##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 Quarterly Report Under section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended September 30, 2005
 Commission File No. 000-20989
 UROPLASTY, INC.
  Minnesota, U.S.A.
(State or other jurisdiction of
incorporation or organization)
    
    41-1719250
(I.R.S. Employer
Identification No.)
 2718 Summer Street NE
Minneapolis, Minnesota 55413-2820
 (612) 378-1180
   þ o
  o þ
   o þ




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEmployment Agreement with Mahedi A. JiwaniCertifications by the CEO & CFO Pursuant to Section 302Certifications by the CEO & CFO Pursuant to Section 906    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
   September 30, 2005(unaudited)
    
    
    March 31, 2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    5,822,977
    
    
    $
    1,492,684Accounts receivable, net
    
    
    833,997
    
    
    
    944,527Inventories
    
    
    671,967
    
    
    
    547,476Income tax receivable
    
    
    93,917
    
    
    
    114,189Other
    
    
    213,899
    
    
    
    161,920Total current assets
    
    
    7,636,757
    
    
    
    3,260,796Property, plant, and equipment, net
    
    
    1,074,882
    
    
    
    1,040,253Intangible assets, net
    
    
    331,880
    
    
    
    39,100Deferred tax assets
    
    
    141,995
    
    
    
    103,075Total assets
    
    $
    9,185,514
    
    
    $
    4,443,224
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##### Table of Contents



September 30, 2005(unaudited)
    
    
    March 31, 2005Liabilities and Shareholders EquityCurrent liabilities:Current maturities  long-term debt
    
    $
    41,468
    
    
    $
    44,606Accounts payable
    
    
    557,955
    
    
    
    362,994Accrued liabilities
    
    
    721,144
    
    
    
    478,682Warrant liability
    
    
    1,357,253
    
    
    
    Total current liabilities
    
    
    2,677,820
    
    
    
    886,282Long-term debt  less current maturities
    
    
    408,193
    
    
    
    461,265Accrued pension liability
    
    
    320,379
    
    
    
    303,781Total liabilities
    
    
    3,406,392
    
    
    
    1,651,328Shareholders equity:Common stock $.01 par value; 20,000,000
shares authorized, 6,873,739 and
4,699,597 shares issued and
outstanding at September 30, 2005 and
March 31, 2005, respectively
    
    
    68,737
    
    
    
    46,996Additional paid-in capital
    
    
    14,740,418
    
    
    
    9,366,644Accumulated deficit
    
    
    (8,689,416
    )
    
    
    (6,491,387
    )Accumulated other comprehensive loss
    
    
    (340,617
    )
    
    
    (130,357
    )Total shareholders equity
    
    
    5,779,122
    
    
    
    2,791,896Total liabilities and shareholders equity
    
    $
    9,185,514
    
    
    $
    4,443,224
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Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    1,554,955
    
    
    $
    1,650,724
    
    
    $
    3,200,608
    
    
    $
    3,403,220Cost of goods sold
    
    
    462,317
    
    
    
    470,172
    
    
    
    883,145
    
    
    
    933,730Gross profit
    
    
    1,092,638
    
    
    
    1,180,552
    
    
    
    2,317,463
    
    
    
    2,469,490Operating expensesGeneral and administrative
    
    
    744,867
    
    
    
    508,260
    
    
    
    1,435,431
    
    
    
    899,372Research and development
    
    
    1,030,808
    
    
    
    585,716
    
    
    
    1,661,406
    
    
    
    1,165,769Selling and marketing
    
    
    804,606
    
    
    
    590,799
    
    
    
    1,468,639
    
    
    
    1,118,7562,580,281
    
    
    
    1,684,775
    
    
    
    4,565,476
    
    
    
    3,183,897Operating loss
    
    
    (1,487,643
    )
    
    
    (504,223
    )
    
    
    (2,248,013
    )
    
    
    (714,407
    )Other income (expense)Interest income
    
    
    27,616
    
    
    
