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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended March 31, 1999
Commission file number 000-23266
UroMed Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04 - 3104185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Providence Highway
Norwood, MA 02062
(Address of principal
executive offices)
(781) 762-2080
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- - --
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
5,184,037 shares of Common stock, no par value,
outstanding at April 30, 1999.
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UROMED CORPORATION
FORM 10-Q
For the quarterly period ended March 31, 1999
Table of contents Page No.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet at March 31, 1999 and December 31, 1998 3
Condensed Statement of Operations for the three months ended
March 31, 1999 and 1998 4
Condensed Statement of Cash Flows for the three months ended
March 31, 1999 and 1998 5
Notes to Condensed Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 -14
Part II - OTHER INFORMATION
Item 6. Exhibits 15
Item 7a. Quantitative and Qualitative Disclosures
About Market Risk 15
Signatures 16
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
UROMED CORPORATION
CONDENSED BALANCE SHEET
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,059 $ 11,576
Short-term investments 14,856 14,704
Inventories 452 422
Prepaid expenses and other assets 770 864
---------- ----------
Total current assets 24,137 27,566
Fixed assets, net 3,986 4,414
Other assets 2,024 1,626
---------- ----------
$ 30,147 $ 33,606
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 100 $ 250
Accrued expenses 2,383 3,026
---------- ----------
Total current liabilities 2,483 3,276
---------- ----------
Convertible subordinated notes 23,406 24,756
---------- ----------
Stockholders' equity:
Common stock 107,222 107,222
Other stockholders' deficit (102,964) (101,648)
---------- ----------
Stockholders' equity 4,258 5,574
---------- ----------
$ 30,147 $ 33,606
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Item 1. Financial Statements (continued)
UROMED CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
<S>
<C> <C>
1999 1998
-------- --------
Revenues $ 442 $ 61
-------- --------
Costs and expenses:
Cost of revenues 605 1,135
Research and development 752 1,921
Marketing and sales 438 1,764
General and administrative 616 1,077
Restructuring (80) 1,024
-------- --------
Total costs and expenses 2,331 6,921
-------- --------
Loss from operations (1,889) (6,860)
Interest income 316 897
Interest expense (406) (1,134)
-------- --------
Loss before extraordinary gain on early
retirement of debt (1,979) (7,097)
Extraordinary gain on early retirement
of debt 701 -
-------- --------
Net loss $(1,278) $(7,097)
======== ========
Basic and diluted per share amounts:
Loss before extraordinary gain on
early retirement of debt $ (.38) $ (1.33)
Extraordinary gain on early
retirement of debt .13 -
-------- --------
Net loss $ (.25) $ (1.33)
========= ========
Basic and diluted weighted average common
shares outstanding 5,179 5,355
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Item 1. Financial Statements (continued)
UROMED CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
<S>
<C> <C>
1999 1998
Net cash used in operating activities $ (2,743) $ (5,372)
--------- ---------
Cash flows from investing activities:
(Purchases) sales of short-term
investments, net (190) 5,710
Purchase of fixed assets - (461)
Decrease in other assets 37 -
--------- ---------
Net cash provided by (used for)
investing activities (153) 5,249
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock - 31
Repurchase of convertible subordinated notes (621) -
--------- ---------
Net cash provided by (used for)
financing activities (621) 31
--------- ---------
Net decrease in cash and cash equivalents (3,517) (92)
Cash and cash equivalents, beginning of period 11,576 12,007
--------- ---------
Cash and cash equivalents, end of period $ 8,059 $ 11,915
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 36 $ 0
</TABLE>
The accompanying notes are an integral part of the financial statements.
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Item 1. Financial Statements (continued)
UROMED CORPORATION
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Nature of Business
UroMed Corporation (the "Company"), a Massachusetts corporation, was
incorporated in October 1990 and is dedicated to establishing itself as a leader
in providing interventional urological products, with a primary emphasis on the
treatment of prostate cancer. The Company has also developed and acquired
technology in urinary incontinence products.
2. Basis of Presentation
The condensed balance sheet at March 31, 1999 and the condensed statement
of operations and the condensed statement of cash flows for the three months
ended March 31, 1999 and 1998 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of these financial statements have
been included. Such adjustments consisted only of recurring items. Interim
results are not necessarily indicative of results for a full year.
