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, 1999
Commission file number 000-20989
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: 5,923,371 on
August 2, 1999
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, 1999 March 31, 1999
_________________ ______________
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,030,158 $ 1,588,984
Marketable securities 1,508,550 1,503,600
Accounts receivable trade 761,374 825,905
Inventories 706,048 754,813
Prepaid expenses 202,910 187,697
Other current assets 112,183 103,439
_________ _________
Total Current Assets 5,321,223 4,964,438
--------- ---------
Property, Plant and Equipment, net 1,190,792 1,228,255
Marketable securities-long term 0 761,325
Intangible assets, net of
accumulated amortization 108,352 111,625
_________ _________
TOTAL ASSETS $ 6,620,367 $ 7,065,643
========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 307,196 $ 295,267
Accrued liabilities:
Compensation and payroll taxes 80,588 139,960
Foreign sales tax 49,694 78,214
Royalties 29,000 34,400
Other 33,211 122,761
Current maturities - long term debt 48,788 46,464
_________ _________
Total Current Liabilities 548,477 717,066
Long term debt - less current maturities 601,126 631,848
_________ _________
Total Liabilities 1,149,603 1,348,914
--------- ---------
Shareholders' equity
Common stock $.01 par value;
Authorized 20,000,000 shares
Issued and outstanding - 5,923,371
shares at June 30 and
March 31, 1999, respectively. 59,234 59,234
Additional paid-in capital 5,784,045 5,784,045
Retained earnings (deficit) (78,964) 75,277
Accumulated other comprehensive loss (288,551) (196,827)
Note receivable-shareholder (5,000) (5,000)
__________ __________
Total Shareholders' Equity 5,470,764 5,716,729
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' __________ __________
EQUITY $ 6,620,367 $ 7,065,643
========== ==========
<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
1999 1998
__________ __________
<S> <C> <C>
Net sales $ 1,470,055 $ 1,315,700
Cost of goods sold 442,034 261,587
__________ __________
Gross profit 1,028,021 1,054,113
Operating expenses:
General and administrative 324,927 242,553
Research and development 286,142 218,141
Selling and marketing 541,622 331,887
__________ __________
1,152,691 792,581
---------- ----------
Operating profit (loss) (124,670) 261,532
Other income (expense):
Interest income 35,088 15,754
Interest expense (6,988) (8,829)
Foreign currency exchange gain (loss) (54,305) 18,905
Other 0 (3,532)
---------- ----------
(26,205) 22,298
Income (loss) pretax (150,875) 283,830
Income tax expense 3,366 34,596
__________ __________
Net (loss)income $ (154,241) $ 249,234
========== ==========
Net (loss) income per common share $(0.03) $0.05
Net (loss) income per common share
assuming dilution $(0.03) $0.05
Weighted average common and potential
common shares outstanding:
Basic 5,923,371 4,740,237
Diluted 5,923,371 5,079,455
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
1999 1998
__________ __________
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (154,241) $ 249,234
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operations:
Depreciation and amortization 44,905 45,914
Amortization of premium and discounts
marketable securities, net 6,042 0
Changes in operating assets and
liabilities:
Accounts receivable 64,531 (28,261)
Inventories 48,765 (82,784)
Prepaid expenses and other
current assets (23,957) (25,317)
Accounts payable 11,929 (27,122)
Accrued liabilities (182,842) 9,212
- ------------------------------------------------------------------------
Net cash (used in) provided by
operating activities (184,868) 140,876
- ------------------------------------------------------------------------
Cash flows from investing activities:
Payments for property, plant and equipm. (66,559) (90,742)
Proceeds from sale of property, plant
and equipment 10,440 0
Payments relating to intangible assets (2,677) (13,256)
Sale of marketable securities 750,000 0
- ------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 691,204 (103,998)
- ------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term obligations (12,640) (14,087)
Proceeds from issuance of notes payable 12,002 16,883
Net proceeds from issuance of stock 0 3,414,624
- ------------------------------------------------------------------------
Net cash (used in) provided by
financing activities (638) 3,417,420
- ------------------------------------------------------------------------
Effect of exchange rates on
cash and cash equivalents (64,524) 41,620
- ------------------------------------------------------------------------
Net increase in cash and cash
equivalents 441,174 3,495,918
Cash and cash equivalents at beginning
of period 1,588,984 889,541
- ------------------------------------------------------------------------
Cash and cash equivalents at end
of period $ 2,030,158 $ 4,385,459
- ------------------------------------------------------------------------
Supplemental disclosure of Cash Flow information:
Cash paid during the quarter:
for interest 6,988 8,829
for income taxes 13,263 2,156
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
UROPLASTY, INC. and Subsidiaries
NOTES 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, 1999.