    9,199
    
    
    
    54,996
    
    
    
    15,078Interest expense
    
    
    (4,515
    )
    
    
    (5,137
    )
    
    
    (9,324
    )
    
    
    (10,321
    )Warrant benefit
    
    
    701,718
    
    
    
    
    
    
    
    15,423
    
    
    
    Foreign currency exchange loss
    
    
    (7,206
    )
    
    
    (4,675
    )
    
    
    (8,405
    )
    
    
    (14,086
    )717,613
    
    
    
    (613
    )
    
    
    52,690
    
    
    
    (9,329
    )Loss before income taxes
    
    
    (770,030
    )
    
    
    (504,836
    )
    
    
    (2,195,323
    )
    
    
    (723,736
    )Income tax expense (benefit)
    
    
    (34,314
    )
    
    
    (14,230
    )
    
    
    2,706
    
    
    
    52,229Net loss
    
    $
    (735,716
    )
    
    $
    (490,606
    )
    
    
    (2,198,029
    )
    
    
    (775,965
    )Basic and diluted loss per common share
    
    $
    (0.11
    )
    
    $
    (0.11
    )
    
    $
    (0.33
    )
    
    $
    (0.17
    )Weighted average common shares
outstanding:Basic and diluted
    
    
    6,853,783
    
    
    
    4,653,870
    
    
    
    6,603,887
    
    
    
    4,622,728
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Additional
    
    
    
    
    
    
    Accumulated
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Other Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    EquityBalance at March 31, 2005
    
    
    4,699,597
    
    
    $
    46,996
    
    
    $
    9,366,644
    
    
    $
    (6,491,387
    )
    
    $
    (130,357
    )
    
    $
    2,791,896Private Placement
    
    
    2,147,142
    
    
    
    21,471
    
    
    
    7,493,526
    
    
    
    
    
    
    
    
    
    
    
    7,514,997Costs of Private Placement
    
    
    
    
    
    
    
    
    
    
    (776,506
    )
    
    
    
    
    
    
    
    
    
    
    (776,506
    )Reissuance of Warrants
    
    
    
    
    
    
    
    
    
    
    (1,372,676
    )
    
    
    
    
    
    
    
    
    
    
    (1,372,676
    )Exercise of Stock Options
    
    
    27,000
    
    
    
    270
    
    
    
    29,430
    
    
    
    
    
    
    
    
    
    
    
    29,700Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,198,029
    )
    
    
    
    
    
    
    (2,198,029
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (214,872
    )
    
    
    (214,872
    )Additional pension
liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,612
    
    
    
    4,612Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,408,289
    )Balance at September 30,
2005
    
    
    6,873,739
    
    
    $
    68,737
    
    
    $
    14,740,418
    
    
    $
    (8,689,416
    )
    
    $
    (340,617
    )
    
    $
    5,779,122
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Six Months EndedSeptember 30,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (2,198,029
    )
    
    $
    (775,965
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    116,565
    
    
    
    80,503Loss on disposal of assets
    
    
    
    
    
    
    2,281Warrant benefit
    
    
    (15,423
    )
    
    
    Deferred tax assets
    
    
    (48,160
    )
    
    
    (30,094
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    47,762
    
    
    
    (64,874
    )Inventories
    
    
    (195,071
    )
    
    
    4,992Other current assets
    
    
    (58,945
    )
    
    
    (17,345
    )Accounts payable
    
    
    212,759
    
    
    
    67,952Accrued liabilities
    
    
    271,288
    
    
    
    (10,566
    )Accrued pension liability
    
    
    39,226
    
    
    
    (1,552
    )Additional pension liability
    
    
    
    
    
    
    1,824Net cash used in operating activities
    
    
    (1,828,028
    )
    
    
    (742,844
    )Cash flows from investing activities:Payments for property, plant and equipment
    
    
    (170,602
    )
    
    
    (47,773
    )Payments for intangible assets
    
    
    (329,167
    )
    