Certain prior year amounts have been reclassified to conform to the current
period financial statement presentation. These reclassifications had no impact
on net loss.
The financial statements should be read in conjunction with the Company's
audited financial statements and related footnotes for the year ended December
31, 1998, which may be found in the Company's 1998 Annual Report on Form 10-K.
3. Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method. At March 31, 1999, inventories
consisted of the following (in thousands):
Raw materials $ 187
Work in process 56
Finished goods 209
--------
$ 452
========
4. Comprehensive Loss
FASB Statement No. 130, "Reporting Comprehensive Income", establishes
standards for the reporting and display of comprehensive income or loss and its
components in the financial statements. The Company's comprehensive income for
the three months ended March 31, 1999 and 1998 was as follows (in thousands):
Quarter ended Quarter ended
March 31, 1999 March 31, 1998
-------------- --------------
Net loss ($1,278) ($7,097)
Unrealized loss
on investments
available-for-sale (38) (58)
-------- --------
Total comprehensive loss ($1,316) ($7,155)
======== ========
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5. Restructuring
During the year ended December 31, 1998, the Company recorded a total
charge of $1,704,000, representing the cost of restructuring its operations to
shift its strategic emphasis to the hospital-based business and away from the
consumer-oriented continence care business, which the Company has concluded will
be best approached by entering into a partnership or other arrangement with a
larger company. During the first quarter of 1998, a plan to effect this
restructuring was adopted by the Board of Directors and, at that time, the
Company recorded a restructuring charge of $1,024,000. This charge consisted of
approximately $579,000 of employee termination benefits and approximately
$445,000 of costs to exit two of the Company's leased facilities. The employee
termination benefits related to the termination of approximately 40 employees,
all of which were terminated as of December 31, 1998, across all functional
areas of the Company. The facility exit costs included the write-off of
approximately $138,000 of leasehold improvements, with the remainder
representing certain contractual lease payments related to the leased
facilities.
During the fourth quarter of 1998, the Company made certain changes to its
restructuring plan and, as a result, an additional charge of $680,000 was
recorded at that time, representing additional facility exit costs.
Specifically, the Company decided not to abandon one of the aforementioned
facilities slated for closure and, at that same time, committed to abandoning
one of the facilities that it had previously expected to keep open. The facility
exit costs include the write-off of approximately $500,000 of leasehold
improvements, with the remainder representing certain contractual lease payments
related to the abandonment of the leased facility.
In March 1999, the Company entered into a lease termination agreement in
respect of the facility that it committed to abandoning during the fourth
quarter of 1998. Based upon the terms of this agreement, the Company's cost of
exiting this facility will be approximately $80,000 less than the Company's
original estimates that were included within the restructuring liability as of
December 31, 1998. As a result, the Company reversed approximately $80,000 of
the restructuring liability during the three months ended March 31, 1999. The
remaining balance of $142,000 at March 31, 1999 is expected to be paid out in
cash during the quarter ended June 30, 1999.
During the quarter ended March 31, 1999, the activity in the restructuring
liability was as follows (in thousands):
Balance at Balance at
December 31, Cash Non-Cash March 31,
1999 Payments Items 1999
------------- ---------- ---------- ------------
Employee termination
Benefits $ 55 $ 33 $ - $ 22
Asset write-downs - - - -
Other facility exit costs 304 104 80 120
---------- ---------- ---------- -----------
$ 359 $ 137 $ 80 $ 142
========== ========== ========== ==========
6. Early Retirement of Debt
On March 19, 1999, the Company repurchased $1.4 million in aggregate
principal amount of its Convertible Subordinated Notes. This repurchase occurred
in an unsolicited open market transaction, with a person who was not an
affiliate of the Company, for a purchase price of $0.6 million plus accrued and
unpaid interest of $0.04 million. As a result of this repurchase, an
extraordinary gain of $0.7 million has been reported in the condensed statement
of operations for the three months ended March 31, 1999.
