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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, 2000
COMMISSION FILE NO. 000-20989
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 55413-2820
(Address of principal executive offices)
(612) 378-1180
(Issuer's telephone number, including area code)
Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.01 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]
Issuer's revenues for its most recent fiscal year: $5,560,019
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 May 19, 2000 was $14,938,178.
The number of shares outstanding of the issuer's only class of common stock on
May 19, 2000 was 5,975,271.
Documents Incorporated By Reference: Portions of the Registrant's Proxy
Statement for its 2000 Annual Meeting of Shareholders (the "Proxy Statement"),
are incorporated by reference in Part III.
Transitional Small Business Disclosure Format:
YES [ ] NO [X]
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PART I
Uroplasty, Inc. ("Uroplasty", the "Company", or 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.
Forward-looking statements may be contained in the "Management's Discussion and
Analysis or Plan of Operation" and other section of this filing. 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 "Factors Affecting the Business" 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.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
The Registrant designs, develops, manufactures, and markets medical products
primarily for the treatment of urinary incontinence and vesicoureteral reflux.
The Registrant's key product is Macroplastique(R) Implants, an injectable, soft
tissue bulking agent used to treat certain types of stress urinary incontinence
("SUI"), the most common form of urinary incontinence. SUI refers to the
involuntary loss of urine as a result of activities that increase
intra-abdominal pressure, such as coughing, laughing, or exercising.
Macroplastique is also used to treat vesicoureteral reflux ("VUR"), a condition
occurring mostly in children in which urine flows backward from the bladder into
the kidney. In addition, doctors in Europe are beginning to use Macroplastique
to treat incontinence in men recovering from prostate surgery. In June 1996,
Macroplastique received the CE mark in Europe (similar to FDA approval in the
United States), allowing the product to be sold throughout the European Union.
Macroplastique is not sold in the United States because it has not been approved
for marketing by the Food and Drug Administration ("FDA"). However, the Company
is currently conducting human clinical trials in the United States on
Macroplastique for the treatment of female SUI pursuant to an Investigational
Device Exemption ("IDE") granted by the FDA in July 1999.
It is estimated urinary incontinence afflicts about 5% of the general population
and women comprise approximately 85% of the sufferers. In Europe, currently the
Registrant's largest market, approximately 17 million people suffer from various
forms of urinary incontinence and about 14.5 million of these sufferers are
women. Bulking agents such as Macroplastique are used to treat women with SUI
caused by intrinsic sphincter deficiency, estimated by the Registrant to
comprise 10% of the female incontinence market or about 1.4 million women in
Europe alone. Of the estimated 2.6 million European men who are incontinent, the
Registrant believes about 25% are candidates for treatment with Macroplastique.
VUR is primarily a pediatric concern, with a prevalence estimated to be as high
as 1% of the pediatric population. The Registrant estimates about half of this
population are candidates for Macroplastique treatments.
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MACROPLASTIQUE(R) IMPLANTS
Macroplastique is an injectable soft tissue bulking agent used to treat SUI and
VUR. Macroplastique is a proprietary composition of heat vulcanized, highly
textured, solid, soft, irregularly shaped polydimethylsiloxane (solid silicone)
implants suspended in a biocompatible carrier solution. Based on the
Registrant's clinical experience outside the United States, Macroplastique does
not cause chronic inflammation, and is not resorbed by the body. Macroplastique
is used to provide bulking of the urethral sphincter to treat female SUI. The
actual implantation of Macroplastique is minimally invasive and can be
accomplished in less than 30 minutes in an inpatient or outpatient setting. It
is designed to restore the patient to normal urinary continence almost
immediately following treatment. Macroplastique is also used to treat
vesicoureteral reflux, a condition occurring primarily in children, as well as
incontinence in men after prostate surgery.
The Registrant markets Macroplastique on the basis that its use can lead to
lower surgical risk, shorter recovery time, and less expense than more invasive
alternatives. The Registrant believes the advantages of Macroplastique are its
biocompatibility, cost effectiveness, and successful use in over 20,000 patients
overseas since 1991.
URINARY INCONTINENCE MARKET
Urinary incontinence is an involuntary loss of urine so severe it has social
and/or hygienic consequences. In varying degrees, urinary incontinence is a
problem suffered by millions of people worldwide. The Agency for Health Care
Policy and Research (a division of the Public Health Service, U.S. Department of
Health and Human Services) estimated in 1996 there were approximately 13 million
adults with urinary incontinence in the United States. The same agency estimated
the total cost (utilizing all management and curative approaches) of treating
incontinence of all types in the United States as $15 billion in 1996. Urinary
incontinence can result in a substantial decrease in a person's quality of life
and is often the main reason a family moves an elderly person to nursing home
care. The Registrant expects the incidence of urinary incontinence will rise as
the percentage of elderly people continues to increase.
TYPES OF URINARY INCONTINENCE
The mechanisms of urinary incontinence are complicated and involve the
interaction between several anatomical structures. In females, urinary
continence is controlled primarily by the sphincter muscle. This muscle
surrounds the urethra and provides constrictive pressure to prevent urine from
flowing out of the bladder. Urination occurs when the sphincter relaxes as the
bladder contracts, allowing urine to flow through the urethra. The urinary
sphincter is also responsible for maintaining continence during periods of
physical stress. Incontinence may result when any part of the urinary tract
fails to function as intended. A broad range of conditions and disorders can
cause incontinence, including birth defects (e.g., Spina Bifida), pelvic
surgery, injuries to the pelvic region or the spinal cord, neurological diseases
(e.g. Multiple Sclerosis, Poliomyelitis), and degenerative changes associated
with aging.
Stress Urinary Incontinence: Stress urinary incontinence ("SUI") refers to the
involuntary loss of urine due to an increase in intra-abdominal pressure from
coughing, sneezing, laughing, straining or lifting. In women, the most common
cause of SUI is hypermobility, a lack of anatomic stability primarily caused by
weak surrounding tissue, resulting in the abnormal movement of the bladder neck
and urethra. This anatomical problem is often the result of childbirth. SUI can
also be caused by intrinsic sphincter deficiency ("ISD"), or the inability of
the sphincter valve or muscle to function properly. ISD can be due to congenital
sphincter weakness or deterioration of the muscular wall of the urethra after
trauma, spinal cord lesion or radiation therapy. To date, Macroplastique has
been used to treat incontinence in women suffering from SUI caused by intrinsic
sphincter deficiency.
Urge Incontinence: Urge incontinence refers to the involuntary loss of urine
associated with an abrupt, strong desire to urinate. Urge incontinence often
occurs with neurologic problems, causing the bladder to contract and empty with
little or no warning.
Overflow Incontinence: Overflow incontinence is associated with an
over-distention of the bladder. This can be the result of an underactive bladder
or an obstruction in the bladder or urethra.
Mixed Incontinence: Mixed incontinence is the combination of urge and stress
incontinence (and, in some cases, overflow). Since prostate enlargement often
obstructs the urethra, older men often have urge incontinence coupled with
overflow incontinence.
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MANAGEMENT AND TREATMENT OF URINARY INCONTINENCE
There are two general approaches to dealing with urinary incontinence. One
approach is to manage symptoms with items such as pads or diapers. The other
approach is to undergo curative treatments in an attempt to restore continence,
such as injection of bulking agents or by invasive surgeries. The Registrant
believes and endorses the treatment of urinary incontinence from the least
invasive to the most invasive therapy as needed.
Management of Urinary Incontinence
Absorbent Products: Absorbent products are the most common form of management
for urinary incontinence because men and women can use them without consulting a
physician. The cost of adult diapers and pads can be substantial, thus creating
a continuous financial burden for patients. Additionally, this management
technique may require frequent changing of diapers and pads to control patient
embarrassment due to odor and/or soiling.
Behavior Modification: The techniques used in behavior modification include
bladder training, scheduled voiding, and pelvic floor muscle exercises known as
Kegels. Some of the tools used in conjunction with these training regimes are
vaginal cones or weights, biofeedback devices, and electrical stimulation. While
these are typically low-risk activities, they do not work for many patients.
Even when considered effective they may only partly alleviate the symptoms and
are seldom curative. These techniques are recommended for lower grade or less
severe cases of urinary incontinence.
Penile Compression Devices: Penile clamps are reserved for temporary use with
male incontinence. Complications such as penile and urethral erosion, penile
edema, pain, and obstruction can be associated with extended and/or improper
use.
Pelvic Organ Support Devices: A pessary is a doughnut-shaped device made of
flexible materials. They are designed to temporarily reduce pelvic prolapse and
alleviate symptoms of pelvic relaxation in females with and without
incontinence. When these devices are misused or neglected, complications such as
ulceration of the vagina and rectovaginal and vesicovaginal fistula can occur.
Persons using pessaries require frequent, regular monitoring.
Occlusion Devices: Urethral occlusion devices, or "plugs", of various designs
are intended to be temporarily applied to occlude the urethra and/or bladder.
