<PAGE>
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 September 30, 2000
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:
5,420,362 shares of Common stock, no par value,
outstanding at October 31, 2000.
<PAGE>
UROMED CORPORATION
FORM 10-Q
For the quarterly period ended September 30, 2000
Table of contents Page No.
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheet at September 30, 2000 and December
31, 1999 3
Condensed Statement of Operations for the three and nine months
ended September 30, 2000 and 1999 4
Condensed Statement of Cash Flows for the nine months ended
September 30, 2000 and 1999 5
Notes to Condensed Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10 -15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Part II - OTHER INFORMATION
Item 6. Exhibits 16
Signatures 17
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
UROMED CORPORATION
CONDENSED BALANCE SHEET
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ ------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,081 $ 3,485
Short-term investments 5,752 14,377
Accounts receivable 719 585
Inventories 1,036 841
Prepaid expenses and other assets 931 475
--------- ---------
Total current assets 14,519 19,763
Fixed assets, net 68 143
Other assets 1,575 1,970
--------- ---------
$ 16,162 $ 21,876
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 253 $ 145
Accrued expenses 1,089 1,347
--------- ---------
Total current liabilities 1,342 1,492
--------- ---------
Convertible subordinated notes 14,393 17,393
--------- ---------
Stockholders' equity:
Common stock 107,259 107,164
Other stockholders' deficit (106,832) (104,173)
--------- ---------
Total stockholders' equity 427 2,991
--------- ---------
$ 16,162 $ 21,876
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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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 Nine Months Ended
September 30, September 30,
------------------- ------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
-------- -------- -------- --------
Revenues $ 1,258 $ 719 $ 3,493 $ 1,837
-------- -------- -------- --------
Costs and expenses:
Cost of revenues 1,209 608 2,967 1,949
Research and development 421 445 1,071 1,784
Marketing and sales 827 505 2,106 1,547
General and administrative 419 364 1,081 1,387
Restructuring - - - ( 80)
-------- -------- -------- --------
Total costs and expenses 2,876 1,922 7,225 6,587
-------- -------- ------- --------
Loss from operations (1,618) (1,203) ( 3,732) ( 4,750)
Gain on sale of assets - 672 - 672
Interest income 178 297 630 877
Interest expense ( 238) ( 385) ( 758) (1,176)
-------- -------- -------- --------
Loss before extraordinary gain
on early retirement of debt (1,678) ( 619) (3,860) (4,377)
Extraordinary gain on early
retirement of debt - - 1,259 701
-------- -------- -------- --------
Net loss $(1,678) $( 619) $(2,601) $(3,676)
======== ======== ======== ========
Basic and diluted per share
amounts:
Loss before extraordinary
gain on early retirement
of debt $ (.32) $ (.12) $ (.75) $ (.84)
Extraordinary gain on
early retirement of debt - - .25 .14
-------- -------- -------- --------
Net loss $ (.32) $ (.12) $ (.50) $ (.70)
======== ======== ======== ========
Basic and diluted weighted
average common shares
outstanding 5,180 5,177 5,169 5,181
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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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>
Nine Months Ended
September 30,
--------------------------
<S> <C> <C>
2000 1999
--------- ---------
Net cash used in operating activities $ (4,357) $ (5,962)
--------- ---------
Cash flows from investing activities:
(Purchases) sales of short-term
investments, net 8,593 (1,615)
Purchase of fixed assets ( 31) ( 7)
Proceeds from sale of assets - 3,340
Decrease in other assets - 196
--------- ---------
Net cash provided by
investing activities 8,562 1,914
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common stock 70 3
Purchase of common stock - (15)
Repurchase of convertible subordinated notes (1,679) (621)
--------- ---------
Net cash (used for)
financing activities (1,609) (633)
--------- ---------
Net increase (decrease)
in cash and cash equivalents 2,596 (4,681)
Cash and cash equivalents, beginning of period 3,485 11,576
--------- ---------
Cash and cash equivalents, end of period $ 6,081 $ 6,895
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 508 $ 1,436
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Item 1. Financial Statements (continued)
UROMED CORPORATION
NOTES TO CONDENSED 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 September 30, 2000 and the condensed
statement of operations for the three and nine months ended September 30, 2000
and 1999 and the condensed statement of cash flows for the nine months ended
September 30, 2000 and 1999 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 normal recurring items.