    
    (5,512
    )Net cash used in investing activities
    
    
    (499,769
    )
    
    
    (53,285
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (21,650
    )
    
    
    (20,761
    )Net proceeds from issuance of common stock
    
    
    6,768,191
    
    
    
    162,112Net cash provided by financing activities
    
    
    6,746,541
    
    
    
    141,351Effect of exchange rates on cash and cash equivalents
    
    
    (88,451
    )
    
    
    25,014Net increase (decrease) in cash and cash equivalents
    
    
    4,330,293
    
    
    
    (629,764
    )Cash and cash equivalents at beginning of period
    
    
    1,492,684
    
    
    
    2,697,670Cash and cash equivalents at end of period
    
    $
    5,822,977
    
    
    $
    2,067,906Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    
    9,803
    
    
    $
    10,930Cash paid during the period for income taxes
    
    
    37,598
    
    
    
    60,362
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1. Basis of Presentation
    2. Nature of Business, Sales of Common Stock and Corporate Liquidity
     Page 7




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3. Inventories
  September 30, 2005
    
    
    March 31, 2005Raw materials
    
    $
    365,805
    
    
    $
    193,980Work-in-process
    
    
    58,845
    
    
    
    75,337Finished goods
    
    
    247,317
    
    
    
    278,159$
    671,967
    
    
    $
    547,476
 4. Intangible Assets
  September 30, 2005Estimated Lives
    
    
    Gross Carrying
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Net valueLicensed technology
    
    
    5
    
    
    $
    355,457
    
    
    $
    50,589
    
    
    $
    304,868Patents and
trademarks
    
    
    6
    
    
    
    237,900
    
    
    
    210,888
    
    
    
    27,012Totals
    
    
    
    
    
    $
    593,357
    
    
    $
    261,477
    
    
    $
    331,880March 31, 2005Licensed technology
    
    
    5
    
    
    $
    26,290
    
    
    $
    19,718
    
    
    $
    6,572Patents and
trademarks
    
    
    6
    
    
    
    237,900
    
    
    
    205,372
    
    
    
    32,528Totals
    
    
    
    
    
    $
    264,190
    
    
    $
    225,090
    
    
    $
    39,100
  Remainder of fiscal 2006
    
    $
    36,0002007
    
    
    75,0002008
    
    
    72,0002009
    
    
    72,0002010
    
    
    70,000Thereafter
    
    
    7,000$
    332,000
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5. Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (735,716
    )
    
    $
    (490,606
    )
    
    $
    (2,198,029
    )
    
    $
    (775,965
    )Items of other comprehensive
income (loss):Translation adjustment
    
    
    (6,713
    )
    
    
    55,566
    
    
    
    (214,872
    )
    
    
    31,994Additional pension liability
    
    
    203
    
    
    
    (1,929
    )
    
    
    4,612
    
    
    
    (988
    )Comprehensive loss
    
    $
    (742,226
    )
    
    $
    (436,969
    )
    
    $
    (2,408,289
    )
    
    $
    (744,959
    )
 6. Options and Warrants
  Number of
    
    
    Range of ExerciseOptions/Warrants
    
    
    PricesFor the three months ended:September 30, 2005
    
    
    3,597,705
    
    
    $0.90 to $10.50September 30, 2004
    
    
    1,647,571
    
    
    $0.90 to $10.50For the six months ended:September 30, 2005
    
    
    3,597,705
    
    
    $0.90 to $10.50September 30, 2004
    
    
    1,647,571
    
    
    $0.90 to $10.50
 7. Shareholders Equity
 Consulting Agreements
  Warrants
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8. Stock-based Compensation
  Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss  As reported
    
    $
    (735,716
    )
    
    $
    (490,606
    )
    
    $
    (2,198,029
    )
    
    $
    (775,965
    )Deduct: Total
stock-based employee
compensation expense
determined under fair
value based method
for all awards
    