They are disposable products and either fit over the urethral opening or in the
urethra and/or bladder to obstruct the involuntary leakage of urine. They are
intended to be used by younger, more physically active stress incontinent women,
because they are more likely to be motivated to use a disposable urethral plug
on a daily basis. The primary problems with these devices are urinary tract
infections, treatment compliance, and progressive urethral dilation which may
require larger plugs over time.
Urinary Catheters and Collection Devices: There are four types of urinary
catheters: 1) intermittent (inserted through the urethra into the bladder every
3 to 6 hours for bladder drainage; may be appropriate for the management of
acute or chronic urinary retention); 2) indwelling (a closed sterile system
inserted through the urethra to allow bladder drainage; may be needed for
short-term treatment and for terminally ill patients); 3) suprapubic (requires
percutaneous or surgical introduction of a catheter into the bladder through the
abdominal wall, for short-term use following gynecologic, urologic and other
types of surgery or as an alternative to long-term urethral catheter use in
men); and 4) external collection (devices made from latex rubber, polyvinyl or
silicone resembling a condom, are secured on the shaft of the penis by a
double-sided adhesive, latex or foam strap and are connected to urine collecting
bags by a tube; may be useful for short-term maintenance). The type and severity
of incontinence and the patient's physical and mental condition determine which
is the best catheter option for the patient.
Drug Therapy: Drug treatment is used to manage multiple types of urinary
incontinence. These drugs tend to fall into one of two categories: those that
manage urge urinary incontinence by affecting the contraction of the muscle
tissue of the bladder and those that manage stress urinary incontinence by
either affecting contraction of the muscle tissue of the bladder neck or
improving the quality of the mucosal lining of the bladder neck and urethra.
Drugs seldom cure stress urinary incontinence and the potential side effects
include urinary retention, nausea, dizziness, blurred vision and the possibility
of unwanted interactions with other drugs.
Curative Treatments for Urinary Incontinence
Surgery: In women, SUI can be surgically corrected through various suspension
and sling procedures. In these procedures, the physician elevates and stabilizes
the urethra and bladder neck. Current surgical procedures require vaginal or
abdominal incisions and are typically performed under general anesthesia.
Surgery is expensive, traumatic, and involves a 3 to 10 day hospital stay with
several months required for full recovery. In men, the main surgical option is
an implanted artificial
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urinary sphincter. However, it carries with it the inherent risks of device
malfunction, tissue erosion and atrophy, and infection. In practice, the
artificial urinary sphincter is rarely applicable to the management of
uncomplicated stress incontinence.
Injectable Bulking Agents: Bulking agents are inserted with a needle into the
area around the urethra, thereby augmenting or bulking the sphincter. Hence,
these materials are often called "bulk-enhancing agents", "bulking agents", or
"injectables". Bulking agents may be either synthetic or biologically derived.
Bulking agents are an attractive alternative to surgery because they are
considerably less invasive than many of the surgical procedures described above.
For this reason, bulking agents represent a particularly desirable treatment
option for the elderly or infirm who may not otherwise be able to withstand the
trauma and morbidity resulting from a fully invasive surgical procedure. Active
women also can benefit from the use of bulking agents since their use will often
allow the patient to return to normal activities in a matter of days instead of
weeks for fully invasive surgical procedures. The 1996 Clinical Practice
Guidelines published by the U.S. Department of Health and Human Services
recommend periurethral bulking agents as a first line treatment for men with ISD
and for women with ISD who do not have co-existing hypermobility.
The two major types of bulking agents are biologically derived and synthetic
agents. Biologically derived bulking agents include injections of autologous fat
and bovine collagen. Fat injections involve complex, invasive harvesting of the
patient's own fat cells and reinjecting them into the bladder neck. Another
procedure involves the injection of processed bovine collagen. The body resorbs
biologically derived agents over time and subsequent injections may be required.
Macroplastique (polydimethylsiloxane) is a synthetic bulking agent. Other
synthetic bulking agents are composed of polytetrafluoroethylene (PTFE)
(currently an investigational device in the U.S. and commercially available
elsewhere) and pyrolytic carbon-coated beads (approved for commercial sale in
the U.S.).
MARKETING, DISTRIBUTION, AND SALES
The Registrant markets and sells Macroplastique and the related ancillary
products used in the implantation procedure only in countries outside the United
States, primarily in Europe. The Registrant has direct sales forces consisting
of seven persons in the United Kingdom, and one sales person for each of The
Netherlands and Canada (in addition to two independent sales representatives in
Canada). Additionally, the Registrant employs five sales managers in The
Netherlands and two in the United States to manage a network of distributors
selling the Company's products in over 35 countries including Europe, Asia,
Australia, and Latin America. The Registrant's technical staff in The
Netherlands and the United States trains both new as well as existing
distributors. The Company has written territory-specific distribution agreements
with each of the individual distributors. None of the distributors may sell
injectable products that compete directly with Macroplastique. No distributor
accounted for more than 10% of the Company's sales. Collectively, the Company's
distributors accounted for approximately 57% and 50% of total net sales in
fiscal years 2000 and 1999, respectively.
The Registrant recently introduced to markets outside the United States a newly
developed set of instruments for the delivery of Macroplastique named the
Macroplastique(R) Implantation System (MIS). The MIS is intended for use by
urologists, gynecologists, and urogynecologists for the implantation of
Macroplastique without the aid of an endoscope. Historically, urologists have
principally performed the Macroplastique procedure. The Company believes that
the MIS will make Macroplastique available to a larger number of physicians and
therefore more female SUI sufferers. However, there can be no assurance that the
MIS will have any significant effect on increasing sales of Macroplastique.
OTHER PRODUCTS
In addition to the urological applications, the Company's implantable bulking
material is also marketed by the Company outside the United States for
reconstructive and cosmetic plastic surgery applications and vocal cord
rehabilitation under the trade name Bioplastique(TM). In The Netherlands and
United Kingdom only, the Company's direct sales force distributes certain wound
care products in accordance with a distributor agreement. Under the terms of the
Distributor Agreement, the Company is not obligated to purchase any minimum
level of wound care products.
GOVERNMENT REGULATIONS
The Registrant's medical device products are subject to regulation by various
governmental agencies depending upon where the products are manufactured and/or
sold. In markets such as the United States and Europe, these regulations are
substantial and can significantly affect a company's ability to obtain and/or
maintain approval for manufacturing and distribution of medical device products.
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In order to market its products within the countries consisting of the European
Union, the Registrant is required to obtain CE marking for its products. To
obtain CE marking, a product must comply with the requirements set forth in
Council Directive 93/42/EEC published in Volume 36 (12 July 1993) of the
Official Journal of the European Communities. This document is called the
Medical Device Directives ("MDD") in Europe. CE mark authorization is granted by
organizations called Notified Bodies who are approved by their respective
national Competent Authorities (which are usually referred to as National Health
Ministries) to conduct medical device evaluations. Notified Bodies are technical
expert organizations who serve as the auditing and certifying arm of the
Competent Authorities.
Under the European MDD, Macroplastique is considered a Class IIb long-term
implantable device. To obtain the CE mark for Macroplastique, the Registrant was
required to submit extensive information regarding product design, labeling, and
preclinical and clinical safety testing to its Notified Body for evaluation by
expert reviewers. In addition, the Registrant maintains registration to rigorous
quality standards ISO 9001 and EN46001. After successfully demonstrating full
compliance to the MDD, the Notified Body issued a Certificate of Authorization
to the Registrant in June 1996, allowing the Registrant to place the CE mark on
Macroplastique and the related accessories. Upon fulfilling any additional
national requirements, Macroplastique can be marketed throughout the European
Union. The Registrant is subject to periodic surveillance audits by its Notified
Body to ensure it adheres to the requirements of the MDD. Changes in existing
requirements or adoption of new requirements or policies could adversely affect
the ability of the Registrant to comply with regulatory requirements. Failure to
comply with regulatory requirements could have a material adverse effect on the
Registrant's business, financial condition, and results of operations. There can
be no assurance the Registrant will not be required to incur significant costs
to comply with laws and regulations in the future, or that laws or regulations
will not have a material adverse effect upon the Registrant's business,
financial condition, or results of operations.
The Registrant maintains facilities in the United States, United Kingdom, The
Netherlands, and Canada, each of which has numerous federal, state, and local
laws relating to such matters as safe working conditions, manufacturing
practices, environmental protection, fire hazard control and disposal of
hazardous or potentially hazardous substances. There can be no assurance that
the Registrant will not be required to incur significant costs to comply with
such laws and regulations now or in the future or that such laws or regulations
will not have a material adverse effect upon the Registrant's ability to do
business, financial condition, or results of operations.
In the United States, the Registrant must comply with the Federal Food, Drug,
and Cosmetic Act, as amended, which is enforced by the FDA. The FDA has
determined that urethral bulking agents such as Macroplastique are Class III
devices subject to a Pre-Market Approval (PMA) application prior to marketing in
the United States.
