386
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 160,811 $ 208,403
Accrued liabilities
Compensation and payroll taxes 62,364 95,343
Royalties 12,400 14,750
Other 127,766 132,962
Current maturities - long term debt 36,954 34,139
Note payable 0 15,000
_________ _________
Total Current Liabilities 400,295 500,597
--------- ---------
Long Term Debt, less current maturities 407,994 437,847
Total Liabilities 808,289 938,444
--------- ---------
Shareholders' equity
Common stock $.01 par value;
Authorized 20,000,000 shares
3,649,525 and 3,472,525 Issued and
outstanding at March 31, 1997 and
1996, respectively 36,495 34,725
Additional paid in capital 1,963,560 1,811,830
Accumulated deficit (592,918) (882,691)
Cumulative translation adjustment (171,721) (224,922)
Note receivable (5,000) (5,000)
__________ __________
Total Shareholders' Equity 1,230,416 733,942
---------- ----------
Commitments and contingencies (note 5)
TOTAL LIABILITIES AND SHAREHOLDERS' __________ __________
EQUITY $ 2,038,705 $ 1,672,386
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UROPLASTY, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended March 31, 1997 and 1996
<CAPTION>
1997 1996
__________ __________
<S> <C> <C>
Net sales $ 3,334,563 $ 2,297,166
Cost of goods sold 753,769 804,638
__________ __________
Gross profit 2,580,794 1,492,528
Operating expenses:
General and administrative 685,430 767,579
Research and development 610,677 389,637
Selling and marketing 908,483 865,607
__________ __________
2,204,590 2,022,823
---------- ----------
Operating profit (loss) 376,204 (530,295)
Other income (expense):
Interest income 2,389 9,726
Interest expense (36,884) (40,177)
Gain on sale of intangible asset 0 496,119
Foreign currency exchange loss (145,070) (220,359)
Other 93,134 (2,393)
__________ __________
(86,431) 242,916
__________ __________
Net income (loss) $ 289,773 $ (287,379)
========== ==========
</TABLE>
Primary income (loss) per common share
and common share equivalents $ 0.08 (0.10)
==== =====
Fully diluted income (loss) per common
share and common share equivalents $ 0.08 (0.10)
==== =====
Weighted average common shares outstanding:
Primary 3,670,275 2,883,775
Fully diluted 3,692,746 2,883,775
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
UROPLASTY, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended March 31, 1997 and 1996
Common stock Additional Cumulative Total
Paid in Accumulated translation Note shareholders'
Shares Amount Capital deficit adjustment receivable equity
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 1, 1995 2,462,525 $ 24,625 1,325,870 (595,312) (202,912) 0 552,271
Issuance of 1,000,000
shares of common
stock 1,000,000 10,000 481,060 0 0 0 491,060
Issuance of 10,000
shares of common
stock pursuant to
stock option exercise 10,000 100 4,900 0 0 (5,000) 0
Net loss 0 0 (287,379) 0 0 (287,379)
Translation adjustment 0 0 0 (22,010) 0 (22,010)
- - -----------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 3,472,525 34,725 1,811,830 (882,691) (224,922) (5,000) 733,942
Issuance of 130,000
shares of common
stock 130,000 1,300 128,700 0 0 0 130,000
Issuance of 47,000
shares of common
stock pursuant to
stock option exercise 17,000 170 8,330 0 0 0 8,500
Issuance of 30,000 shares
of Common Stock for note
payable conversion 30,000 300 14,700 0 0 0 15,000
Net income 0 0 289,773 0 0 289,773
Translation adjustment 0 0 0 53,201 0 53,201
- - -----------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997 3,649,525 $ 36,495 1,963,560 (592,918) (171,721) (5,000) 1,230,416
- - -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UROPLASTY, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended March 31, 1997 and 1996
<CAPTION>
1997 1996
__________ __________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 289,773 $ (287,379)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operations:
Depreciation and amortization 63,913 62,778
Loss (gain) on disposal of assets 45,000 (496,119)
Changes in operating assets and
liabilities:
Accounts receivable (166,596) 102,101
Inventories (130,718) (104)
Prepaid expenses (12,062) 37,568
Accounts payable (47,592) (133,811)
Accrued liablities (40,525) 41,945
- ------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 1,193 (673,021)
- ------------------------------------------------------------------------
Cash flows from investing activities:
Payments for property, plant and equipment (85,276) (61,902)
Payments relating to intangible assets (7,202) (45,693)
Proceeds from sale of intangible asset 0 496,119
- ------------------------------------------------------------------------
Net cash (used in) provided by
investing activities (92,478) 388,524
- ------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term obligations (35,947) (57,663)
Proceeds from issuance of notes payable 8,909 15,000
Net proceeds from issuance of stock 138,500 491,060
Payments received on note receivable 22,595 148,950
- ------------------------------------------------------------------------
Net cash provided by financing activities 134,057 597,347
- ------------------------------------------------------------------------
Exchange rate changes 53,201 (22,010)
- ------------------------------------------------------------------------
Net increase in cash and cash equivalents 95,973 290,840
Cash and cash equivalents at beginning
of year 718,630 427,790
- ------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 814,603 718,630
- ------------------------------------------------------------------------
Supplemental disclosure of Cash Flow information:
Cash paid during the year for interest $ 37,425 30,856
Supplemental disclosure of non-cash financing activities:
During the year March 31, 1997 $15,000 in notes payable were converted
into common stock.