Interim results are not necessarily indicative of results for a full year. The
balance sheet as of December 31, 1999 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
These condensed financial statements should be read in conjunction with the
Company's audited financial statements and related footnotes for the year ended
December 31, 1999, which may be found in the Company's 1999 Annual Report on
Form 10-K.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation - an Interpretation of APB Opinion No. 25". FIN 44 clarifies
the application of APB Opinion No. 25 ("APB 25"), including the following:
definition of an employee for purposes of applying APB 25; the criteria for
determining whether a plan qualifies as a non-compensatory plan; the accounting
consequences of varioius modifications to the terms of previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 became effective July 1, 2000, but
certain conclusions in FIN 44 cover specific events that occurred after either
December 15, 1998 or January 12, 2000. The application of FIN 44 has not had a
material impact on the Company's financial position or results of operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC) issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues in financial
statements. In June 2000, the SEC issued Staff Accounting Bulletin 101B, an
amendment to SAB 101, which delays the implementation of SAB 101. The
application of the guidance in SAB 101 will be required in the Company's fourth
quarter of 2000. The Company is currently determining the impact that SAB 101
will have on its financial position and results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, collectively referred to as
derivatives, and for hedging activities. The Company will adopt SFAS No. 133 as
required by SFAS No. 137, "Deferral of the effective date of FASB Statement No.
133," in fiscal year 2001. The Company does not expect the adoption of SFAS 133
to have a material impact on its financial position or results of operations.
6
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3. Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method.
The components of inventory at September 30, 2000 are as follows:
(in thousands)
Raw materials $ 182
Work in process 221
Finished goods 633
------
Total Inventory $1,036
======
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 loss for the three
months and nine months ended September 30, 2000 and 1999 was as follows (in
thousands):
Three months ended Three months ended
September 30, 2000 September 30, 1999
-------------- --------------
Net loss ($1,678) ($ 619)
Unrealized gain (loss)
on investments
available-for-sale ( 46) 17
-------- --------
Total comprehensive loss ($1,724) ($ 602)
======== ========
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
-------------- --------------
Net loss ($2,601) ($3,676)
Unrealized gain (loss)
on investments
available-for-sale ( 32) ( 26)
-------- --------
Total comprehensive loss ($2,633) ($3,702)
======== ========
5. Early Retirement of Debt
In March 2000 and in March 1999, the Company repurchased, at a discount,
portions of its outstanding 6% Convertible Subordinated Notes due October 15,
2003 ( the "Notes"). These repurchases occurred in unsolicited open market
transactions, with persons who are not affiliated to the Company.
During March 2000, the Company repurchased $3,000,000 in aggregate
principal amount of its Notes for $1,679,000 in cash. As a result of this
repurchase $62,000 of deferred financing fees were written off, and an
extraordinary gain of $1,259,000 was reported in the condensed statement of
operations for the nine months ended September 30, 2000.
During March 1999, the Company repurchased $1,350,000 in aggregate
principal amount of its Notes for $621,000 in cash. As a result of this
transaction $28,000 of deferred financing fees were written off and an
extraordinary gain of $701,000 was reported in the condensed statement of
operations for the nine months ended September 30, 1999.
6. Termination of Distributor Agreement
During the three months ended September 30, 2000, the Company entered into
a termination agreement with Johnson & Johnson Medical K.K. regarding the rights
to distribute the INTROL product in Japan. This termination agreement resulted
in a payment of $0.4 million to the Company, which has been recognized as
revenue for the three months ended September 30, 2000.
7
<PAGE>
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. On April 15, 1999, the
Company disposed of its Breast Cancer business through a spin-out to a separate
corporation in which the Company holds an approximate one-third interest.
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, 1999. 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 tables below presents information about the Company's segments for the three
months and nine months ended September 30, 2000 and 1999. Asset information by
segment is not reported, because the Company does not produce such information
internally (in thousands):
Prostate cancer
and Breast
Incontinence Cancer Totals
---------------- -------- --------
Three months ended September 30, 2000
Revenues $ 1,258 $ - $ 1,258
Depreciation (28) - (28)
Operating Loss (1,252) - (1,252)
Three months ended September 30, 1999
Revenues $ 719 $ - $ 719
Depreciation (202) - (202)
Operating Loss (216) - (216)
The following are reconciliations of the operating loss amounts presented
above to corresponding totals in the accompanying financial statements:
Three months ended September 30, 2000 1999
--------------------------------------------------------------------
Total for reportable segments $ (1,252) $ (216)
Corporate (366) (315)
Interest income 178 297
Interest expense (238) (385)
---------- ----------
Loss before extraordinary
gain on the early retirement
of debt $ (1,678) $ (619)
========== ==========
During the three months ended September 30, 2000, 32% of total company
revenues was the result of proceeds received in connection with the termination
of an agreement with a Japanese distribution partner. There were no product
sales to customers in Japan for the three months ended September 30, 1999.