A PMA is a rigorous submission requiring the manufacturer to substantiate claims
of safety and effectiveness with valid scientific evidence. The PMA process is
lengthy and expensive with no guarantee of final approval at its completion. In
some instances, the FDA will decide that additional testing or clinical studies
are necessary to support the PMA submission. Such a decision considerably
lengthens the time and expense required for obtaining U.S. marketing approval.
If the FDA approves the PMA submission, it may still place certain conditions on
the manufacturer, such as the initiation of a post-marketing study or
restrictions to the product's intended use.
After PMA approval, the Registrant must comply with other FDA regulations to
maintain its U.S. marketing approval. The Registrant's manufacturing facilities
will be subject to routine inspections by the FDA to ensure the Registrant is in
compliance with Quality System Requirements. Even though the Registrant has
achieved ISO 9001 registration, there can be no assurance the FDA would find the
Registrant's quality system to be in compliance with all relevant aspects of the
requirements. The Registrant is also subject to a variety of state and local
laws and regulations in those states or localities where its product will be
manufactured and/or marketed. Any applicable state or local regulations may
hinder the Registrant's ability to market its products in those states or
localities.
THIRD-PARTY REIMBURSEMENT
Throughout much of the world, the Registrant sells Macroplastique to hospitals
and other users who often transfer the cost of the medical product and services
to various third-party payers. These third-party payers consist of government
health programs, private health insurance plans, managed care organizations, and
other similar programs. They may deny or substantially limit reimbursement if
they believe that a medical device was not used in accordance with established
payer protocols regarding cost-efficient treatment methods, used for an
unapproved indication, and/or was not otherwise covered. In some markets,
medical device manufacturers are being forced to demonstrate the clinical
efficacy and cost-effectiveness of their products to third-party payers before
these organizations will agree to provide reimbursement to patients. Changes to
third-party reimbursement policies in the United States, Europe, and other
Macroplastique markets could significantly reduce the Registrant's ability to
commercialize its products.
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In most European nations and other Macroplastique markets, third-party
reimbursement is currently available for Macroplastique for the treatment of
urinary incontinence. Within the United States, third-party reimbursement is
currently available for certain bulking agents and the Registrant believes it
can obtain third-party reimbursement for Macroplastique near the time the
product is approved for marketing or sometime thereafter. However, there is
currently no uniform policy for reimbursement in the United States and no
guarantee Macroplastique will be reimbursed at the levels expected by the
Registrant, if at all. The availability of third-party reimbursement for
Macroplastique or competitors' products and continuing efforts to reduce the
costs of health care by decreasing reimbursement rates may reduce the price
received by the Registrant for sale of Macroplastique.
PRODUCT LIABILITY
The medical device industry is subject to substantial litigation. The Registrant
is a manufacturer of a long-term implantable device and consequently faces an
inherent business risk of exposure to product liability claims resulting from
alleged adverse effects to the patient. The Registrant currently carries $2
million of worldwide product liability insurance on a claims made form, plus
another policy specific to the United Kingdom only. There can be no assurance,
however, that the Registrant's existing insurance coverage limits are adequate
to protect the Registrant from any liabilities which it might incur in
connection with the clinical trials of Macroplastique or the initial
commercialization of Macroplastique in the United States. There can be no
assurance that liability claims will not exceed coverage limits. Such insurance
is expensive and in the future may not be available on acceptable terms, if at
all. Furthermore, the Registrant does not expect to be able to obtain insurance
covering its costs and losses as a result of any recall of its products due to
alleged defects, whether such a recall is instituted by the Registrant or
required by a regulatory agency. A product liability claim, recall, or other
claim with respect to uninsured liabilities or in excess of insured liabilities
could have a material adverse effect on the business, financial condition, and
results of operations of the Registrant.
MANUFACTURING
The Registrant manufactures Macroplastique at its own facilities. Components are
manufactured in the United States, and finished products in The Netherlands from
medical grade materials obtained from qualified suppliers. The Registrant's
facilities utilize dedicated heating, ventilation, and high efficiency
particulate air (HEPA) filtration systems for the manufacturing areas to provide
a controlled working environment. All manufacturing processes, including
material storage, handling, gowning, and cleaning, are performed according to
written procedures approved by the Registrant's Quality Department. All critical
manufacturing processes are performed in a cleanroom environment by trained
production technicians. An outside vendor sterilizes Macroplastique using a
validated method and returns the product to the Registrant for final inspection
and testing.
The Company currently purchases its base silicone solution from Rhodia (formerly
Applied Silicone Corporation) and its carrier solution from GAF Corporation,
which are single sources of supply for such products at the moment, and with
neither of whom does it have a supply agreement. Alternative suppliers for these
materials do exist should the current suppliers discontinue production or
distribution. However, the Company would need to complete additional testing to
qualify the materials obtained from any new suppliers. Additionally, limited
notice of the need to switch suppliers for either of these materials could
result in production delays and inventory depletion.
The Registrant's manufacturing facilities are periodically audited by an
independent registrar to ensure compliance with ISO 9001 and EN 46001 quality
system requirements. Prior to marketing the product in the United States, the
Registrant will also be inspected by the U.S. FDA and will also be subject to
any additional state, local, and federal government regulations in both the U.S.
and The Netherlands applicable to the manufacture of the Registrant's products.
See "Description of Business - Government Regulations".
COMPETITION
Competition in the urinary incontinence products market is intense. The
Registrant faces competition from existing manufacturers of management and
curative treatments, competing manufacturers of commercially available bulking
agents, and from companies developing new or improved treatment methods. The
Registrant believes the principal competitive factors among treatment methods
include physician and patient acceptance of the method in managing or curing
incontinence, cost and availability of third-party reimbursement, marketing and
sales capability, and the existence of meaningful patent protection. The
Registrant's ability to compete in this market also will depend on the
consistency of its product quality as well as delivery and product pricing.
Other factors within and outside the Registrant's control include its
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product development and innovation capabilities, ability to obtain required
regulatory approvals, ability to protect its proprietary technology,
manufacturing and marketing capabilities, and ability to attract and retain
skilled employees.
Current major competitors who compete in the urinary incontinence management and
treatment market include Kimberly-Clark Corp. and Procter & Gamble Co. for adult
diapers and absorbent pads; Empi, Inc. and MedCare Technologies, Inc. with
electrical pelvic floor stimulators and behavioral treatments; Abbott
Laboratories, Warners Wellcome, and Hoechst Marion Roussell for pharmaceutical
treatments; C. R. Bard, Inc., Kendall Co., Mentor Corp., and Baxter
International for catheter/urine collection bag drainage systems; and American
Medical Systems, Inc.; Boston Scientific Corporation, Influence, Inc., and
Johnson & Johnson for sling procedures and artificial sphincter implants. The
Registrant believes some of its current competitors and others who do not have
injectable bulking products are also seeking to develop competing bulking
agents.
There are currently at least three injectable soft tissue bulking agent products
competing directly with Macroplastique. Two of these are supplied by companies
with considerably larger financial and other resources than Uroplasty. These
products are Urethrin(R), manufactured and distributed only outside the U.S. by
Mentor, Inc. and Contigen(R) distributed by C.R. Bard worldwide pursuant to
license agreements with Collagen Aesthetics Corporation (an INAMED Company). The
third company, Advanced UroScience, Inc., obtained FDA approval in September
1999 for a bulking agent comprised of pyrolytic carbon coated beads in a carrier
gel.
The Registrant expects other devices for treating urinary incontinence by means
of soft tissue injection therapy will become available in the future and
competition will continue to intensify. In addition, the Registrant believes
that the Convatec division of Bristol Meyers Squibb, Micro Therapeutics, Inc.,
Reprogenesis, Inc., Protein Polymer Technologies, Inc., BCD Matrix, Inc.,
Lifecell Corporation, and Collagenesis are performing research and development
and/or are seeking regulatory approval for various kinds of injectable bulking
agents for treatment of urinary incontinence. Additionally, American Medical
Systems acquired Urovive(R) from UroSurge, Inc. Urovive is a detachable balloon
for implantation in the urethra as a bulking agent in treating stress urinary
incontinence.
Many of the Registrant's competitors and potential competitors have
significantly greater financial, manufacturing, marketing, distribution and
technical resources, and experience than the Registrant. In addition, many of
the Registrant's competitors offer broader product lines within the urology
market, which may give such competitors the ability to negotiate exclusive,
long-term supply contracts and to offer comprehensive pricing for their
products. It is possible that other large health care and consumer products
companies may enter this industry in the future. Furthermore, smaller companies,
academic institutions, governmental agencies, and other public and private
research organizations will continue to conduct research, seek patent
protection, and establish arrangements for commercializing products. Such
products may compete directly with any products which may be offered by the
Registrant in the future.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
No customer accounted for 10% or more of the Company's consolidated net sales
during either fiscal 2000 and 1999.
