UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
UROPLASTY, INC.
(Exact name of registrant as specified 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 55413-2820
(Address of principal executive offices)
Registrant's telephone number, including area code:
(612) 378-1180
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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 [ ]
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS)
Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15(b) 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 ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 5,917,371 on
August 5, 1998
Transitional Small Business Disclosure Format
YES [ ] NO [X]
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UROPLASTY, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, 1998 March 31, 1998
_________________ ______________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 4,385,459 $ 889,541
Accounts receivable trade 795,096 766,835
Inventories 377,208 294,424
Prepaid expenses 209,945 184,628
_________ _________
Total Current Assets 5,767,708 2,135,428
--------- ---------
Property, Plant and Equipment 1,351,801 1,261,059
Less accumulated depreciation
and amortization (256,046) (216,529)
_________ _________
1,095,755 1,044,530
--------- ---------
Intangible assets, net of
accumulated amortization 108,445 101,586
_________ _________
TOTAL ASSETS $ 6,971,908 $ 3,281,544
========= =========
</TABLE>
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<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 331,660 $ 358,782
Accrued liabilities
Compensation and payroll taxes 56,724 81,526
Royalties 25,800 16,900
Other 141,869 116,755
Current maturities - long term debt 51,556 47,219
_________ _________
Total Current Liabilities 607,609 621,182
--------- ---------
Long term debt - less current maturities 623,587 609,606
Total Liabilities 1,231,196 1,230,788
--------- ---------
Shareholders' equity
Common stock $.01 par value;
Authorized 20,000,000 shares
Issued and outstanding - 5,917,371 and
4,191,525 shares at June 30 and
March 31, 1998, respectively. 59,174 41,915
Additional paid in capital 5,829,964 2,432,599
Accumulated deficit (7,395) (256,629)
Cumulative translation adjustment (136,031) (162,129)
Note receivable shareholder (5,000) (5,000)
__________ __________
Total Shareholders' Equity 5,740,712 2,050,756
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' __________ __________
EQUITY $ 6,971,908 $ 3,281,544
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UROPLASTY, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three months ended
June 30
1998 1997
__________ __________
<S> <C> <C>
Net sales $ 1,315,700 $ 1,149,239
Cost of goods sold 261,587 236,623
__________ __________
Gross profit 1,054,113 912,616
Operating expenses:
General and administrative 242,553 206,894
Research and development 218,141 134,228
Selling and marketing 331,887 217,159
__________ __________
792,581 558,281
---------- ----------
Operating profit 261,532 354,335
Other income (expense)
Interest income 15,754 1,167
Interest expense (8,829) (8,757)
Foreign currency exchange gain (loss) 18,905 (71,095)
Other (3,532) 0
---------- ----------
22,298 (78,685)
Income pretax 283,830 275,650
Income tax expense 34,596 36,958
__________ __________
Net income $ 249,234 $ 238,692
========== ==========
Net income per common share $0.05 $0.07
Net income per common share
assuming dilution $0.05 $0.06
Weighted average common shares
outstanding:
Basic 4,740,237 3,649,525
Diluted 5,079,455 3,916,073
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
UROPLASTY, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three months ended
June 30
1998 1997
__________ __________
<S> <C> <C>
Cash flows from operating activities:
Net income $ 249,234 $ 238,692
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 45,914 46,628
Changes in operating assets and
liabilities
Accounts receivable (28,261) (229,362)
Inventories (82,784) 18,888
Prepaid expenses (25,317) 10,863
Accounts payable (27,122) 106,049
Accrued liabilities 9,212 (5,110)
- ------------------------------------------------------------------------
Net cash provided by operating activities 140,876 186,648
- ------------------------------------------------------------------------
Cash flows from investing activities:
Payments for property, plant and equipm. (90,742) (58,613)
Payments relating to intangible assets (13,256) (8,103)
- ------------------------------------------------------------------------
Net cash used in investing activities (103,998) (66,716)
- ------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term obligations (14,087) (10,081)
Proceeds from issuance of notes payable 16,883 0
Net proceeds from issuance of stock 3,414,624 0
- ------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 3,417,420 (10,081)
- ------------------------------------------------------------------------
Effect of exchange rates on
cash and cash equivalents 41,620 (5,260)
- ------------------------------------------------------------------------
Net increase in cash and cash
equivalents 3,495,918 104,591
Cash and cash equivalents at beginning
of period 889,541 814,603
- ------------------------------------------------------------------------
Cash and cash equivalents at end
of period $ 4,385,459 $ 919,194
- ------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
UROPLASTY, INC. and Subsidiaries
FOOTNOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The financial statements included in this Form 10-QSB have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed, or
omitted, pursuant to such rules and regulations, although management believes
the disclosures are adequate to make the information presented not misleading.