<FN>
See accompanying notes to consolidated statements.
</TABLE>
UROPLASTY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1997 and 1996.
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Uroplasty, Inc. (the Company or UPI) is a manufacturer and distributor
of urological and plastic surgery implantable medical devices. The
primary focus of the Company's business is the marketing of an
implantable device for the management of stress urinary
incontinence and vesicoureteral reflux. Currently, all sales of
the Company's products are to customers outside the United States
by the Company's foreign subsidiaries.
BASIS OF PRESENTATION
Uroplasty, Inc. was incorporated as a wholly owned subsidiary of
Bioplasty, Inc. in January 1992 for the purpose of developing the
urological implant product. The primary business of Bioplasty,
Inc. was the marketing of certain mammary prostheses products,
which as a result of extensive product liability litigation
brought in the United States against Bioplasty, Inc. and all other
manufacturers of certain mammary prostheses products,
caused Bioplasty, Inc. and Uroplasty, Inc. to file
petitions for relief from creditors under Chapter 11 of the
Federal Bankruptcy Code in April 1993.
On January 31, 1994, the U.S. Bankruptcy Court confirmed the
reorganization plan of Uroplasty, Inc. and Bioplasty, Inc.
Pursuant to the confirmed plan, all pre-petition claims against
Uroplasty, Inc. and Bioplasty, Inc. were discharged. As of March
31, 1996, Uroplasty, Inc. and Bioplasty, Inc., with the exception
of amounts payable under long-term debt (see note 3), have
satisfied all their obligations under the plan of reorganization.
The reorganization plan was effective for financial reporting purposes
as of January 31, 1994. In accordance with Statement of Position
No. 90-7 of the American Institute of Certified Public
Accountants, Uroplasty, Inc. and Bioplasty, Inc. accounted for the
reorganization using fresh-start reporting.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned foreign subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of product to customers.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
PATENTS
Patents are stated at cost and are amortized over six years using the
straight line method.
INCOME TAXES
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial
carrying amounts of existing assets and liabilities and their
respective tax bases.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
INVENTORIES
Inventories are stated at the lower of cost, (first-in, first-out
method), or market (net realizable value), and consist of the
following at March 31, 1997 and 1996:
1997 1996
------------------------------------------------------------------
Raw materials $ 88,864 84,053
Work-in-process 136,204 69,437
Finished goods 162,305 103,165
------------------------------------------------------------------
$ 387,373 256,655
------------------------------------------------------------------
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists principally of manufacturing
equipment, office equipment, and leasehold improvements.
Depreciation is provided for using both straight-line and
accelerated methods over useful lives ranging from four to seven
years. Maintenance and repairs are charged to expense as incurred.
Renewals and betterments are capitalized and depreciated over
their estimated useful service lives.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries were
translated in accordance with the provisions of SFAS No. 52. Under this
Statement, all assets and liabilities are translated using period-end
exchange rates and statements of operations items are translated using
average exchange rates for the period. The resulting translation adjustment
is recorded as a separate component of shareholders' equity. Foreign currency
transaction gains and losses are recognized currently in net income.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based upon the weighted
average number of common shares and common shares equivalents outstanding.
STOCK BASED COMPENSATION
The Company applies APB Opinion No.25 in accounting for the issuance
of stock incentives to employees and directors and, accordingly, no
compensation expense has been recognized in the financial statements.
Effective April 1, 1996, in accordance with Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation, pro
forma information reflecting compensation cost for such issuances is
presented in note "4".
IMPAIRMENT OF LONG-LIVED ASSETS
Effective April 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for the Long-Lived Assets to be Disposed Of, which prescribes
accounting and reporting standards when circumstances indicate that the
carrying amount of an asset may not be recoverable. No cumulative effect
adjustment occurred as a result of this change in accounting principle.