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7. Segment Reporting
The Company has determined its reportable segments based on its method of
internal reporting, which disaggregates its business by product category. The
Company's reportable segments are (i) its prostate cancer and incontinence
business, which includes the Cavermap surgical aid, the I-125 brachytherapy
seeds and needles and all consumer and surgical incontinence products, and (ii)
its breast cancer business, which includes all development efforts for its
proposed BreastExam, BreastView and BreastCheck products.
The accounting policies of the segments are the same as those described in
Note 2, "Summary of Significant Accounting Policies" in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998. The Company evaluates
the performance of its operating segments based on operating results which
represents income or loss before interest income and expense and extraordinary
gain on early retirement of debt. There are no intersegment revenues.
The table below presents information about the Company's segments for the
three months ended March 31, 1999 and March 31, 1998. Asset information by
segment is not reported, since the Company does not produce such information
internally (in thousands):
Prostate cancer
and Breast
Incontinence Cancer Totals
---------------- -------- --------
Three months ended March 31, 1999
Revenues $ 442 $ - $ 442
Restructuring 80 - 80
Depreciation (419) (9) (428)
Operating Loss (1,003) (422) (1,425)
Three months ended March 31, 1998
Revenues 61 - 61
Restructuring (1,024) - (1,024)
Depreciation (300) (12) (312)
Operating Loss (4,847) (913) (5,760)
The following are reconciliations of the operating loss amounts presented
above to corresponding totals in the accompanying financial statements:
Three months ended March 31, 1999 1998
- --------------------------------------------------------------------
Total for reportable segments $ (1,425) $ (5,760)
Corporate (464) (1,100)
Interest income 316 897
Interest expense (406) (1,134)
---------- ----------
Loss before extraordinary
gain on the early retirement
of debt $ (1,979) $ (7,097)
========== ==========
Approximately 25% of the Company's product sales in the first quarter of
1999 were made to a customer in Japan, compared to negligible sales in the first
quarter of 1998.
On April 15, 1999, the Company completed the "spin-out" of its breast
cancer business into a new, private company, Assurance Medical, Inc.
("Assurance"). In conjunction with this spin-out, Assurance received $8.0
million in equity financing from two healthcare venture capital firms and the
Company contributed its breast cancer screening technology to Assurance in
exchange for a minority equity position. The Company does not expect the
transaction itself to have any material impact on its financial position or
results of operations.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Management's Discussion and Analysis should be read incorporating
"Forward-Looking Statements and Associated Risks" contained later in this
report.
Overview
The Company is dedicated to establishing itself as a leader in providing
interventional urological products, with primary emphasis on the treatment of
prostate cancer. The Company seeks to market a portfolio of products including
its two main proprietary products for the treatment of prostate cancer: the
CaverMap Surgical Aid, available to aid physicians in preserving vital nerves
during prostate cancer surgery, and the Symmetra I-125 radioactive seeds, not
yet FDA-cleared, used in a brachytherapy procedure to treat localized prostate
cancer. The Company's product portfolio also includes brachytherapy introducer
needles and minimally invasive incontinence surgical products. In addition to
its current portfolio of products, the Company has also developed incontinence
products, including the FDA-cleared Impress Softpatch. The Company is in the
process of evaluating how best to capitalize on these potential product
opportunities via partnerships, divestments, and/or spinoffs, if possible.
UroMed also continues to dedicate resources to the development and/or
acquisition of product lines that fit into its strategic platform.
Results of Operations
Revenues
The Company's revenues for the first quarter of 1999 increased 625% to $0.4
million as compared to $0.06 million in the first quarter of 1998. This increase
is primarily due to sales of CaverMap Surgical Aid, brachytherapy needles and
AlloSling products in the first quarter of 1999, as compared to no sales of
these products in the first quarter of 1998. Sales in the first quarter of 1998
were comprised primarily of the Company's consumer-oriented incontinence
products, which are not actively marketed by the Company any longer. The Company
is seeking third party arrangements to capitalize on these incontinence products
and technology.
Cost of revenues
Cost of revenues for the first quarter of 1999 decreased 47% to $0.6
million as compared to $1.1 million in the first quarter of 1998. The major
components of the decrease are as follows: $0.2 million in salaries and related
costs as a result of the headcount reduction in the 1998 restructuring, $0.1
million in reductions in distribution costs and $0.1 million attributable to
reductions in facilities and related expenses.