PATENTS, TRADEMARKS, AND LICENSES
The Company's success depends in part on its ability to obtain and maintain
patent protection for its products, preserve its trade secrets, and operate
without infringing the proprietary rights of third parties. The Company seeks to
protect its technology by filing patent applications for patentable technologies
that it considers important to the development of its business based on an
analysis of the cost of obtaining a patent, the likely scope of protection, and
the relative benefits of patent protection compared to trade secret protection,
among other considerations. The Company also relies upon trade secrets,
know-how, and continuing technological innovation to develop and maintain its
competitive position.
Multiple patents covering the Macroplastique materials, processes, and
applications have been issued to the Company by the Patent Offices in the United
States, United Kingdom, Japan, Germany, The Netherlands, and Canada. Such
patents will expire in the U.S. at various times between 2010 and 2013.
Applications are also currently pending in various other European countries.
There can be no assurance that any of the Company's pending and/or future U.S.
and/or foreign patent applications will result in issued patents, or that any
issued patents will be of sufficient scope or strength to provide meaningful
protection of the Company's products. The coverage sought in a patent
application can be denied or significantly reduced before the patent is issued.
In addition, there can be no assurance that any current and/or future U.S.
and/or foreign patents of the Company will not be challenged or circumvented by
competitors or others, or that such patents will be found to be valid or
sufficiently broad to protect the Company's technology or provide the Company
with any competitive advantage. Should attempts be made to challenge,
circumvent, or invalidate the Company's patents in the U.S. Patent and Trademark
<PAGE> 9
Office or courts of competent jurisdiction, including administrative boards or
tribunals, the Company may have to participate in legal or quasi-legal
proceedings therein to maintain, defend, and/or enforce its rights in these
patents. Any legal proceedings to maintain, defend, and/or enforce the Company's
patent rights could be lengthy and costly, with no guarantee of success.
The Company also relies heavily upon trade secrets and other proprietary
information. The Company seeks to maintain the confidentiality of such
information by requiring employees, consultants, and other parties to sign
confidentiality agreements, and by limiting access by parties outside the
Company to such information. There can be no assurance, however, that these
measures will prevent the unauthorized disclosure or use of this information or
that others will not be able to independently develop such information.
Additionally, there can be no assurance that any agreements regarding
confidentiality and non-disclosure will not be breached, or, in the event of any
breach, that adequate remedies would be available to the Company.
In July 1998, the Company announced that the United States Patent and Trademark
Office ("USPTO") had informed the Company that the USPTO will, as Uroplasty
requested, initiate an interference proceeding between Uroplasty and Advanced
UroScience, Inc. ("AUI"), to determine which company was the first to invent
carbon-coated micro beads for use in treating urinary incontinence. Although the
USPTO originally granted the applicable patent to AUI, the interference
proceeding may result in a determination that either Uroplasty or AUI is the
proper holder, or that a patent should not have been granted. See Item 3. "Legal
Proceedings".
In 1992, the Company and its then parent, Bioplasty, Inc., were sued by Collagen
Corporation, which alleged that Macroplastique infringed on one of its U.S.
patents for a bulking agent. The parties entered into a license and settlement
agreement in 1993 pursuant to which the Company pays Collagen a royalty of 5% of
net sales of certain products sold in the U.S. with a minimum of $50,000 per
year. In fiscal 1999, the Company received several letters from Collagen's
counsel questioning whether additional royalties were payable as a result of
either the manufacture or sale by the Company of Macroplastique in the United
States. The Company's position is that royalties are payable only on "net sales"
in the United States and, there having been none, no additional royalties are
payable. Collagen has not brought any new or renewed legal action in connection
with its allegations. There can be no assurance, however, that Collagen and/or
any other third party will not pursue legal action with respect to these
matters.
Claims by competitors such as Collagen and other third parties that the
Company's products allegedly infringe the patent or other intellectual property
rights of others could have a material adverse effect on the Company. There has
been substantial litigation regarding patent and other intellectual property
rights in the medical device industry, and intellectual property litigation may
be used against the Company as a means of gaining a competitive advantage.
Intellectual property litigation is complex, time-consuming, and expensive, and
the outcome of such litigation is difficult to predict. Any future litigation,
regardless of outcome, could result in substantial expense to the Company and
significant diversion of the efforts of the Company's technical and management
personnel. An adverse outcome in any litigation could subject the Company to
significant liabilities to third parties, require disputed rights to be licensed
from others, if licenses to such rights could be obtained, or require the
Company to cease making, using, or selling certain products. There can be no
assurance that any licenses required under any patents or proprietary rights
would be made available on terms acceptable to the Company, if at all. In
addition to being costly, protracted litigation to defend or prosecute
intellectual property could result in the Company being unable to commercialize
Macroplastique on a timely basis or at all, and could have a material adverse
effect on the Company's business, financial condition, and results of
operations.
Although the Company intends to apply for 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 Company has a Royalty Agreement with three individuals, two of whom are
former officers and directors. Under such Agreement, the Company pays royalties,
in the aggregate, of three to five percent of net sales of Macroplastique and
Bioplastique, subject to a monthly minimum of $4,500. The royalties payable
under this Agreement will continue until the patent referenced in the Agreement
expires in 2010.
In December 1995, the Company obtained a license from a British surgeon which
became superceded by a subsequent Agreement entered into by the parties in
October 1998. Pursuant to this subsequent Agreement, the Company received an
absolute assignment of a patent relating to the Macroplastique Implantation
System in return for a royalty equal to ten British Pounds for each unit sold
during the life of the patent. The Company began commercialization of the
product in March 2000.
<PAGE> 10
RESEARCH AND DEVELOPMENT
The Registrant has an active Research and Development program working to develop
new products in the field of incontinence. The Registrant is also continually
evaluating potential improvements as well as new methods and devices for the
implantation of Macroplastique and on new applications for this material. R&D
expenses also include the costs of clinical studies including the U.S. trial
currently underway pursuant to the IDE approved by the FDA. Expenditures for
research and development totaled $1,684,178 and $1,236,855 for the fiscal years
ended March 31, 2000 and March 31, 1999, respectively. None of these costs were
borne directly by customers.
COMPLIANCE WITH ENVIRONMENTAL LAWS
Compliance by the Registrant with applicable environmental requirements during
its fiscal years ended March 31, 2000 and 1999 has not had a material effect
upon its capital expenditures, earnings, or competitive position.
EMPLOYEES
As of March 31, 2000, the Registrant had sixty-three employees, of which
fifty-seven were full-time and six part-time. None of such employees has a
collective bargaining agreement with the Registrant.
INCORPORATION AND CURRENT SUBSIDIARIES
The Registrant was incorporated in January 1992 as a Minnesota Corporation and a
wholly-owned subsidiary of its parent. In February 1995, the Registrant became a
stand-alone, privately-held company pursuant to a Plan of Reorganization
confirmed by the U.S. Bankruptcy Court. The Registrant's shares became
registered and the Registrant became a reporting company pursuant to a
registration statement filed with the Securities and Exchange Commission in July
1996.
The Registrant's wholly owned foreign subsidiaries and their respective
principal functions are as follows:
Uroplasty BV Incorporated in The Netherlands, is the
manufacturer of Macroplastique and sells
Macroplastique outside of The Netherlands to
distributors.
Uroplasty LTD Incorporated in and acts as the sole
distributor of Macroplastique, Bioplastique, and
wound care products in the United Kingdom.
Bioplasty BV Incorporated in and acts as a distributor of
Macroplastique, Bioplastique, and wound care
products in The Netherlands.
Uroplasty Corp. Incorporated in and acts as a distributor of
Macroplastique and Bioplastique in Canada.
FACTORS AFFECTING THE BUSINESS
The following factors are important and should be considered carefully in
connection with any evaluation of the Company's business, financial condition,
results of operations and prospects. Additionally, any one or combination of the
following factors could cause the Company's actual results to materially differ
from those reflected in any forward-looking statements of the Company.
Government Regulation: The Registrant's product, manufacturing processes, and
product development activities are subject to extensive and rigorous regulation
by governmental and regulatory authorities in foreign countries similar to the
U.S. Food and Drug Administration ("FDA"). In Europe, where Macroplastique(R)
has been used since 1991, the Registrant's introduction of medical devices as
well as the design, manufacturing, labeling, distribution, sale, marketing,
advertising, promotion, and recordkeeping procedures for the Company's products
are subject to laws and regulations governing medical devices contained in the
European Medical Device Directives ("MDD").
In the United States, the Registrant cannot market or sell Macroplastique until
pre-market approval ("PMA") authorization is received from the FDA. In July
1999, Uroplasty received approval from the FDA of an Investigational Device
Exemption ("IDE") relating to a U.S. clinical trial for the treatment of female
stress urinary incontinence ("SUI") using Macroplastique. Upon successful
completion of the clinical trial, the Registrant plans to submit a PMA
application to the FDA requesting approval to commercialize Macroplastique in
the U.S. There can be no assurance that the U.S. clinical trials will be
successfully completed or that the requisite approvals or certifications will be
granted for Macroplastique or any other product on a timely basis, or at all, or
that such regulatory reviews will not involve delays that would conflict with
the Company's ability to commercialize its products in the U.S.