The financial statements presented herein as of June 30, 1999 and for the
three months ended June 30, 1999 and 1998 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.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
(2) Marketable Securities
The Company accounts for its marketable debt securities in accordance with the
provisions of Statement of Financial Accounting Standards No. 115 ("SFAS
115"), "Accounting for Certain Investments in Debt and Equity Securities". The
Company's marketable debt securities are classified as available-for-sale and
are carried at fair value.
(3) Inventories
Inventories are summarized as follows:
June 30, 1999 March 31, 1999
_____________ ______________
Raw materials $ 110,514 $ 126,364
Work-in-process 315,396 354,521
Finished goods 280,138 273,928
________ ________
$ 706,048 $ 754,813
======== ========
(4) Comprehensive Income
SFAS No. 130 , "Reporting Comprehensive Income", establishes standards for
reporting and presentation of comprehensive income and its components in a
full set of financial statements. Comprehensive income consists of net income
and net unrealized gains (losses) on securities and is presented in the
consolidated statements of stockholders' equity and comprehensive income. The
statement requires only additional disclosures in the consolidated financial
statements; it does not affect the Company's financial position or results of
operations. The Company adopted SFAS No. 130 in fiscal 1999. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS No. 130. For the quarters ended June 30, 1999 and 1998 net (loss) income,
items of other comprehensive income and comprehensive income are as follows:
Three months ended
June 30
1999 1998
__________ __________
Net (loss) income $ (154,241) $ 249,234
Items of other comprehensive (loss) income:
Unrealized loss on marketable securities (333) 0
Translation adjustment (91,391) 26,098
__________ __________
Total comprehensive (loss) income $ (245,965) $ 275,332
========== ==========
(5) Reconciliation of earnings and share amounts used in EPS calculation
Basic earnings per common share was computed by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. Diluted earnings per common shares for the quarters ended June 30,
1999 and 1998 was calculated using the treasury stock method to compute the
weighted average common stock outstanding assuming the conversion of dilutive
potential common shares.
<TABLE>
<CAPTION>
Basic (loss) Dilutive (loss)
income income
per share per share
(Loss) income Effect of (Loss) income
Net (loss) to common dilutive to common
income shareholders securities shareholders
__________ ____________ __________ _____________
<S> <C> <C> <C> <C>
For the quarters ended
June 30, 1999
Loss (154,241) (154,241) - (154,241)
Shares - 5,923,371 - 5,923,371
Per share amount - (0,03) - (0,03)
June 30, 1998
Income 249,234 249,234 - 249,234
shares - 4,740,237 339,218 5,079,455
Per share amount - (0,05) - (0,05)
</TABLE>
<PAGE>
UROPLASTY, INC. and Subsidiaries
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company was incorporated in Minnesota in 1992 as a wholly-owned subsidiary
of Bioplasty, Inc.("Bioplasty"). Since February 1994, the Company has been a
separate and distinct entity from Bioplasty.
The Company sells Macroplastique(R) and the related ancillary products for use
in augmenting soft tissues for the purpose of treating urinary incontinence
and vesicoureteral reflux. At this time, sales are only made outside the
United States because the Company does not have regulatory approval to market
its product in the United States.
The Company's current objectives are to focus on growth in sales and market
penetration of Macroplastique in the European market for urinary incontinence
and vesicoureteral reflux treatment, and to begin the U.S. regulatory process
for Macroplastique as a treatment for female stress urinary incontinence.
The Company also sells the Macroplastique product in a different configuration
for plastic surgery applications under the name Bioplastique(tm), in limited
markets. In addition, the Company sells specialized wound care products in
the Netherlands and Great Britain as a distributor for Derma Sciences, Inc.,
pursuant to a written arrangement which provides for a schedule of prices and
involves the submission by the Company of purchase orders to meet product
demand.