Operating Expenses
Research and development expenses in the first quarter of 1999 decreased
61% to $0.8 million as compared to $1.9 million in the first quarter of 1998.
Major components of the decrease are as follows: $0.5 million in salaries and
related costs as a result of the headcount reduction in the 1998 restructuring,
$0.2 million due to the timing of clinical study efforts for both the CaverMap
Surgical Aid and the Company's potential breast cancer products and $0.2 million
due to Impress Softpatch development activities which have since ceased.
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On April 15, 1999, the Company completed the "spin-out" of its breast
cancer business into a new, private company, Assurance Medical, Inc.
("Assurance"). In conjunction with this spin-out, Assurance received $8.0
million in equity financing from two healthcare venture capital firms and the
Company contributed its breast cancer screening technology to Assurance in
exchange for a minority equity position. The completion of this transaction
relieves the Company from having to continue to fund the development of this
technology and, as a result, the Company anticipates that the transaction will
result in expenditure savings of approximately $0.45 million per quarter over
the course of 1999 versus what expenses would have been if the spin-out had not
happened. The Company hopes to eventually share in the benefits related to this
technology via its equity stake in Assurance, although there can be no assurance
that the Company will be able to do so. The Company does not expect the
transaction itself to have any material impact on UroMed's financial position or
results of operations.
In May 1996, the Company acquired the technology underlying the Impress
Softpatch, and at March 31, 1999, there is approximately $3.5 million of
manufacturing equipment included within fixed assets that is specific to the
Impress Softpatch manufacturing process. In connection with the restructuring of
its operations in 1998 (See Note 5 of the financial statements), the Company
concluded that the best vehicle for capitalizing on the Impress Softpatch
product opportunity was a partnership with, or the sale of the technology to, a
large company that has an extensive distribution channel. The Company is
currently in pursuit of such an arrangement. At this time, the Company expects
to enter into an arrangement during 1999 that would allow it to fully recover
the carrying value of the Impress manufacturing equipment, although there can be
no assurance that the Company will be able to do so
Marketing and sales expenses in the first quarter of 1999 decreased 75% to
$0.4 million as compared to $1.8 million in the first quarter of 1998. Major
components of the decrease are as follows: $0.7 million in salaries and related
costs as a result of the headcount reduction in the 1998 restructuring, $0.2
million in public relations and product literature and $0.2 million in travel
and related expenses.
General and administrative expenses in the first quarter of 1999 decreased
43% to $0.6 million as compared to $1.1 million in the first quarter of 1998.
Major components of the decrease are as follows: $0.2 million in salaries and
related costs as a result of the headcount reduction in the 1998 restructuring
and $0.2 million in consulting fees.
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Restructuring
During the year ended December 31, 1998, the Company recorded a total
charge of $1,704,000, representing the cost of restructuring its operations to
shift its strategic emphasis to the hospital-based business and away from the
consumer-oriented continence care business, which the Company has concluded will
be best approached by entering into a partnership or other arrangement with a
larger company. During the first quarter of 1998, a plan to effect this
restructuring was adopted by the Board of Directors and, at that time, the
Company recorded a restructuring charge of $1,024,000. This charge consisted of
approximately $579,000 of employee termination benefits and approximately
$445,000 of costs to exit two of the Company's leased facilities. The employee
termination benefits related to the termination of approximately 40 employees,
all of which were terminated as of December 31, 1998, across all functional
areas of the Company. The facility exit costs included the write-off of
approximately $138,000 of leasehold improvements, with the remainder
representing certain contractual lease payments related to the leased
facilities.
During the fourth quarter of 1998, the Company made certain changes to its
restructuring plan and, as a result, an additional charge of $680,000 was
recorded at that time, representing additional facility exit costs.
Specifically, the Company decided not to abandon one of the aforementioned
facilities slated for closure and, at that same time, committed to abandoning
one of the facilities that it had previously expected to keep open. The facility
exit costs include the write-off of approximately $500,000 of leasehold
improvements, with the remainder representing certain contractual lease payments
related to the abandonment of the leased facility.