8
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Prostate cancer
and Breast
Incontinence Cancer Totals
---------------- -------- --------
Nine months ended September 30, 2000
Revenues $ 3,493 $ - $ 3,493
Restructuring - - -
Depreciation ( 106) - ( 106)
Operating Loss (2,639) - (2,639)
Nine months ended September 30, 1999
Revenues $ 1,837 $ - $ 1,837
Restructuring 80 - 80
Depreciation (1,037) (9) (1,046)
Operating Loss (2,449) (422) (2,871)
The following are reconciliations of the operating loss amounts presented
above to corresponding totals in the accompanying financial statements:
Nine months ended September 30, 2000 1999
--------------------------------------------------------------------
Total for reportable segments $ (2,639) $ (2,871)
Corporate (1,093) (1,207)
Interest income 630 877
Interest expense (758) (1,176)
---------- ----------
Loss before extraordinary
gain on the early retirement
of debt $ (3,860) $ (4,377)
========== ==========
During the nine months ended September 30, 2000, 11% of total revenues was
the result of proceeds received in conjunction with the termination of an
agreement with a Japanese distribution partner. Product sales to a customer in
Japan for the nine months ended September 30, 1999 were approximately 10% of
total product sales for that period.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This Management's Discussion and Analysis should be read together with
"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 used in
a brachytherapy procedure to treat localized prostate cancer. The Company's
product portfolio also includes brachytherapy introducer needles and fascia lata
used in incontinence surgical procedures. UroMed, through its approximate
one-third ownership of Assurance Medical, Inc., has supported the development of
electronic palpation technology in order to aid physicians in the mission of
finding suspicious breast lumps earlier. The Company 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 third quarter of 2000 increased 75% to $1.3
million as compared to $0.7 million in the third quarter of 1999. For the first
nine months of 2000 revenues increased 90% to $3.5 million as compared to $1.8
million for the first nine months of 1999. The increase for the third quarter of
2000 as compared to the third quarter of 1999 is a result of a $0.3 million
increase in revenues from the Company's Symmetra seed product, which was in the
early stages of commercial release in 1999, and a $0.1 million increase in
revenues from the CaverMap Surgical Aid. Additionally, during the three months
ended September 30, 2000, the Company recorded revenue of $0.4 million in the
form of a payment from Johnson & Johnson Medical K.K. in connection with the
termination of the agreement between the Company and Johnson & Johnson Medical
K.K. for distribution rights to the INTROL product in Japan. These increases
have been partially offset by decreases of $0.2 million in 2000 in revenue from
incontinence related products, which are no longer actively marketed.
The increase for the nine months ended September 30, 2000 as compared to
the same period in 1999 is primarily the result of a $0.8 million increase in
revenues of the CaverMap Surgical Aid and a $0.8 million increase in revenues of
the Symmetra I-125 seeds.
Cost of revenues
Cost of revenues for the third quarter of 2000 increased 99% to $1.2
million as compared to $0.6 million in the third quarter of 1999. For the first
nine months of 2000 cost of revenues increased 52% to $2.9 million as compared
to $1.9 million for the first nine months of 1999. The major component of both
increases is the increase in variable direct material costs as a result of
increased revenue levels in 2000 when compared to 1999. Additionally, the three
and nine months ended September 30, 2000 include $0.3 million and $0.6 million,
respectively, in costs associated with scrapping Symmetra I-125 seeds that
decayed to radioactive strength ranges not considered saleable. The nine months
ended September 30, 2000 include $0.1 million in amortization expense for the
Company's investment in Bebig's Symmetra manufacturing line.
10
<PAGE>
Operating Expenses
Research and development expenses in the third quarter of 2000 decreased 5%
to $0.42 million as compared to $0.45 million in the third quarter of 1999. For
the first nine months of 2000 research and development expenses decreased 40% to
$1.1 million from $1.8 million for the first nine months of 1999. Major
components of the decrease for the first nine months of 2000 as compared to the
first nine months of 1999 are as follows: a $0.4 million reduction in CaverMap
related spending; a $0.2 million reduction in Assurance Medical related expenses
as Assurance Medical was spun out into a separate corporation in April 1999; and
a $0.2 million reduction in support of the development of the production
capability for Symmetra.