    
    (424,902
    )
    
    
    (35,914
    )
    
    
    (858,333
    )
    
    
    (71,921
    )Net loss  Pro forma
    
    $
    (1,160,618
    )
    
    $
    (526,520
    )
    
    $
    (3,056,362
    )
    
    $
    (847,886
    )Net loss per common
share  As reported:Basic and diluted
    
    $
    (0.11
    )
    
    $
    (0.11
    )
    
    $
    (0.33
    )
    
    $
    (0.17
    )Net loss per common
share  Pro forma:Basic and diluted
    
    $
    (0.17
    )
    
    $
    (0.11
    )
    
    $
    (0.46
    )
    
    $
    (0.18
    )
 9. Savings and Retirement Plans
   Page 10




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Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Gross service cost, net of
employee contribution
    
    $
    43,436
    
    
    $
    29,399
    
    
    $
    88,297
    
    
    $
    58,475Interest cost
    
    
    24,975
    
    
    
    16,638
    
    
    
    50,810
    
    
    
    33,093Expected return on assets
    
    
    (14,403
    )
    
    
    (9,535
    )
    
    
    (29,314
    )
    
    
    (18,966
    )Amortization
    
    
    7,037
    
    
    
    3,285
    
    
    
    14,303
    
    
    
    6,533Net periodic retirement cost
    
    $
    61,045
    
    
    $
    39,787
    
    
    $
    124,096
    
    
    $
    79,135
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Discount rate
    
    
    4.50-5.25
    %
    
    
    5.25-5.50
    %
    
    
    4.50-5.25
    %
    
    
    5.25-5.50
    %Expected return on assets
    
    
    4.00-5.00
    %
    
    
    4.50-5.00
    %
    
    
    4.00-5.00
    %
    
    
    4.50-5.00
    %Expected rate of
increase in future
compensation:General
    
    
    3
    %
    
    
    3
    %
    
    
    3
    %
    
    
    3
    %Individual
    
    
    0%-3
    %
    
    
    0%-3
    %
    
    
    0%-3
    %
    
    
    0%-3
    %
 10. Foreign Currency Translation
   11. Income Tax Expense
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12. Business Segment Information
     AdjustmentsUnited
    
    The
    
    United
    
    andStates
    
    Netherlands
    
    Kingdom
    
    Eliminations
    
    ConsolidatedFiscal 2006Sales to customers,
three-months ended
September 30, 2005
    
    $
    1,350
    
    
    $
    1,238,605
    
    
    $
    460,758
    
    
    $
    (145,758
    )
    
    $
    1,554,955Sales to customers,
six-months ended
September 30, 2005
    
    
    1,350
    
    
    
    2,576,206
    
    
    
    918,528
    
    
    
    (295,476
    )
    
    
    3,200,608Income tax benefit,
three-months ended
September 30, 2005
    
    
    
    
    
    
    (34,314
    )
    
    
    
    
    
    
    
    
    
    
    (34,314
    )Income tax expense,
six-months ended
September 30, 2005
    
    
    
    
    
    
    2,706
    
    
    
    
    
    
    
    
    
    
    
    2,706Net income (loss),
three-months ended
September 30, 2005
    
    
    (641,312
    )
    
    
    (122,681
    )
    
    
    (12,678
    )
    
    
    40,954
    
    
    
    (735,717
    )Net income (loss),
six-months ended
September 30, 2005
    
    
    (2,297,787
    )
    
    
    (134,784
    )
    
    
    31,736
    
    
    
    202,806
    
    
    
    (2,198,029
    )Long-lived
assets
At September 30, 2005
    
    
    668,167
    
    
    
    733,711
    
    
    
    4,884
    
    
    
    
    
    
    
    1,406,762Fiscal 2005Sales to customers,
three-months ended
September 30, 2004
    
    $
    
    
    
    $
    1,415,794
    
    
    $
    413,024
    
    
    $
    (178,094
    )
    