<PAGE> 11
If and when regulatory approval to market a product is obtained from the FDA,
this approval may necessitate limitations on the indicated uses of the product.
Marketing approval can also be withdrawn by the FDA in the United States (and by
regulatory authorities in foreign countries) due to failure to comply with
regulatory requirements or the occurrence of unforeseen problems following
initial approval. The Registrant may be required to make further filings with
the FDA and other regulatory authorities in foreign countries under certain
circumstances, such as the addition of product claims or product reformulation.
The FDA and other regulatory authorities in foreign countries could also limit
or prevent the manufacture and/or distribution of the Registrant's products and
have the power to demand the recall of such products. Medical device regulations
depend strongly on administrative interpretation, and there can be no assurance
that future interpretation made by the FDA or other regulatory bodies, with
possible retroactive effect, will not adversely affect the Registrant. The FDA
and various other authorities either currently inspect or will inspect the
Registrant's facilities from time to time to determine whether Uroplasty is in
compliance with regulations relating to medical device manufacturing including
regulations concerning design, manufacturing, testing, quality control, product
labeling, distribution, promotion, and record keeping practices. A determination
that the Registrant is in material violation of such regulations could lead to
the imposition of civil penalties, including fines, product recalls, product
seizures or, in extreme cases, criminal sanctions.
Effects of Technological Developments: The Registrant competes in a market
characterized by technological innovation, extensive research efforts, and
significant competition. Improvements in existing treatment options or
developments of new treatment methods may have a material adverse effect on the
Registrant's ability to increase sales of Macroplastique, successfully
commercialize any future products, and may render such products noncompetitive
or obsolete. Other companies are currently engaged in the development of
products and innovative methods for treating SUI that are similar to, or compete
with, Macroplastique and these companies may have greater financial resources
and know how than the Registrant. Significant developments by any of these
companies or advances by medical researchers at universities, government
research facilities, or private research laboratories could eliminate the market
for Macroplastique or otherwise render Macroplastique obsolete. Although
technological change has not had a direct material impact on the Registrant in
recent years, the potential that such a change might occur is a continuing risk
for the Company.
Macroplastique Market Acceptance: The Registrant currently sells Macroplastique
in Europe and other foreign countries. Acceptance of Macroplastique by
physicians in preference to other treatment options, including other bulking
agents, will depend upon the demonstration of its safety and effectiveness,
relative performance of Macroplastique compared to other market approved
products, availability of other treatment options, and ease of use and relative
cost compared to treatment options including other bulking agents. Physicians
may elect not to use Macroplastique unless adequate reimbursement from health
care payers is available. Health care payer acceptance of a treatment utilizing
Macroplastique will require, among other things, evidence of the cost
effectiveness of this treatment as compared to other treatment options. There
can be no assurance that the acceptance of Macroplastique by urological and
gynecological health care providers will develop or continue to grow in Europe
and other areas where Macroplastique is already used.
Single Product: The Company currently derives over 90% of its revenues from
sales of Macroplastique and related products. Discontinuance or reduction of
revenues from Macroplastique sold outside of the U.S. could therefore have a
material adverse effect on the Registrant's business, financial condition, and
results of operations. The Company does not expect that commercialization of
other new products will be feasible without a substantial, continuing commitment
to research and development for an extended period of time or acquisitions of
new products, or both. Also, new medical products must typically undergo
clinical trials and regulatory clearance or approval before commercialization.
There can be no assurance as to whether or when commercialization of other
products might begin or as to the likelihood that any such initiative would be
successful. The market for medically-related products changes constantly. If the
market changes, new or strengthened competition emerges, customer preferences
change, and/or new technology causes Macroplastique to be viewed as a less
effective treatment, the Registrant's business, financial condition, and results
of operation would be adversely affected.
Patents and Proprietary Rights: The Registrant's success depends in part on the
ability to preserve trade secrets, obtain and maintain patent protection for
Uroplasty's products under United States and international patent laws and other
intellectual property laws, and operate without infringing upon the proprietary
rights of third parties. Patents covering the materials, process, and
applications have been issued to the Company by the Patent Offices in the United
States, United Kingdom, Japan, Germany, The Netherlands, and Canada.
Applications are also currently pending in various other European countries. No
assurances can be given that the scope of any patent protection will prevent
competitors (most of which have financial and other resources substantially
greater than the Registrant) from introducing products competitive with the
Company's products, the Registrant's patents will be held valid if subsequently
challenged, others will not claim rights in or ownership of the patents and
other proprietary rights held by the Registrant, or the Company's product and
processes will not infringe, or be alleged to infringe, the proprietary rights
of others.
<PAGE> 12
A number of patents have been issued to others in the area of injectable bulking
agents. The validity and breadth of claims covered in medical device technology
patents involve complex legal and factual questions and may therefore be highly
uncertain. The Registrant also relies upon unpatented trade secrets to protect
the Company's proprietary technology. No assurance can be given that others will
not independently develop or otherwise acquire substantially equivalent
techniques and/or gain access to and disclose the Registrant's proprietary
technology. Further, no assurance can be given that the Company can ultimately
protect meaningful rights to such unpatented proprietary technology. There has
been substantial litigation regarding patent and other intellectual property
rights in the medical device industry. Companies in the medical device industry
have employed intellectual property litigation to gain a competitive advantage.
Litigation may be necessary to enforce any patents issued to the Registrant,
protect trade secrets or proprietary information owned by the Registrant against
claimed infringement of the rights of others, or determine the scope and
validity of the proprietary rights of others. The defense and prosecution of
patent litigation or other legal and/or administrative proceedings related to
patents is costly and time-consuming regardless of the outcome. An adverse
outcome in any litigation could subject the Registrant to significant
liabilities to third parties, require disputed rights to be licensed from
others, and/or require the Registrant to cease making, using, or selling any
products. There can be no assurance that any licenses required under any patents
or proprietary rights would be made available on terms acceptable to the
Company, if at all.
Public Reaction to Silicone Products: Macroplastique is comprised of heat
vulcanized polydimethylsiloxane, which results in a solid, flexible silicone
elastomer. In the 1990's the United States breast implant industry became the
subject of significant controversies surrounding the possible effects upon the
human body of the use of silicone gel in breast implants resulting in a massive
flood of product liability litigation, leading to the bankruptcy of several
companies, including Uroplasty's former parent, Bioplasty, Inc. (which in turn
caused Uroplasty, Inc. to file for bankruptcy in 1993). The Company uses only
solid silicone material and not semi-liquid silicone gel (as was used in breast
implants) in the Macroplastique product. However, there can be no assurance that
the use by the Registrant and others of solid silicone in medical devices
implanted in the human body will not result in controversies, litigation, or
negative publicity from news media, competitors or legislative and regulatory
investigations. Furthermore, there can be no assurance that in the event such
negative publicity occurred, that it would not have a significant adverse effect
on the Company's future financial position or results of operations.
Third-Party Reimbursement: Any success of the Registrant will depend, in part,
upon satisfactory reimbursement for Macroplastique procedures from third party
health care payers. In the U.S. and many foreign countries, third-party
reimbursement is currently generally available for surgical procedures for
urinary incontinence, but there is no uniform policy for such reimbursements.
The Company sells Macroplastique to physicians, hospitals and other users which
bill various third-party payers, such as government health programs, private
health insurance plans, managed care organizations, and other similar programs
for the health care products and services provided to their patients. Payers may
deny reimbursement if they determine that a product used in a procedure was not
used in accordance with established payer protocols regarding cost-efficient
treatment methods, was used for an unapproved indication or was not otherwise
covered. Third-party payers are increasingly challenging the prices charged for
medical products and services and, in some instances, have pressured medical
suppliers to lower their prices. The availability of third-party reimbursement
for Macroplastique or competitors' products and continuing efforts to reduce the
costs of health care by decreasing reimbursement rates may reduce the price
received by the Company for Macroplastique or increase the relative expense to
the consumer. The Registrant believes a material amount of Macroplastique
revenues are received from third party payers; therefore failure to receive
sufficient reimbursement from health care payers for procedures using
Macroplastique or adverse changes in governmental and third-party payers'
policies toward reimbursement for such procedures would materially adversely
affect the Registrant's business, financial condition, and results of
operations.
Lack of Long-Term Controlled Clinical Studies: Although the Registrant is
currently conducting a controlled human clinical trial pursuant to an IDE
approved by the FDA and the Company believes Macroplastique is safe when used as
recommended, no controlled human clinical studies have yet been completed on
this product. Accordingly, no assurance can be given that Macroplastique, even
when used as recommended, will have the effect intended or will not have adverse
effects over a patient's lifetime. For example, there can be no assurance as to
whether or how frequently patients will require additional treatments of
Macroplastique and whether any such additional treatments will be effective or
will have a negative effect on physician, payer, or patient acceptance.