Marketing and sales expenses in the third quarter of 2000 increased 64% to
$0.8 million as compared to $0.5 million for the third quarter of 1999. For the
first nine months of 2000 marketing and sales expenses increased 36% to $2.1
million as compared to $1.5 million for the first nine months of 1999. The
increase in the third quarter of 2000 as compared to the third quarter of 1999
is due to a $0.3 million increase in Symmetra marketing expenses as the result
of marketing programs and trade shows. For the first nine months of 2000 as
compared to the first nine months of 1999 the major components of the increase
are as follows: a $0.2 million reduction in Assurance Medical related expenses;
a $0.3 million increase in sales compensation due to an increased headcount; and
a $0.5 million increase in Symmetra related marketing expenses.
General and administrative expenses in the third quarter of 2000 increased
15% to $0.42 million as compared to $0.36 million in the third quarter of 1999.
For the first nine months of 2000, general and administrative expenses decreased
22% to $1.1 million from $1.4 million for the first nine months of 1999. The
increase in the third quarter of 2000 as compared to the third quarter of 1999
is a result of $0.1 million in consulting expenses. The major components of the
decrease for the first nine months of 2000 as compared to the first nine months
of 1999 are as follows: a $0.2 million reduction due to the receipt of proceeds
for an asset previously written off; and a $0.1 million reduction in Assurance
Medical related expenses.
11
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Restructuring
In March 1999, the Company entered into a lease termination agreement in
respect to the facility that it committed to abandon during the fourth quarter
of 1998. Based upon the terms of this agreement, the Company's cost of exiting
this facility were $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 $80,000 of the restructuring liability during the
first quarter of 1999. The remaining balance was paid out in cash during 1999.
Gain on Sale of Assets
On July 21, 1999, the Company entered into an agreement to sell global
rights to its Impress Softpatch technology and assets to Procter & Gamble. Under
the agreement, the Company received $3.3 million in cash at closing and is to
receive an additional $150,000 in cash payments each year for a four-year period
commencing on July 21, 2000. In addition and under certain conditions, UroMed
may receive additional cash consideration in the form of royalty and other
payments. As a result of the transaction, the Company reported a gain of $0.7
million in the third quarter of 1999.
Interest income and interest expense
Interest income in the third quarter of 2000 decreased 40% to $0.2 million
as compared to $0.3 million in the third quarter of 1999. For the first nine
months of 2000 interest income decreased 28% to $0.6 million from $0.9 million
for the first nine months of 1999. These decreases were 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 6% Convertible
Subordinated Notes due October 15, 2003, the "Notes".
Interest expense in the third quarter of 2000 decreased 38% to $0.2 million
as compared to $0.4 million in the third quarter of 1999. For the first nine
months of 2000 interest expense decreased 36% to $0.8 million from $1.2 million
for the first nine months of 1999. These decreases were attributable to the
reduction in outstanding Notes due to repurchases thereof during 1999 and 2000.
Extraordinary gain on early retirement of debt
In March 2000 and in March 1999, the Company repurchased, at a discount,
portions of its outstanding Notes. These repurchases occurred in unsolicited
open market transactions, with persons who are not affiliated to the Company.
During March 2000, the Company repurchased $3.0 million in aggregate
principal amount of its Notes for $1.7 million in cash. As a result of this
repurchase, an extraordinary gain of $1.3 million was reported in the condensed
statement of operations for the nine months ended September 30, 2000.
During March 1999, the Company repurchased $1.4 million in aggregate
principal amount of its Notes for $0.6 million in cash. As a result of this
repurchase, an extraordinary gain of $0.7 million was reported in the condensed
statement of operations for the nine months ended September 30, 1999.
12
<PAGE>
Liquidity and Capital Resources
Cash and short-term investments totaled $11.8 million at September 30,
2000, compared to $17.9 million at December 31, 1999. At September 30, 2000, the
Company's funds were invested in corporate debt obligations and money market
funds.
Net cash used in operating activities of $4.4 million during the nine
months ended September 30, 2000 was primarily a result of the net loss before
extraordinary gain of $3.9 million for the nine months ended September 30, 2000.
In addition, there was a cash outflow of $0.5 million in the form of an advance
payment to Bebig, the Company's manufacturer of Symmetra seeds.
Net cash provided by investing activities was $8.6 million during the nine
months ended September 30, 2000, due primarily to net sales of short-term
investments.
Net cash used for financing activities was $1.6 million during the nine
months ended September 30, 2000, due primarily to the $1.7 million used to
repurchase $3.0 million in aggregate principal amount of Notes.