The results of operations for any interim period are not necessarily
indicative of results for a full year. These statements should be read in
conjunction with the financial statements and related notes included in the
Company's Annual Report on Form 10-KSB for the year ended March 31, 1998.
The financial statements presented herein as of June 30, 1998 and for
the three months ended June 30, 1998 and 1997 reflect, in the
opinion of management, all material adjustments consisting only of normal
recurring adjustments necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods.
(2) Inventories
Inventories are summarized as follows:
June 30, 1998 March 31, 1998
_____________ ______________
Raw materials $ 43,627 $ 47,891
Work-in-process 178,553 118,973
Finished goods 155,028 127,560
________ ________
$377,208 $294,424
(3) Private Placement
On June 18, 1998, the Company completed a private placement of 1,702,950
shares of Common Stock at $2.375 per share, which resulted in net proceeds
to the Company of approximately $3,400,000. In connection with the private
placement, the Company issued warrants to purchase an aggregate of 150,000
shares of Common Stock at an exercise price of $2.375 per share. The
warrants are exercisable until June 18, 2003.
<PAGE>
UROPLASTY, INC. and Subsidiaries
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Set forth below is management's discussion and analysis of financial
condition and results of operations for the three months ended June 30, 1998
and 1997.
Results of Operations
Sales were $1,315,700 for the first quarter ended June 30, 1998 as
compared to $1,149,239 for the first quarter of fiscal 1998. This increase of
$166,461 (14%) is the result of increased sales of the Macroplastique products
due to aggressively expanded overseas marketing activities. The Macroplastique
product line now accounts for 93% of total sales.
It is expected that Macroplastique sales will continue to grow
through further market awareness, expansion of the distribution network and
the introduction of innovations in Macroplastique implantation for fiscal 1999.
Management believes there will be upward pressure on selling,
general and administrative expenses as efforts continue to market
Macroplastique. Increased spending for research and development projects in
fiscal 1999 is anticipated, along with expenditures for the United States
regulatory approval process. General and administrative costs increased 17%
from $206,894 in the first quarter of fiscal 1998 to $242,553 in the first
quarter of fiscal 1999. The FDA approval costs in the first quarter of fiscal
1999 were $62,934 compared to none in the first quarter of 1998. Other R&D
expenses increased 16% from $134,228 in the first quarter of fiscal 1998 to
$155,207 in the first quarter of fiscal 1999. The increase resulted from
development and testing efforts on new and existing products. Selling and
marketing expenses increased 53% from $217,159 in the first quarter of fiscal
1998 to $331,887 in the first quarter of fiscal 1999, due to the addition of
four sales personnel and expanded presence at international and domestic medical
conferences to increase market awareness of Macroplastique.
The income tax expense of $34,596 relates to the profit of a foreign
subsidiary in the first quarter of fiscal 1999.
The operating profit for the three months ended June 30, 1998 was
$261,532, compared to $354,335 for same period last year. The decrease is
primarily due to the increased operating expenses, partially offset by increased
sales.
For the three months ended June 30, 1998 net income totaled
$249,234; this includes a foreign currency exchange gain of $18,905.
Comparatively, the three months ended June 30, 1997 showed $238,692 net income
and a $71,095 foreign currency exchange loss.
In addition to Macroplastique and its related ancillary products, the
Registrant sells Bioplastique(TM)Implants for plastic surgery applications. The
Company's current focus is on growth in sales of the Macroplastique line for
treatment of male and female urinary incontinence and vesicoureteral reflux,
while preparing for future growth as it works toward United States regulatory
approval.