Raw Material Suppliers: The Registrant currently purchases certain raw materials
from single sources. Alternative suppliers for these materials exist should the
current suppliers discontinue production or distribution. However, the Company
would need to complete additional testing to qualify the materials obtained from
any new suppliers. Additionally, limited notice of the need to switch suppliers
for any of these materials could result in production delays and inventory
depletion, and alternative suppliers could change prices significantly higher
than current costs. The Registrant has not experienced any shortage of these
materials to date; however, no assurance can be given that shortages of these
materials will not be experienced in the future.
<PAGE> 13
Research and Development Expenses and Expected Losses: The Registrant's future
success will depend upon, among other factors, its ability to introduce and
market Macroplastique on a timely basis in the U.S. and, to that end, the
Company has committed the largest portion of the proceeds resulting from its
private placement of Common Stock in fiscal 1998. Although the Registrant
realized net income during fiscal years 1997 through 1999, the Company incurred
a substantial loss in fiscal 2000 and expects to incur a loss in fiscal year
2001 due largely to the significant costs associated with clinical trials and
other aspects of the FDA approval process. The development and commercialization
by the Registrant of Macroplastique and other products in the U.S. will require
substantial additional product development, clinical, regulatory, and other
expenditures for the foreseeable future.
Additional Capital Requirements: In the event product sales and/or expenses
differ from expected levels, the Registrant may require additional financing to
complete the IDE clinical study and pre-market approval application for
Macroplastique in the U.S. Further, the Registrant will need additional funds
for market introduction of Macroplastique to the U.S. for female SUI, as well as
for the development of VUR and male incontinence markets, because separate
regulatory approval is needed for each of these indications. There can be no
assurance that additional capital will be available to the Registrant when
needed or on terms acceptable to the Company.
International Operations and Currency Fluctuations: The Registrant currently
sells Macroplastique only outside the U.S. through wholly-owned foreign
subsidiaries. Sales and operations outside of the U.S. are subject to certain
inherent risks, including, without limitation, fluctuations in the value of the
U.S. dollar relative to foreign currencies, tariffs, quotas, taxes and other
market barriers, political and economic instability, restrictions on the import
and export of technology, difficulties in staffing and managing international
operations, difficulties in obtaining work permits for employees, difficulties
in collecting receivables, potentially adverse tax consequences, potential
language barriers, and difficulties in operating in a different culture and
legal system. There can be no assurance that any of these factors will not have
a materially adverse effect on the Registrant's financial condition or results
of operations. In particular, because the Company's international sales are
denominated primarily in Dutch Guilders or the Euro, currency fluctuations in
countries where the Registrant does business may render the Company's products
less price competitive than those of competing companies whose sales are
denominated in weaker currencies. The Registrant reports its financial results
in U.S. dollars, and fluctuations in the value of either the dollar or the
currencies in which the Company transacts business can have a negative impact on
its financial condition or results of operations. Consequently, the Registrant
has exposure to foreign currency exchange risks. The Registrant attempts to
lessen that exposure by keeping to a minimum the amount of time that trade
payables and receivables are outstanding, and by denominating product sales in a
currency which historically has been more stable than other foreign currencies.
However, there can be no assurance that historical stability of any currency is
any indication of its future stability.
Limited Public Market for Common Stock; Possible Stock Price Volatility:
Announcements of new products and services by the Registrant or its competitors,
technological innovations by competitors, disputes regarding patents or other
proprietary rights, regulatory developments and economic and other external
factors, as well as period-to-period fluctuations in the Company's financial
results, could cause the market price of the Registrant's Common Stock to
fluctuate significantly. In addition, the stock market in general and, in
particular the market prices for medical technology companies, have historically
experienced significant volatility which has affected the market price of
securities of many companies and which has sometimes been unrelated to the
operating performance of such companies. Such volatility may adversely affect
the market price of the Company's Common Stock.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant owns office and warehouse space at Hofkamp 2, 6161 DC Geleen, The
Netherlands. In addition, the Registrant leases office, warehouse, laboratory
and production space at 2718 Summer Street NE, Minneapolis Minnesota 55413-2820,
USA; office and warehouse space at Unit 3, Woodside business Park, Whitley Wood
Lane, Reading, Berkshire RG2 8LW, United Kingdom; and office, warehouse,
laboratory and manufacturing space at Industrieweg 12, 5627 BS Eindhoven, The
Netherlands; office space at 5955 Airport Road, Suite 305, L4V 1R9 Mississauga,
Ontario, Canada. The Registrant considers its facilities adequate; however,
additional office, production, and warehouse space will likely be necessary upon
FDA approval and subsequent increases in production, marketing, and sales
activities in the U.S.
<PAGE> 14
ITEM 3. 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 pyrolytic carbon-coated micro
beads for use in treating urinary incontinence. The USPTO had not, as of June
14, 2000, formally declared the interference proceeding.
At such time as the interference proceeding is formally declared, 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, during the third quarter of fiscal 1999, the Company commenced a
related lawsuit against AUI for misappropriation of trade secrets pertaining to
the pyrolytic carbon-coated micro beads. AUI, subsequent to December 31, 1998,
brought a counterclaim against the Company with respect to such matter. In
October 1999, the Company announced that the U.S. District Court for Minnesota
had granted a motion by AUI to dismiss the Company's claims against AUI, which
the Company has since appealed.
The U.S. Court of Appeals, Eighth Circuit, has notified the Company that
pursuant to the Company's request, the appeal has been transferred to the
Federal Circuit, and in May 2000 the Company filed its appeal of the District
Court's order granting summary judgment with the U.S. Court of Appeals for the
Federal Circuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant did not submit any matter to a vote of its security holders
during the fourth quarter of its recently completed fiscal year.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of the date hereof, there is only a limited public trading market for the
Company's Common Stock.
The following table sets forth the high and low bid prices for the Company's
Common Stock, as reported in the NASD'S Bulletin Board system (market symbol
UROP.OB) on a quarterly basis, from April 1999 through March 2000, and for the
period April 1, 2000 through May 19, 2000. Such quotations represent interdealer
prices, without retail markup, mark down or commission, and do not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Quarters Low Bid High Bid
<S> <C> <C>
First Quarter $2.250 $3.625
Second Quarter 2.500 3.563
Third Quarter 2.000 2.625
Fourth Quarter 2.250 3.313
April 1, 2000 - May 19, 2000 $2.625 $2.875
</TABLE>
As of May 19, 2000, approximately 630 holders held the Company's Common Stock of
record. Registered ownership includes nominees who may hold securities on behalf
of multiple beneficial owners.
<PAGE> 15
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS DISCUSSION OF THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS OF THE
REGISTRANT SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY
BY, THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE WITHIN THIS
ANNUAL REPORT, THE MATERIAL CONTAINED IN THE "RISK FACTORS" AND "BUSINESS"
SECTIONS OF THIS ANNUAL REPORT, AND THE CAUTIONARY DISCLOSURE ABOUT
FORWARD-LOOKING STATEMENTS AT THE FRONT OF PART I OF THIS ANNUAL REPORT.
OVERVIEW
Uroplasty, Inc. develops, manufactures, and/or markets medical products in
certain segments of the urology, wound care, and plastic surgery markets.
Products sold by the Company are subject to regulation by the U.S. FDA and/or
various regulating agencies in countries outside the U.S. Existing sales have
been, and future sales growth is expected to be, derived from Macroplastique and
related ancillary products designed for use by urologists, gynecologists, and
uro-gynecologists for the primary treatment of SUI and for the treatment of VUR
(backflow of urine from the bladder to the kidneys). Macroplastique is comprised
of soft, irregularly textured, vulcanized, medical grade silicone elastomer
implants suspended in a biocompatible carrier solution. When injected via a
minimally invasive procedure in the soft tissue of the mid-urethra and bladder
neck (in the case of SUI), and at the ureteral orifice (in the case of
vesicoureteral reflux), the implants act as a bulking material to restore
urinary continence or to eliminate reflux of urine from the bladder to the
kidneys.
In addition to the urological applications, the Company's implantable bulking
material is also marketed by the Company outside the U.S. for reconstructive and
cosmetic plastic surgery applications and vocal cord rehabilitation under the
trade name Bioplastique(TM). In The Netherlands and United Kingdom, the
Company's direct sales force distributes on behalf of another company certain
wound care products in accordance with an executed Distributor Agreement. Under
the terms of the Distributor Agreement, the Company is not obligated to purchase
any minimum level of wound care products.
The Company's products are currently sold by direct sales forces in the United
Kingdom, The Netherlands, and Canada, and by a network of distributors in
numerous countries outside the U.S., including Western Europe, Australia, and
Central and South America. In September 1999, the Company received unconditional
approval from the FDA pursuant to a previously filed IDE Application to initiate
human clinical studies in the U.S. for the Company's primary product
Macroplastique in the treatment of female SUI. Through various urological
investigators in various clinical sites across the U.S., the Company is
currently performing the human procedures specified by the study protocol.
The Company's current objectives are to focus on sales and marketing activities
designed to increase market penetration and sales of Macroplastique for SUI and
VUR applications in countries outside the U.S., and to efficiently and
effectively execute the Macroplastique human clinical study for treatment of
female SUI within the U.S.