(2) NOTES RECEIVABLE
Notes receivable consist of the following at March 31, 1997 and 1996:
1997 1996
------------------------------------------------------------------
Installment payments due from sale of
assets, discounted at 8% per annum $ 0 22,595
------------------------------------------------------------------
(3) LONG-TERM DEBT
Long-term debt consists of the following at March 31, 1997 and 1996:
1997 1996
- - --------------------------------------------------------------------------
Non-interest bearing, unsecured
promissory note payable,
discounted at 8% per annum,
$16,000 quarterly payments,
remaining balance due February 1999 $ 444,948 471,986
Less current maturities 36,954 34,139
- - --------------------------------------------------------------------------
$ 407,994 437,847
- - --------------------------------------------------------------------------
The promissory note is payable to the Trust established in the
Chapter 11 reorganization to administer the satisfaction of the
pre-petition product liability claims.
Maturities of long-term debt during ensuing years ending March 31 are
as follows:
1998 36,954
1999 407,994
------------------------------------------------------
$ 444,948
------------------------------------------------------
(4) SHAREHOLDERS' EQUITY
STOCK OPTIONS
Pursuant to the Uroplasty, Inc. Qualified Incentive Stock Option Plan,
the Company has reserved 350,000 shares of its common stock for
issuance to employees, directors and consultants. All options are
exercisable when granted and generally expire five years from
date of grant. Options are granted at the discretion of the
directors and are exercisable in amounts equal to or greater than
the current market value of the Company's common stock at date of
grant. The plan provides for the exercise of options during a
limited period following termination of employment, death, or
disability.
Included in the options granted are 60,000 options awarded to the
members of the board of directors effective March 27, 1995. As a
result of one board member's retirement, 10,000 options were
canceled. These options vest over two years and are exercisable
for five years after vesting.
Stock options activity under this plan is summarized as follows:
Weighted-average Shares
Exercise Price Shares Available
Per Share Outstanding for Grant
- -----------------------------------------------------------------------------
Balance at
March 31, 1995 $ 0.51 176,000 219,000
Granted 0.50 84,700 (84,700)
Exercised 0.50 (10,000) 0
Canceled 0.50 (4,000) 4,000
- -----------------------------------------------------------------------------
Balance at
March 31, 1996 0.50 246,700 128,300
Granted 1.00 3,000 (3,000)
Exercised 0.50 (17,000) 0
Canceled 0.50 (9,500) 4,500
- -----------------------------------------------------------------------------
Balance at
March 31, 1997 $ 0.51 223,200 129,800
- -----------------------------------------------------------------------------
At March 31, 1997, the range of exercise prices and weighted-average remaining
contractual life of outstanding options was $0.50 - $1.00 and 3.57 years,
respectively.
The Company applies APB No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its plans. Accordingly, no
compensation expense has been recognized for its stock-bases compensation
plans. Had the Company determined compensation cost based on the fair value
at the grant date for its stock options under SFAS No. 123, the Company's
net income and earnings per share would have been reduced by an immaterial
amount in both fiscal 1997 and 1996.
(5) COMMITMENTS AND CONTINGENCIES
LICENSE AGREEMENT
On December 7, 1995, the Company entered into an agreement as
licensee to obtain exclusive patent rights covering certain
injection-related instrumentation. Under this agreement, the
Company made a cash payment of approximately $30,000 to the
licensor and will make royalty payments at the rate of 10% of the
worldwide net sales for a period of 10 years.
SAVINGS AND RETIREMENT PLAN
The Company has a savings and retirement plan for eligible employees.
The plan was adopted pursuant to Section 401(k) of the Internal
Revenue Code. Contributions to the plan are discretionary for both
the Company and the employees. For the years ended March 31, 1997 and
1996 the Company made no contributions.
OPERATING LEASE COMMITMENTS
UPI leases office, warehouse, and production space under three
operating leases and leases various automobiles for its employees.
Future minimum lease payments under noncancelable operating leases
with an initial or remaining lease term in excess of one year for
the ensuing years ending March 31 are as follows:
1998 $ 242,950
1999 220,573
2000 144,744
2001 76,149
2002 50,959
-----------------------------------------------------
$ 735,375
-----------------------------------------------------
In addition to the above operating leases, the Company had
contracted for certain production activities, office space,
and production personnel for approximately $19,000 per month.
This contract expired on May 31, 1997 and will not be renewed.