In March 1999, the Company entered into a lease termination agreement in
respect of the facility that it committed to abandoning during the fourth
quarter of 1998. Based upon the terms of this agreement, the Company's cost of
exiting this facility will be approximately $80,000 less than the Company's
original estimates that were included within the restructuring liability as of
December 31, 1998. As a result, the Company reversed approximately $80,000 of
the restructuring liability during the first quarter of 1999. The remaining
balance of $142,000 at March 31, 1999 is expected to be paid out in cash during
the second quarter of 1999.
During the first quarter of 1999, the activity in the restructuring
liability was as follows (in thousands):
Balance at Balance at
December 31, Cash Non-Cash March 31,
1999 Payments Items 1999
------------- ---------- ---------- ------------
Employee termination
Benefits $ 55 $ 33 $ - $ 22
Asset write-downs - - - -
Other facility exit costs 304 104 80 120
---------- ---------- ---------- -----------
$ 359 $ 137 $ 80 $ 142
========== ========== ========== ==========
As compared to the first quarter of 1998, in the first quarter of 1999 cost
savings from the 1998 restructuring amounted to approximately $2.7 million,
which was in line with management's estimate. The major reductions from 1998
expenditure levels were as follows: $1.6 million in reduced employee expenses,
$0.4 million in reduced public relations and selling costs, $0.4 million in
clinical and regulatory expenses, $0.1 million in reduced distribution costs and
$0.2 million in reduced facility costs (including amortization). Annual cost
savings in 1999 (as compared to 1998) are expected to reach approximately $11.0
million.
Interest income and interest expense
Interest income in the first quarter of 1999 decreased 65% to $0.3 million
as compared to $0.9 million in the first quarter of 1998. The decrease was
attributable to the reduced size of the Company's investment portfolio, caused
by the need to fund the Company's operations and to repurchase a portion of its
Convertible Subordinated Notes.
Interest expense in the first quarter of 1999 decreased 64% to $0.4 million
as compared to $1.1 million in the first quarter of 1998. The decrease was
attributable to the reduction in outstanding Convertible Subordinated Notes due
to repurchases thereof during 1998 and 1999.
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Extraordinary gain on early retirement of debt
On March 19, 1999, the Company repurchased $1.4 million in aggregate
principal amount of its Notes. This repurchase occurred in an unsolicited
open market transaction, with a person who was not an affiliate of the Company,
for a purchase price of $0.6 million plus accrued and unpaid interest of $0.04
million. As a result, an extraordinary gain on the early retirement of these
Notes of $0.7 million has been reported in the condensed statement of operations
for the three months ended March 31, 1999.
Liquidity and Capital Resources
Cash and short-term investments totaled $22.9 million at March 31, 1999
compared to $26.3 million at December 31, 1998. At March 31, 1999, the Company's
funds were invested in U.S. government obligations, corporate debt obligations
and money market funds.
Net cash used in operating activities of $2.7 million during the three
months ended March 31, 1999 was primarily a result of the net loss for the
period. In addition, there were decreases in accounts payable and accrued
expenses due to lower operating costs. These uses were partially offset by
depreciation and amortization charges.
Net cash used by investing activities was $0.2 million during the three
months ended March 31, 1999 due primarily to net purchases of short-term
investments. The Company made no fixed asset purchases during the period.
Net cash used for financing activities was $0.6 million during the three
months ended March 31, 1999, as a result of the $0.6 million used to repurchase
$1.4 million in aggregate principal amount of Notes.
In October 1996, the Company completed the sale of $69.0 million of its 6%
Convertible Subordinated Notes due October 15, 2003 (the "Notes"). In March
1999, the Company repurchased approximately $1.4 million of Notes for
approximately $0.6 million. Through March 1999, the Company repurchased a total
of approximately $45.6 million in aggregate principal amount of its Notes
resulting in an outstanding principal balance of the Notes at March 31, 1999 of
$23.4 million. The Company is considering from time to time additional
repurchases of its Notes. Any repurchases of Notes may be made on the open
market or in privately negotiated transactions. The Company plans to fund such
purchases from its working capital.