Set forth below is management's discussion and analysis of the financial
condition and results of operations for the year ended March 31, 2000 and 1999.
See note 7 to the Consolidated Financial Statements for business segment
information.
RESULTS OF OPERATIONS
Net Sales: The Macroplastique product line accounts for over 90% of total net
sales during the periods presented. In fiscal year ended March 31, 2000, net
sales of all products were $5,560,019, representing a $251,432 or 5% increase
when compared to net sales of $5,308,587 for fiscal 1999. The sales increase was
the result of a 13% increase in units and a modest price increase for the cost
of inflation. These increases were partially offset by exchange rate changes
(strengthening of the dollar in fiscal 2000 caused foreign sales to be
translated into less dollars than they would have been in fiscal 1999) and a
change in customer mix. A higher percentage of sales in fiscal 2000 were to
distributors at lower unit sales amounts than hospitals and physicians in direct
markets.
Management expects that unit sales of Macroplastique will increase in fiscal
2001 as a result of an expanded sales force in existing and new geographical
markets and as a result of enhancements to the surgical technique leading to an
increased number of implanting doctors and greater penetration of the SUI
market. There can be no assurance however, that the Company's efforts to
increase sales and market penetration will be successful.
Gross Profit: Gross profit was $3,955,896 and $4,051,530 for the years ended
March 31, 2000 and 1999, respectively, or 71% and 76% of net sales. The decrease
in gross profit percentage is due to increased manufacturing costs and a higher
portion of Macroplastique sales made to distributors at lower sales prices and
gross margins when compared to sales made to
<PAGE> 16
hospitals and physicians in direct markets. Increased manufacturing costs
resulted from the Company's investment in upgraded operational systems made to
increase capacities and enhance the Company's ability to meet future sales
demands with the same or lower production costs per unit.
General and Administrative Expense: General and administrative ("G&A") expenses
increased 20% from $1,246,997 during fiscal 1999 to $1,491,529 during fiscal
2000. The increase in G&A expenses is primarily due to increased costs of
professional fees related to the legal proceeding described in Item 3 and
increased office and sales support personnel costs.
Research and Development Expense: Research and development ("R&D") expenses
increased $447,323, or 36%, from $1,236,855 during fiscal 1999 to $1,684,178
during fiscal 2000. The increase in R&D expense during the year ended March 31,
2000 reflects development costs and testing associated with various product
enhancements for the Macroplastique delivery system, which are intended to
broaden the base of physicians using Macroplastique to treat female SUI. R&D
expense also increased in fiscal 2000 due to various costs associated with FDA
and other clinical studies, including additional personnel and a greater portion
of existing salaries dedicated to the clinical function.
Management believes that initiation of Macroplastique human clinical studies in
the U.S. pursuant to the Company's approved IDE Application will cause R&D
expenses to increase further during fiscal 2001. The human clinical study costs
are primarily comprised of physician and medical fees relating to the patient
procedures and follow-up examinations, in addition to the costs of monitoring
the study, maintaining and evaluating the patient treatment, and follow-up
examination data.
Selling and Marketing Expenses: Selling and marketing costs increased 43% from
$1,445,877 during fiscal 1999 to $2,071,547 during fiscal 2000. The increase in
selling and marketing expenses are principally attributable to personnel costs
of the expanding sales forces outside the U.S., sales incentive programs, and a
greater presence at international and domestic medical conferences intended to
increase market awareness of Macroplastique. Because the Company's intention is
to continue to expand Macroplastique marketing and distribution activities and
to introduce improved delivery instrumentation to make the product available to
a larger number of physicians, selling and marketing expenses are expected to
continue to increase in fiscal 2001.
Other Income (Expense): Other income (expense) includes interest income,
interest expense, foreign currency exchange gains and losses, and other
non-operating costs when incurred. Other income (expense) was $(82,582) and
$125,521 for the years ended March 31, 2000 and 1999, respectively. The majority
of the difference was due to exchange gains and losses and a $40,000 gain on
liquidation of a subsidiary in fiscal 1999. Exchange gains and losses are
recognized primarily as a result of fluctuations in currency rates between the
U.S. Dollar (the functional reporting currency) and the Dutch Guilder, Canadian
Dollar, and British Pound (currencies of the Company's subsidiaries), as well as
their effect on the valuation of intercompany obligations between the Registrant
and its foreign subsidiaries. These exchange gains and losses do not represent
actual cash flow gains and losses until such time as one currency is used to
purchase another currency for the payment of a portion of the intercompany
obligation. During fiscal 2000, approximately $41,000 of the total exchange loss
of $177,326 reflected realized currency transaction losses. During fiscal 1999,
the $19,937 exchange loss was comprised of approximately $59,000 of realized
currency transaction losses and unrealized losses of approximately $39,000
primarily from revaluation of intercompany obligations.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company's cash and cash equivalent balances totaled
$1,553,093 and investments in marketable securities totaled an additional
$750,000. Marketable securities at March 31, 2000, are comprised of investments
in investment-grade commercial paper. The capital resources existing at March
31, 2000 were derived from operations during the fiscal years ended March 31,
1997 and 1998, plus the net proceeds from the Company's sale of approximately
1.7 million shares of Common Stock in June 1998.
At March 31, 2000, the Company had working capital of approximately $3.5
million. During fiscal year 2000, the Company used approximately $1,220,000 of
cash from operating activities. The Company expects cash to be used in
operations during fiscal 2001 as a result of Macroplastique sales and marketing
initiatives and the costs of conducting the Macroplastique human clinical trial
in the U.S.
The Company currently has no financing arrangements in place with any bank for
general working capital needs, and no material unused sources of liquidity other
than the cash and marketable securities described above, equipment leasing
arrangements, and its accounts receivable and inventory balances at March 31,
2000 of approximately $955,000 and $736,000, respectively.
<PAGE> 17
The Company has operations in the U.S. and internationally. U.S. 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.
Management expects increasing costs associated with the conduct of the U.S.
human clinical study for Macroplastique pursuant to the FDA approved IDE, the
subsequent PMA submission and review process, and pre-commercialization and
market launch costs in the U.S. relating to Macroplastique for female SUI. In
the event that anticipated increases in current sales levels are not achieved,
additional funds from the sale of the Company's securities or other alternative
sources will be necessary. There can be no assurance that such alternative
sources of funds will be available to the Company when they are needed or
pursuant to terms considered acceptable to the Company at that time. However,
Management believes that current resources and the funds generated from sale of
the Company's products outside the U.S. will be adequate to meet the Company's
cash flow needs through fiscal 2001.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company plans to adopt the new standard in fiscal 2001. The
Company is currently evaluating SFAS No. 133, but does not expect it will have a
material effect on its financial statements.
In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. Aspects of SAB 101
relevant to the Company primarily concern the timing of the recognition of
revenue and certain expenses related to arrangements that involve the receipt of
nonrefundable, up-front fees. SAB 101 requires that in particular situations the
nonrefundable fees and certain associated costs be recognized over the
contractual term or average life of the underlying arrangement. SAB 101 will be
effective for the Company's fiscal year ending March 31, 2001.
In March 2000 the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation". FIN No. 44 provides guidance only for certain issues that arose
in applying APB Opinion No. 25, "Accounting for Stock Issued to Employees". The
Company plans to adopt the provisions of this interpretation in Fiscal 2001.
ITEM 7. FINANCIAL STATEMENTS
The information contained under the headings "Consolidated Statements of
Operations", "Consolidated Balance Sheets", "Consolidated Statements of
Shareholders' Equity and Comprehensive Loss", "Consolidated Statements of Cash
Flows", "Notes to Consolidated Financial Statements" and "Independent Auditors'
Report" is incorporated herein by reference.
<PAGE> 18
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The Registrant's Directors and Executive Officers as of March 31, 2000 were as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE TERM EXPIRES
<S> <C> <C> <C> <C>
Daniel G. Holman 54 Chairman, President, CEO 1994 2000
Joel R. Pitlor 61 Director 1994 2001
R. Patrick Maxwell 55 Director 1994 2002
Alex Gerwer 45 Director 1998 2000
Christopher Harris 41 Vice President of Corporate Development
Larry Heinemann 47 Vice President of Sales & Marketing
Susan Hartjes Holman 46 Vice President of Operations & Regulatory Affairs
Arie J. Koole 36 Controller
Donald A. Major 38 Chief Financial Officer, Secretary
</TABLE>
All directors are members of the Nominating Committee; all directors except Mr.
Holman are members of the Compensation Committee; and Mr. Maxwell and Mr. Pitlor
are members of the Audit Committee.
The Registrant has entered into Employment Agreements with Mr. Holman, Mr.