ROYALTIES
Under the terms of an agreement with former officers and directors of
the Company, UPI pays royalties equal to between three percent and
five percent of the net sales of certain products, subject to a
specified monthly minimum of $4,500. As of March 31, 1997, the
royalties under the agreement are being accrued at a rate of
approximately two percent to four percent of total sales on a
monthly basis. The royalties payable under this agreement will continue
for the longer of the term of the patent or ten years from the
date of this agreement, which began in November, 1993.
Under the terms of a settlement agreement for a patent suit brought by
a competitor in 1991, UPI is obligated to pay the plaintiff a
royalty equal to five percent of the net sales of certain products
in the United States, or a minimum of $50,000 per year as long as
the products are being marketed abroad.
(6) INCOME TAXES
The Company had net income in 1997, however, due to the net loss
carryforward no tax was provided for. Effective tax rates differ
from statutory federal income tax rates for the year ended March 31, 1997
and 1996 as follows:
1997 1996
------- -------
Statutory federal income tax rate 34.0% (34.0)%
Valuation allowance increase (34.0) 36.0
State income taxes, net of federal 2.0 (2.0)
benefit
------------------------------------------------------
0.0% 0.0%
------------------------------------------------------
Deferred taxes as of March 31, 1997 and 1996 consist of the following:
1997 1996
--------- ---------
Deferred tax assets:
Inventory reserve $ 9,000 $ 9,000
Allowance for doubtful accounts 44,000 51,000
Net operating loss carryforwards 212,000 315,000
----------------------------------------------------------------
265,000 375,000
Less valuation allowance (265,000) (375,000)
----------------------------------------------------------------
$ 0 $ 0
----------------------------------------------------------------
At March 31, 1997, the Company had net operating loss carryforwards
(NOL) of approximately $590,000 for federal income tax purposes,
which begin to expire in 2010.
(7) MAJOR CUSTOMERS AND DOMESTIC AND FOREIGN OPERATIONS
During fiscal 1997 approximately 14% of the Company's net sales were to one
customer.
Information regarding operations in different geographies for the years ended
March 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
United Adjustments
States Europe and eliminations Consolidated
---------------------------------------------------------
Fiscal 1997
- -----------
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $ 0 3,972,740 (638,177) 3,334,563
Income from operations 201,931 909,960 (735,687) 376,204
Other income (expense) 29,764 128,610 (244,805) (86,431)
Net income 231,694 1,038,511 (980,497) 289,773
Identifiable assets at
March 31, 1997 $ 4,434,731 3,032,906 (5,428,932) 2,038,705
Fiscal 1996
- -----------
Sales to unaffiliated
customers $ 0 2,968,471 (671,305) 2,297,166
Income from operations (881,576) 158,849 192,432 (530,295)
Other income (expense) 662,503 (15,959) (403,628) 242,916
Net income (loss) (219,073) 142,890 (211,196) (287,379)
Identifiable assets at
March 31, 1996 $ 4,180,733 2,798,093 (5,306,440) 1,672,386
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Uroplasty, Inc.:
We have audited the accompanying consolidated balance sheets of
Uroplasty, Inc. and subsidiaries as of March 31, 1997 and 1996,
and the related consolidated statements of operations, shareholders' equity,
and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position
of Uroplasty, Inc. and subsidiaries as of March 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 23, 1997
Uroplasty BV
Hertogsingel 54
6214 AE Maastricht
The Netherlands
Bioplasty BV
Hertogsingel 54
6214 AE Maastricht
The Netherlands
Uroplasty LTD
Unit 3, Woodside Business Park
Whitley Wood Lane, Reading
Berkshire, RG2 8LW
United Kingdom
Bioplasty BVBA
p/a Amerikalei 35
2000 Antwerpen
Belgium
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements of Uroplasty, Inc. and subsidiaries as of
and for the year ended March 31, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-START> Apr-01-1996
<PERIOD-END> Mar-31-1997
<CASH> 814,603
<SECURITIES> 0
<RECEIVABLES> 502,744
<ALLOWANCES> 124,000
<INVENTORY> 387,373
<CURRENT-ASSETS> 1,810,345
<PP&E> 241,075
<DEPRECIATION> 92,745
<TOTAL-ASSETS> 2,038,705
<CURRENT-LIABILITIES> 400,295
<BONDS> 0
<COMMON> 36,495
0
0
<OTHER-SE> 1,193,921
<TOTAL-LIABILITY-AND-EQUITY> 2,038,705
<SALES> 3,334,563
<TOTAL-REVENUES> 3,334,563
<CGS> 753,769
<TOTAL-COSTS> 2,204,590
<OTHER-EXPENSES> 145,070
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (36,884)
<INCOME-PRETAX> 289,773
<INCOME-TAX> 0
<INCOME-CONTINUING> 289,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 289,773
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