    $
    1,650,724Sales to customers,
six-months ended
September 30, 2004
    
    
    
    
    
    
    2,861,247
    
    
    
    872,855
    
    
    
    (330,882
    )
    
    
    3,403,220Income tax benefit,
three-months ended
September 30, 2004
    
    
    
    
    
    
    (14,230
    )
    
    
    
    
    
    
    
    
    
    
    (14,230
    )Income tax expense,
six-months ended
September 30, 2004
    
    
    
    
    
    
    52,229
    
    
    
    
    
    
    
    
    
    
    
    52,229Net income (loss),
three-months ended
September 30, 2004
    
    
    (420,915
    )
    
    
    (27,692
    )
    
    
    (19,737
    )
    
    
    (22,262
    )
    
    
    (490,606
    )Net income (loss),
six-months ended
September 30, 2004
    
    
    (974,961
    )
    
    
    105,559
    
    
    
    (5,405
    )
    
    
    98,842
    
    
    
    (775,965
    )Long-lived
assets
At September 30, 2004
    
    
    312,561
    
    
    
    772,340
    
    
    
    14,954
    
    
    
    
    
    
    
    1,099,855
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-looking Statements
     Overview
     
    
    Pursue regulatory approval in the U.S. for our Macroplastique product line.
 Page 13




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
    
    Successfully market and sell Urgent PC and I-Stop products by building our own U.S.
marketing and sales organization, using a combination of direct and independent sales
representatives;
    
    Expand distribution of our products outside of the U.S.; and
    
    Acquire or license complimentary products if appropriate opportunities arise.
   Critical Accounting Policies
  Revenue Recognition
 Accounts Receivable
 Inventories
 Foreign
Currency Translation/Transactions
 Page 14




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Impairment of Long-Lived Assets
  Results of Operations
 Three-month period ended September 30, 2005 compared to three-month period ended September 30, 2004
      Page 15




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 
 Six-month period ended September 30, 2005 compared to six-month period ended September 30, 2004
    Page 16




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 


Liquidity and Capital Resources


Cash Flows






Sources of Liquidity. Page 17




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Commitments and Contingencies.












Page 18



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##### Table of Contents



Payments Due by PeriodRemainder of Fiscal
    
    
    
    
    
    
    Fiscal 2008 andTotal
    
    
    2006
    
    
    Fiscal 2007
    
    
    thereafterMinimum royalty payments
    
    $
    470,333
    
    
    $
    152,000
    
    
    $
    124,833
    
    
    $
    193,500Notes payable
    
    
    449,661
    
    
    
    20,733
    
    
    
    41,468
    
    
    
    387,460Operating lease commitments
    
    
    343,986
    
    
    
    154,206
    
    
    
    120,263
    
    
    
    69,517Total contractual obligations
    
    $
    1,263,980
    
    
    $
    326,939
    
    
    $
    286,564
    
    
    $
    650,477
 
 ITEM 3. CONTROLS AND PROCEDURES.
  Internal Control Matters
  Page 19




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PART II. OTHER INFORMATION
  
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Abstentions andItem
    
    Votes For
    
    Votes Against
    
    Votes Withheld
    
    Broker Non-VotesDirector Election
    
    
    3,932,986
    
    
    
    
    
    
    
    7,898
    
    
    
    2,905,855Stock Option Plan
    
    
    1,523,905
    
    
    
    92,271
    
    
    
    9,746
    
    
    
    5,220,817
 
 ITEM 5. OTHER INFORMATION
    Page 20




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##### Table of Contents



ITEM 6. EXHIBITS.
     Page 21




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SIGNATURES
  UROPLASTY, INC.Date: November 14, 2005
    
    by:
    
    /s/ SAM B. HUMPHRIESSam B. HumphriesPresident and Chief Executive OfficerDate: November 14, 2005
    
    by:
    
    /s/ DANIEL G. HOLMANDaniel G. HolmanChief Financial Officer
 Page 22