In October 1996, the Company completed the sale of $69.0 million of its
Notes. Through September 30, 2000, the Company repurchased a total of $54.6
million in aggregate principal amount of its Notes resulting in an outstanding
principal balance of the Notes at September 30, 2000 of $14.4 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 1999 (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 September 30, 2000, the
Company has repurchased approximately 240,000 shares of its Common Stock for
$573,000 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
did not repurchase any common stock during the first nine months of 2000.
The Company's common stock is presently listed on the Nasdaq SmallCap
Market ("Nasdaq SmallCap") under the symbol URMD. The Nasdaq SmallCap has
continued listing requirements that must be maintained by all the companies it
lists. As of September 30, 2000, the Company is not in compliance with the net
tangible asset component of these listing requirements. As a result, the Company
may be delisted and subsequently listed on the over-the-counter bulletin board.
There is no assurance that the Company's common stock will continue to be listed
on the Nasdaq SmallCap or that the movement of the Company's common stock from
the Nasdaq SmallCap to another stock exchange or to over-the-counter bulletin
board will not have a material adverse effect on the market value or liquidity
of the Company's common stock.
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 the development of the Company's marketing capability and market
acceptance of the CaverMap Surgical Aid and the Symmetra I-125 seed. 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.
13
<PAGE>
RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation - an Interpretation of APB Opinion No. 25". FIN 44 clarifies
the application of APB Opinion No. 25 ("APB 25"), including the following:
definition of an employee for purposes of applying APB 25; the criteria for
determining whether a plan qualifies as a non-compensatory plan; the accounting
consequences of varioius modifications to the terms of previously fixed stock
options or awards; and the accounting for an exchange of stock compensation
awards in a business combination. FIN 44 became effective July 1, 2000, but
certain conclusions in FIN 44 cover specific events that occurred after either
December 15, 1998 or January 12, 2000. The application of FIN 44 has not had a
material impact on the Company's financial position or results of operations.
In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
Financial Statements". SAB 101 summarizes the SEC's views in applying generally
accepted accounting principles to selected revenue recognition issues in
financial statements. In June 2000, the SEC issued Staff Accounting Bulletin
101B, an amendment to SAB 101, which delays the implementation of SAB 101. The
application of the guidance in SAB 101 will be required in the Company's fourth
quarter of 2000. The Company is currently determining the impact that SAB 101
will have on its financial position and results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivatives and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, collectively referred to as
derivatives, and for hedging activities. The Company will adopt SFAS No. 133 as
required by SFAS No. 137, "Deferral of the effective date of FASB Statement No.
133," in fiscal year 2001. The Company does not expect the adoption of SFAS 133
to have a material impact on its financial position or results of operations.
14
<PAGE>
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
Certain statements contained in this Quarterly Report on Form 10-Q 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 including the timing and extent of
sales, (ii) the continued marketing activities for the commercial launch of the
Symmetra I-125 brachytherapy seeds, (iii) the Company's planned uses for its
cash and other liquid resources, and (iv) 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 breast care products 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 without
limitation those described below:
- - The uncertainty that the CaverMap Surgical Aid and Symmetra I-125 seeds
will gain market acceptance among physicians in the United States.
- - The uncertainty that the Company will be able to develop and maintain
an effective sales force and implement a successful marketing campaign
for the CaverMap Surgical Aid and the Symmetra I-125 brachytherapy
seed in the United States.
- - The Company's dependence on others, including the supplier of
Symmetra I-125 seeds Bebig Isotepentechnik and Umweltdiagnostik GmbH of
Berlin, Germany, for its products and raw materials and certain other
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 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 and 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, 1999 under the headings
"Forward-Looking Statements and Associated Risks" and "Risk Factors", and
are incorporated herein by reference.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not use derivative financial instruments. Of the revenues
for the nine months ended September 30, 2000, 11% is the result of a payment
from a Japanes customer for the termination of an agreement to distribute one of
the Company's products, and 8% is the result of sales to foreign customers,
primarily in Europe. All such payments and foreign sales were denominated in
U.S. dollars. The Company believes, based on a hypothetical ten percent adverse
movement in foreign currency exchange rates for the European Euro, the potential
losses in future earnings and cash flows are immaterial, although the actual
effects may differ materially from the hypothetical analysis.
Part II. OTHER INFORMATION
Item 6. Exhibits
27 Financial Data Schedule
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Page 17
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: November 14, 2000 /s/ Daniel Muscatello
-------------- ----------------------------------
Daniel Muscatello, President and
Chief Executive Officer
Date: November 14, 2000 /s/ Domenic C. Micale
-------------- -----------------------------------
Domenic C. Micale, Vice President
of Finance and Administration, and
Treasurer
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