Set forth below is management's discussion and analysis of the financial
condition and results of operations as of June 30, 1999 and for the three
months ended June 30, 1999 and 1998.
Results of Operations
Sales were $1,470,055 for the three months ended June 30, 1999 as compared to
$1,315,700 for the three months ended June 30, 1998. This increase of
$154,355, or 12%, is the result of increased sales of the Macroplastique
product due to increased overseas marketing activities. The Macroplastique
product line accounts for 94% 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.
The gross profit percentage decreased from 80% in the first quarter fiscal
1999 to 70% in the first quarter fiscal 2000. This decrease is due to new
manufacturing equipment installation, qualification and validation during the
first two months of the quarter, which resulted in lower than normal component
production at the U.S. facility and increased import duties on components
shipped from the United States to The Netherlands.
General and administrative expenses increased 34% from $242,553 in the first
quarter of fiscal 1999 to $324,927 in the first quarter of fiscal 2000. The
increase is primarily due to increased costs of professional fees related to
the legal proceeding decribed in Item 1 and increased personnel costs.
Research and development costs increased 31% from $218,141 in the first
quarter of fiscal 1999 to $286,142 in the first quarter of fiscal 2000. The
majority of this increase relates to the U.S. regulatory submission costs,
which were $109,094 in the first quarter of fiscal 2000 compared to $62,934
same period last year. Other R&D expenses increased 14% from $155,207 in
fiscal 1999 to $177,048 in fiscal 2000. Increased spending for research and
development projects is anticipated, along with expenditures for U.S.
regulatory submissions.
Selling and marketing costs increased 63% from $331,887 in the first quarter
of fiscal 1999 to $541,622 in the first quarter of fiscal 2000. This increase
is due to a non-recurring expense relating to the termination of an officer,
an increased sales force and expanded presence at international and domestic
medical conferences to increase market awareness of Macroplastique.
The operating loss for the quarter ended June 30, 1999 was $124,670, compared
to an operating profit of 261,532 for the same period last year. The decrease
is primarily due to increased operating expenses.
The other expense for the quarter ended June 30, 1999 was $26,205, compared to
other income of $22,298 for the same period last year. This decrease is
attributable to foreign currency exchange losses of approximately $54,000 in
the first quarter of fiscal 2000, partially offset by increased interest
income as a result of greater average cash balances related to the proceeds of
the private placement.
For the quarter ended June 30, 1999, net loss totaled $154,241 compared to net
income of $249,234 for the quarter ended June 30, 1998.
Liquidity and Capital Resources
As of June 30, 1999, the Company had $2,030,158 in cash and cash equivalents
and $1,508,550 in marketable securities. The capital resources were derived
from the private placement of common stock and existing sales of the
Registrant's products.
On June 30, 1999 the inventory balance was $706,048, compared to a balance of
$754,813 on March 31, 1999.
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, securities and accounts receivable balances. The
Company expects it can satisfy its cash requirements and does not expect it
will have to raise additional funds in the next twelve months.
The proceeds from the private placement in May and June, 1998 are being used
to pursue submissions, clinical studies and marketing approvals with the U.S.
Food and Drug Administration. The Company estimates that fiscal year 2000
funding for such purposes will be approximately $1,500,000. If such proceeds
are not sufficient to complete the Premarket Approval, additional cash from
internal or other sources will be needed in fiscal year 2001.
The Company has significant operations in the United States and
internationally. United States net operating loss carryforwards cannot be used
to offset taxable income in foreign jurisdictions. Furthermore, repatriation
of dividends to the U.S. parent may result in additional foreign or U.S.
taxes.
Forward-looking Statements
The Registrant may from time to time make written or oral "forward-looking
statements", including statements contained in this filing by the Company with
the Securities and Exchange Commission and in its reports to stockholders, as
well as elsewhere. "Forward-looking statements" are statements such as those
contained in projections, plans, objectives, estimates, statements of future
economic performance, and assumptions related to any of the foregoing, and may
be identified by the use of forward-looking terminology, such as "may,
"expect," "anticipate," "estimate, "goal," "continue," or other comparable
terminology. By their very nature, forward-looking statements are subject to
known and unknown risks and uncertainties relating to the Company's future
performance that may cause the actual results, performance or achievements of
the Company, or industry results, to differ materially from those expressed or
implied in any such "forward-looking statements". Any such statement is
qualified by reference to the following cautionary statements.