The Board of Directors of the Company authorized a Common Stock repurchase
program in 1998 (the "Repurchase program"). The Company is authorized to
repurchase up to one million shares of the outstanding Common Stock, from time
to time, subject to prevailing market conditions. As of March 31, 1999, the
Company has repurchased approximately 187,000 shares of its Common Stock for
approximately $500,000 as part of the Repurchase program. Purchases pursuant to
the Repurchase program may be made on the open market or in privately negotiated
transactions. The Company plans to fund such purchases from its working capital.
The Company has made no further purchases during the first quarter of 1999.
The Company believes that available cash, cash equivalents and short-term
investments will be sufficient to meet the Company's operating expenses and
capital requirements for at least the next twelve months. The Company's future
long-term liquidity and capital requirements depend on numerous factors,
including, but not limited to: development of the Company's marketing
capability, market acceptance of the CaverMap Surgical Aid and the I-125 seed,
development of partnerships and alliances for its assets and technology in
incontinence. There can be no assurance that the Company will not require
additional financing or that, if required, such financing will be available on
terms acceptable to the Company.
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Year 2000
The Company has identified its Year 2000 risk in three categories: internal
business software; imbedded chip technology; and external non-compliance by
significant suppliers and service providers.
INTERNAL BUSINESS SOFTWARE. During 1996, the Company purchased an
Enterprise Resource Planning System ("ERP System") which was Year 2000
compliant. The ERP System provides for significantly all of the Company's
internal accounting, business management and planning needs. The total hardware,
software, installation and testing cost of the ERP System was approximately $1.2
million which has been spent to date. The Company does not anticipate incurring
significant additional costs for further testing and compliance activities.
Given that its internal business software is Year 2000 compliant, the Company
does not have a contingency plan in place.
IMBEDDED CHIP TECHNOLOGY. At this time, most of the Company's products are
manufactured by outside suppliers and, as such, the Company has limited
manufacturing activities. The Company does not rely materially on imbedded chip
technology in its manufacturing processes and therefore does not anticipate that
Year 2000 issues will significantly affect its ability to manufacture finished
goods.
At this time, the Company believes that it will not encounter significant
operational difficulties from the effect of a Year 2000 issue arising from its
imbedded chip technology. Accordingly, based on these expectations, the Company
does not have a contingency plan to address material Year 2000 issues. If
significant Year 2000 issues arise, there can be no assurance that the Company
will be able to develop and implement a contingency plan in a timely manner and,
if not, the Company's operations could be adversely effected.
EXTERNAL NON-COMPLIANCE BY SIGNIFICANT SUPPLIERS AND SERVICE PROVIDERS. The
Company has identified all of its significant suppliers and service providers to
determine the extent to which the Company's business is vulnerable to those
third parties' failure to remedy their own Year 2000 issues. The Company's
significant suppliers include those that supply the products sold, or proposed
to be sold, by the Company including the CaverMap Surgical Aid, the Symmetra
I-125 seeds, the AlloSling incontinence surgical products, and the INTROL
Bladder Neck Support Prosthesis. At this time, the Company has begun the process
of contacting its significant suppliers (including those that supply its
products) and service providers concerning their successful completion of a Year
2000 compliance testing or indication that they were working toward achieving
Year 2000 compliance. At this time, the Company has received notification from
most significant suppliers and service providers of their Year 2000 compliance.
However, some responses were made only informally, and formal notification is
still pending. Based upon the results of the remaining inquiries to significant
suppliers and service providers, and to the extent that responses to Year 2000
readiness responses are unsatisfactory, the Company intends to develop a
contingency plan. There can be no assurance that all significant suppliers and
service providers will successfully complete their Year 2000 compliance, that
the Company's contingency plans could replace those noncompliant suppliers or
service providers (including those that supply its products) with suppliers or
service providers that are Year 2000 compliant, or that these Year 2000 issues
would not have a material adverse effect on the Company. The main risks
associated with the Year 2000 issue are the uncertainties as to whether the
Company's suppliers or service providers can continue to perform to perform
their services for the Company uninterrupted by the Year 2000 event. The
Company's suppliers and service providers, if they are unable to remediate their
Year 2000 issues, may be unable to produce or deliver goods ordered by the
Company. The Company depends significantly upon telephone orders; should the
Company's telephone service be adversely affected, the Company will be unable to
receive a high percentage of its retail orders. The Company also depends in
large measure on delivery services such as Federal Express and UPS to deliver
goods to customers; accordingly should one or more of these delivery services
prove unable to make deliveries as a result of Year 2000 issues, the Company's
cash flow and business would be severely affected. Although the state of
readiness of the Company's suppliers and service providers will be monitored and
evaluated, and contingency plans will be developed, no assurances can be given
as to the eventual state of readiness of the Company's suppliers and/or service
providers. Nor can any assurance be given as to the eventual effectiveness of
the Company's contingency plans.