Liquidity and Capital Resources
As of June 30, 1998, the Company had $4,385,459 in cash and cash
equivalents. The $3,403,123 of net proceeds from the private placement of
common stock are invested in a short-term investment account. The June 30, 1998
balance of this investment account was $3,413,902 and is included in cash and
cash equivalents on the balance sheet. In addition to the private placement
proceeds, the capital resources are derived from existing sales of the
Registrant's products.
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.
The company is expanding its manufacturing facility in The Netherlands
with the addition of new cleanrooms to triple manufacturing capacity. The
capital equipment needs are expected to be financed through lease financing.
The proceeds of the private placement of common stock will be used to
pursue an Investigational Device Exemption (IDE) application, clinical studies
and Premarket Approval (PMA) application for Macroplastique(R) with the U.S.
Food and Drug Administration.
<PAGE>
UROPLASTY, INC. and Subsidiaries
PART II - OTHER INFORMATION
Except for the following, none of the items contained in PART II of
Form 10-QSB are applicable to the Company for the quarter ended
June 30, 1998.
ITEM 1. LEGAL PROCEEDINGS
On July 21, 1998, the Company announced that the United States
Patent and Trademark Office ("USPTO") had informed the Company that the
USPTO will initiate an interference proceeding between the Company and
Advanced UroScience, Inc. ("AUI"), White Bear Lake, Minnesota, to determine
which company was the first to invent carbon-coated micro beads for use in
treating urinary incontinence.
The Company expects that it could take the USPTO twenty-four months
or more to reach a final decision concerning this matter. Although the USPTO
originally granted the applicable patent to AUI, the interference proceeding
may result in a determination that either Uroplasty, Inc. or AUI is the
proper holder, or that a patent should not have been granted.
An interference proceeding, like other patent litigation, can be
complex, time consuming and expensive.
ITEM 2. CHANGES IN SECURITIES
a) In May and June, 1998, the Company sold 1,702,950 shares of its
Common Stock for an aggregate of $4,044,506.25 to a group of accredited
investors for cash pursuant to a private placement. As part of the
transaction, the Company paid to R. J. Steichen & Company, as Placement
Agent, an Agent's commission of $404,450.62 (10% of gross proceeds) and a
non-accountable expense allowance of $121,335.18 (3% of gross proceeds).
Such securities transaction was made in reliance upon the
exemptions from registration under Sections 3(b) and 4(2) of the Securities
Act of 1933, as amended (in that sales were made to a small number of
persons, many of whom were accredited investors, and all of whom were
required to purchase for investment purposes only, and each of the
instruments recited that they were issued for investment purposes only).
b) The Company's total number of Common Shares Outstanding has been
reduced by an aggregate of 104 shares due to the voiding of two stock
certificates. These shares were issued as part of the Company's 1994
Reorganization proceedings and have been cancelled.
<PAGE>
UROPLASTY, INC. and Subsidiaries
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UROPLASTY, INC.
Dated: August 6, 1998 By /s/ DANIEL G. HOLMAN
Daniel G. Holman
Chairman, President and CEO
(Principal Executive and Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-START> Apr-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 4,385,459
<SECURITIES> 0
<RECEIVABLES> 795,096
<ALLOWANCES> 0
<INVENTORY> 377,208
<CURRENT-ASSETS> 5,767,708
<PP&E> 1,351,801
<DEPRECIATION> 256,046
<TOTAL-ASSETS> 6,971,908
<CURRENT-LIABILITIES> 607,609
<BONDS> 0
<COMMON> 59,174
0
0
<OTHER-SE> 5,681,538
<TOTAL-LIABILITY-AND-EQUITY> 6,971,908
<SALES> 1,315,700
<TOTAL-REVENUES> 1,315,700
<CGS> 261,587
<TOTAL-COSTS> 261,587
<OTHER-EXPENSES> 792,581
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,829)
<INCOME-PRETAX> 283,830
<INCOME-TAX> 34,596
<INCOME-CONTINUING> 249,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 249,234
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