The Registrant's business operates in highly competitive markets and is
subject to changes in general economic conditions, competition, customer and
market preferences, government regulation, the impact of tax regulation,
foreign exchange rate fluctuations, the degree of market acceptance of
products, the uncertainties of potential litigation, as well as other risks
and uncertainties detailed elsewhere herein and from time to time in the
Registrant's Securities and Exchange Commission filings.
In this filing, the following section contains "forward-looking statements":
"Management's Discussion and Analysis of Financial Condition and Results of
Operation". Various factors and risks (not all of which are identifiable at
this time) could cause the Company's results, performance or achievements to
differ materially from that contained in the Company's forward-looking
statements, and investors are cautioned that any forward-looking statement
contained herein or elsewhere is qualified by and subject to the warnings and
cautionary statements contained above and in the Risk Factors section of this
filing.
The Company does not undertake and assumes no obligation to update any
forward-looking statement that may be made from time to time by or on behalf
of the Company.
Conversion to Euro Currency
On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "participating countries") adopted the euro as their common legal
currency and established fixed conversion rates between their existing
sovereign currencies and the euro. The euro trades on currency exchanges and
is available for non-cash transactions. The participating countries will
issue sovereign debt exclusively in euro, and will redenominate outstanding
sovereign debt in euro.
With respect to presently known trends and uncertainties related to the euro
conversion, the Company does not expect there will be any long-term
competitive implications of the conversion (such as effects on product or
service pricing due to increased transparency), nor does it anticipate any
material costs in connection with the conversion nor a lack of ability to pass
any costs that might result along to customers.
Year 2000 Compliance
The Company's existing information system, consisting of hardware and software
supplied by third parties, is year 2000 compliant. However, because most
computer systems are, by their nature, interdependent, it is possible that
non-compliant third party computers could impact the Company's operations. The
Company could be adversely affected by the year 2000 problem if it or
unrelated parties fail to successfully address this problem. The Company has
communicated with unrelated parties, including suppliers and regulatory
consultants with whom it deals, to coordinate year 2000 compliance. Based on
the information obtained, the Company developed a contingency plan which
identifies where the greatest risks of non-compliance exist and what steps the
Company might take in order to deal with the most reasonably likely worst case
scenario. Inventory levels of the Company's products are high enough to meet
product demands for a couple of months in case the Company would not be able
to manufacture products due to a worst case scenario. The costs incurred in
addressing year 2000 compliance are expensed as incurred in compliance with
GAAP. The costs were not material.
<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 three months ended
June 30, 1999.
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, as
requested by the Company, 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 USPTO has not, as of the date
hereof, formally commenced the interference proceeding.
At such time as the interference proceeding is formally commenced, 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.
In addition, subsequent to July 21, 1998, the Company commenced a related
lawsuit against AUI for misappropriation of trade secrets, and AUI, subsequent
to December 31, 1998, brought a counterclaim against the Company with respect
to such matter.
<PAGE>
UROPLASTY, INC. and Subsidiaries
SIGNATURE
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 2, 1999 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-31-2000
<PERIOD-START> Apr-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 2,030,158
<SECURITIES> 1,508,550
<RECEIVABLES> 761,395
<ALLOWANCES> 21
<INVENTORY> 706,048
<CURRENT-ASSETS> 5,321,223
<PP&E> 1,584,192
<DEPRECIATION> 393,400
<TOTAL-ASSETS> 6,620,367
<CURRENT-LIABILITIES> 548,477
<BONDS> 0
<COMMON> 59,234
0
0
<OTHER-SE> 5,411,530
<TOTAL-LIABILITY-AND-EQUITY> 6,620,367
<SALES> 1,470,055
<TOTAL-REVENUES> 1,470,055
<CGS> 442,034
<TOTAL-COSTS> 442,034
<OTHER-EXPENSES> 1,152,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,988)
<INCOME-PRETAX> (150,875)
<INCOME-TAX> 3,366
<INCOME-CONTINUING> (154,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154,241)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