The preceding discussion contains forward-looking statements information
within the meaning of Section 21E of the Exchange Act. This disclosure is also
subject to protection under the Year 2000 Information and Readiness Disclosure
Act of 1998, Public Law 105-271, as a "Year 2000 Statement" and "Year 200
Readiness Disclosure" as defined therein. Actual results may differ materially
from such projected information due to changes in underlying assumptions.
<PAGE>
Page 14
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
Certain statements contained in this Annual Report may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding (i) the planned progression of the Company's
commercialization strategies for the CaverMap Surgical Aid, the Symmetra I-125
brachytherapy seed and introducer needle and the Allosling surgical products,
including the timing and extent of initial or other sales, (ii) the timing
related to the commencement of marketing activities for the commercial launches
of the Symmetra I-125 brachytherapy seeds, (iii) the timing related to final
regulatory clearance for the Symmetra I-125 brachytherapy seed (iv) the
Company's planned uses for its cash and other liquid resources, (viii) the
extent of future revenues, expenses and results of operations and the
sufficiency of the Company's financial resources to meet planned operational
costs and other expenditure needs, and the development of partnerships and/or
strategic alliances for all incontinence and related assets and technology.
These forward-looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, many of which are beyond
the Company's control. Actual results could differ materially from these
forward-looking statements as a result of certain factors, including those
described below:
- - The uncertainty that the CaverMap Surgical Aid and Symmetra I-125 seeds
will gain market acceptance among physicians.
- - The uncertainty that the Company will be able to develop an effective
sales force and implement a successful marketing campaign for the CaverMap
Surgical Aid and the Symmetra I-125 brachytherapy seed.
- - The uncertainty that the Company will be able to develop effective
partnerships and/or strategic alliances for its assets and technology as
part of its incontinence effort.
- - The uncertainty of receiving regulatory clearance for the Company's
Symmetra I-125 brachytherapy seed.
- - The Company's dependence on others for raw materials and certain
components of its products, including certain materials available only from
single sources.
- - The uncertain protection afforded the Company by its patents and/or
other intellectual property rights relating to the Company's products.
- - The uncertainty as to whether the Company will be able to manufacture,
market and sell its products at prices that permit it to achieve
satisfactory margins in the production and marketing of its products.
- - Risks relating to FDA or other governmental oversight of the Company's
operations, including the possibility that the FDA could impose costly
additional labeling requirements on, or restrict the marketing of, the
Company's products, or suspend operations at one or more of the Company's
facilities.
- - The uncertainty of the size of the potential markets of the Company's
products.
Other relevant risks are described in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 under the headings
"Forward-Looking Statements and Associated Risks" and "Risk Factors", and
are incorporated herein by reference.
<PAGE>
Page 15
Part II. OTHER INFORMATION
Item 6. Exhibits
27 Financial Data Schedule
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company does not use derivative financial instruments. While
approximately 25% of the Company's sales in the first quarter of 1999 were made
to a customer in Japan, these sales are denominated in dollars. The Company
believes, based on a hypothetical ten percent adverse movement in foreign
currency exchange rates for the Japanese Yen, the potential losses in future
earnings and cash flows are immaterial, although the actual effects may differ
materially from the hypothetical analysis.
<PAGE>
Page 16
SIGNATURES
Pursuant to requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UroMed Corporation
Date: May 14, 1999 /s/ John G. Simon
-------------- ----------------------------------
John G. Simon, President and
Chief Executive Officer
Date: May 14, 1999 /s/ Domenic C. Micale
-------------- -----------------------------------
Domenic C. Micale, Director of
Finance (Principal Financial and
Accounting Officer)
<PAGE>
Page 17
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