Major, Ms. Holman, Mr. Heinemann, and Mr. Harris, the terms of which, among
other things, specify a base salary subject to annual adjustment by mutual
agreement of the Company and the Employee, and a severance payment to the
employee upon employment termination without cause. Any severance amounts
payable under the Agreement shall be limited to the Employee's base salary for
not less than four months and not longer than twelve months after employment
termination, depending on the Employee's years of service. Contemporaneously
with the execution of the Employment Agreement, each of the officers executed an
Employee Confidentiality, Inventions, Non-Solicitation, and Non-Compete
Agreement, certain terms of which specify the Employee shall not disclose
confidential information, shall assign to the Company without charge all
intellectual property relating to the Company's business which is created or
conceived during the term of employment, shall not encourage Employees to leave
the employment of the Company for any reason and shall not compete with the
Company during the term of employment and for a period of eighteen months
thereafter. Also in connection with the execution of these Agreements, the
officers were granted varying amounts of stock options to purchase the Company's
Common Stock at the fair market value at date of grant of $2.50 per share. In
all cases the options are exercisable for five years or until one year after
employment termination (subject to certain termination provisions), whichever
date is earlier, and vest in three equal amounts on each one year anniversary
date subsequent to the option grant date.
The following paragraphs describe the business experience of each of the
Registrant's directors and officers.
<PAGE> 19
Daniel G. Holman: Mr. Holman has served as Chairman of the Board, President and
Chief Executive Officer of Uroplasty, Inc. since February 1994, and as Chief
Financial Officer from June 1996 to November 1999. He was Executive Vice
President of Bioplasty, Inc. from 1973 to 1985, its President from 1985 to 1987,
and Secretary from 1986 to March 1992. Mr. Holman has been Chairman of the Board
of Bioplasty, Inc. since March 1992, and President and CEO since February 22,
1993. He served as Chairman of the Board and Chief Executive Officer of
Bio-Vascular, Inc. from June 1988, to September 1991, served as a director of
Genetic Laboratories Wound Care, Inc. from February 1988 until July 1993, and as
Vice President from February 1988 through November 1992. Mr. Holman holds a
Bachelor of Arts degree in Biology from St. Cloud State University.
Joel R. Pitlor: Mr. Pitlor has been a director since February 1994. He 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. 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: Mr. Maxwell was appointed a Director of Uroplasty in April
1994 and elected by shareholders in August 1997. He has been an attorney since
1969. Mr. Maxwell holds and has held management positions in numerous other
businesses (primarily temporary placement services, telemarketing and legal
expense insurance).
Alex Gerwer: Mr. Gerwer was elected a Director of Uroplasty in August 1998. He
has been a Principal and Consultant for AKN in San Diego, California, a
management consulting firm to medical companies since 1990. From 1988 to 1990,
he was the Manager of New Business Development for Nihon Kohden America, a
medical electronics company in Irvine, California. Mr. Gerwer was a research
Scientist for Diatek, Inc. in San Diego, California from 1986 to 1988. Mr.
Gerwer received a B.S. in Chemistry and Physics from the University of Michigan,
and a Master of Science in Chemical Physics from the California Institute of
Technology.
Christopher Harris: Mr. Harris joined Bioplasty in October 1989 as Area Sales
Manager in the United Kingdom. Since September 1994, he has been the Managing
Director of the Registrant's subsidiary in the United Kingdom. In February 1996,
Mr. Harris was appointed as Director of Corporate Development and in January
1997 he was appointed Vice President of Corporate Development. Mr. Harris, a
certified nurse in the United Kingdom, practiced general surgery nursing for two
years and operating room nursing for nine years prior to 1989.
Larry Heinemann: Mr. Heinemann joined Uroplasty in September 1998 as Director of
Sales for North and South America. In July 1999 he was promoted to Vice
President of Sales and Marketing for Uroplasty, Inc. Prior to joining Uroplasty,
Inc., Mr. Heinemann worked for two divisions of C. R. Bard, Inc. From January
1996 to September 1998, he was employed by the Bard Medical Division in the
positions of Territory Manager and Sales Training. From May 1987 to January
1996, Mr. Heinemann was employed by the Bard Urological Division in various
positions of Sales Consulting and Training Management. Prior to that time, Mr.
Heinemann was employed by surgical device divisions of Squibb and Sterling Drug
in various sales management positions. Mr. Heinemann holds a Bachelor of Science
Degree from the School of Business of Eastern Illinois University and majored in
Marketing and Personnel Management. He is a member of SUNA (Society of
Urological Nursing Association), and has been serving on the Board as an
Industry Liaison for the Upper Midwest Chapter since 1991.
Susan Hartjes Holman: Ms. Holman joined Bioplasty, Inc. in September 1991 as
Director of Operations and served as Vice President of Operations and Regulatory
Affairs from April 1993 until May 1996. In November 1994 she was appointed
Vice-President of Operations and Regulatory Affairs for Uroplasty, Inc. and was
elected Secretary in September 1996. Prior to 1991, Mrs. Holman 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 manufacturing,
quality assurance, and research. Ms. Holman has Bachelor of Arts degrees in
Biology-Microbiology and Biomedical Science from St. Cloud State University, and
has done graduate work in the biological sciences. Mrs. Holman is a senior
member and a Certified Quality Auditor of the American Society for Quality and
served several years on its Executive Committee and is a member of the American
Society of Microbiology, and the Henrici Society for Microbiologists. She has
served on several national and international standards committees.
Arie Koole: Mr. Koole joined Bioplasty in May 1993 as Financial Manager in The
Netherlands. Since January 2000 he has been the Managing Director of the
Registrant's subsidiaries in The Netherlands. In June 1996, Mr. Koole was
appointed as Director of Finance and in January 2000, Mr. Koole was appointed as
Controller. From 1987 to 1993, Mr. Koole was a financial auditor with the
international accounting firm Deloitte & Touche in The Netherlands. Mr. Koole
has a bachelor degree in Business Economics.
<PAGE> 20
Donald A. Major: Mr. Major joined Uroplasty, Inc. in November 1999 as Chief
Financial Officer and Secretary, and from January 1991 until May 1996, he served
in various officer positions with Bioplasty, Inc. and Uroplasty, Inc., the
latest of which was Vice President of Finance, Chief Financial Officer and
Secretary of Uroplasty, Inc. From May 1996 until November 1999, Mr. Major was
Chief Financial Officer of Advanced Bio-Surfaces, Inc., a Minneapolis, Minnesota
start-up company engaged in the development of an in-situ cured and
arthroscopically delivered polymer material for the resurfacing of worn joints
due to osteoarthritis. Prior to joining Bioplasty, Inc. in 1991, Mr. Major was
an Audit Manager with Grant Thornton, an international accounting and management
consulting firm. Mr. Major holds a Bachelor of Arts Degree in Accounting from
the College of Business at Michigan State University, is a Certified Public
Accountant, and a member of the American Institute of CPAs and the Minnesota
Society of CPAs.
Mr. Holman and Ms. Holman became husband and wife in June 1999.
ITEM 10. EXECUTIVE COMPENSATION
The information contained under the heading "Executive Compensation" in the
Proxy Statement is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Principal Shareholders" in the
Proxy Statement is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Certain Transactions" in the Proxy
Statement is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS 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:
<TABLE>
<CAPTION>
Number Description
<S> <C>
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 between Bio-Vascular, Inc. and
Uroplasty, Inc. (Filed as Exhibit 6.3 to Form 10SB)
</TABLE>
<PAGE> 21
<TABLE>
<S> <C>
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:
10.10 Employment Agreement between Uroplasty, Inc. and Daniel G. Holman dated
December 7, 1999.
10.11 Employment Agreement between Uroplasty, Inc. and Christopher Harris dated
December 7, 1999.
10.12 Employment Agreement between Uroplasty, Inc. and Donald A. Major dated
December 7, 1999.
10.13 Employment Agreement between Uroplasty, Inc. and Susan Holman dated December
7, 1999.
10.14 Employment Agreement between Uroplasty, Inc. and Larry Heinemann dated
December 7, 1999.
10.15 Uroplasty, Inc. 1997 Stock Option Plan as Amended July 29, 1999 and December
7, 1999.
10.16 Uroplasty, Inc. 1995 Stock Option Plan as Amended December 7, 1999.
13.0 Financial Statements
21.0 Subsidiaries of the Registrant
27.0 Financial Data Schedule
</TABLE>
<PAGE> 22
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 21, 2000 By: /s/ DONALD A. MAJOR
--------------------
Donald A. Major
Chief Financial Officer and Secretary
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.
<TABLE>
<CAPTION>
Name Title/Capacity Date
<S> <C> <C>
/s/ DANIEL G. HOLMAN President, Chief Executive Officer June 21, 2000
-------------------- Director (Principal Executive Officer)
Daniel G. Holman
/s/ DONALD A. MAJOR Chief Financial Officer June 21, 2000
------------------- (Principal Financial Officer)
Donald A. Major
/s/ ARIE J. KOOLE Controller June 21, 2000
----------------- (Principal Accounting Officer)
Arie J. Koole
/s/ JOEL R. PITLOR Director June 21, 2000
------------------
Joel R. Pitlor
/s/ R. PATRICK MAXWELL Director June 21, 2000
----------------------
R. Patrick Maxwell
/s/ ALEX GERWER Director June 21, 2000
---------------
Alex Gerwer
</TABLE>
