##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended September 30, 2010
 o
    
    Transition Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from  to .
 Commission File No. 001-32632
 (UROPLASTY LOGO)
 UROPLASTY, INC.
  Minnesota, U.S.A.
(State or other jurisdiction of 
incorporation or organization)
    
    41-1719250
(I.R.S. Employer Identification No.)
 5420 Feltl Road
Minnetonka, Minnesota, 55343
 (952) 426-6140
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
  o þ




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##### 



Table of Contents
INDEX
 UROPLASTY INC. AND SUBSIDIARIES
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    5Condensed Consolidated Statement of Shareholders Equity and Comprehensive Loss
    
    
    6Condensed Consolidated Statements of Cash Flows
    
    
    7Notes to the Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults upon Senior Securities
    
    
    21Item 4. (Removed and Reserved)
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21SIGNATURES
    
    
    22Certifications by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 302
    
    
    23Certifications by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906
    
    
    25EX-31.1EX-32.1EX-99.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  
 
 September 30, 2010
    
    
    March 31, 2010AssetsCurrent assets:Cash and cash equivalents
    
    $
    15,387,687
    
    
    $
    2,311,269Short-term investments
    
    
    6,000,000
    
    
    
    3,500,000Accounts receivable, net
    
    
    1,492,279
    
    
    
    1,287,440Inventories
    
    
    472,584
    
    
    
    341,497Income tax receivable
    
    
    
    
    
    
    23,820Other
    
    
    318,808
    
    
    
    237,321Total current assets
    
    
    23,671,358
    
    
    
    7,701,347Property, plant, and equipment, net
    
    
    1,186,372
    
    
    
    1,230,771Intangible assets, net
    
    
    2,122,945
    
    
    
    2,533,095Deferred tax assets
    
    
    115,026
    
    
    
    108,530Total assets
    
    $
    27,095,701
    
    
    $
    11,573,743




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##### Table of Contents



September 30, 2010
    
    
    March 31, 2010Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    487,114
    
    
    $
    485,594Current portion  deferred rent
    
    
    35,000
    
    
    
    35,000Income tax payable
    
    
    12,433
    
    
    
    10,000Accrued liabilities:Compensation
    
    
    952,835
    
    
    
    903,057Other
    
    
    264,578
    
    
    
    212,028Total current liabilities
    
    
    1,751,960
    
    
    
    1,645,679Deferred rent  less current portion
    
    
    94,886
    
    
    
    112,500Accrued pension liability
    
    
    556,124
    
    
    
    601,037Total liabilities
    
    
    2,402,970
    
    
    
    2,359,216Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock $.01 par value; 40,000,000
shares authorized, 20,526,457 and
14,946,540 shares issued and
outstanding at September 30, 2010
and March 31, 2010, respectively
    
    
    205,265
    
    
    
    149,465Additional paid-in capital
    
    
    53,463,984
    
    
    
    36,178,126Accumulated deficit
    
    
    (28,469,141
    )
    
    
    (26,617,161
    )Accumulated other comprehensive loss
    
    
    (507,377
    )
    
    
    (495,903
    )Total shareholders equity
    
    
    24,692,731
    
    
    
    9,214,527Total liabilities and shareholders equity
    
    $
    27,095,701
    
    
    $
    11,573,743




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    3,244,823
    
    
    $
    2,986,475
    
    
    $
    6,280,322
    
    
    $
    5,812,404Cost of goods sold
    
    
    594,469
    
    
    
    535,074
    
    
    
    1,105,165
    
    
    
    1,087,044Gross profit
    
    
    2,650,354
    
    
    
    2,451,401
    
    
    
    5,175,157
    
    
    
    4,725,360Operating expensesGeneral and administrative
    
    
    897,368
    
    
    
    713,040
    
    
    
    1,747,685
    
    
    
    1,561,591Research and development
    
    
    472,008
    
    
    
    435,898
    
    
    
    872,637
    
    
    
    963,713Selling and marketing
    
    
    2,017,420
    
    
    
    1,968,054
    
    
    
    4,005,946
    
    
    
    4,025,342Amortization
    
    
    210,682
    
    
    
    211,503
    
    
    
    421,450
    
    
    
    423,3163,597,478
    
    
    
    3,328,495
    
    
    
    7,047,718
    
    
    
    6,973,962Operating loss
    
    
    (947,124
    )
    
    
    (877,094
    )
    
    
    (1,872,561
    )
    
    
    (2,248,602
    )Other income (expense)Interest income
    
    
    17,999
    
    
    
    24,230
    
    
    
    31,627
    
    
    
    55,629Interest expense
    
    
    (1,938
    )
    
    
    (1,788
    )
    
    
    (3,885
    )
    
    
    (9,694
    )Foreign currency exchange gain (loss)
    
    
    10,574
    
    
    
    (7,365
    )
    
    
    12,364
    
    
    
    (14,697
    )Other, net
    
    
    
    
    
    
    2,000
    
    
    
    (192
    )
    
    
    (183
    )26,635
    
    
    
    17,077
    
    
    
    39,914
    
    
    
    31,055Loss before income taxes
    
    
    (920,489
    )
    
    
    (860,017
    )
    
    
    (1,832,647
    )
    
    
    (2,217,547
    )Income tax expense
    
    
    2,183
    
    
    
    14,642
    
    
    
    19,333
    
    
    
    22,887Net loss
    
    $
    (922,672
    )
    
    $
    (874,659
    )
    
    $
    (1,851,980
    )
    
    $
    (2,240,434
    )Basic and diluted loss per common share
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    (0.15
    )Weighted average common shares
outstanding:Basic and diluted
    
    
    19,088,249
    
    
    
    14,946,540
    
    
    
    17,207,957
    
    
    
    14,942,179




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AdditionalCommon Stock
    
    
    Paid-in
    
    
    
    
    
    
    Accumulated Other
    
    
    Total ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Accumulated Deficit
    
    
    Comprehensive Loss
    
    
    EquityBalance at March 31, 2010
    
    
    14,946,540
    
    
    $
    149,465
    
    
    $
    36,178,126
    
    
    $
    (26,617,161
    )
    
    $
    (495,903
    )
    
    $
    9,214,527Proceeds from public offering, net of costs of $1,182,941
    
    
    4,600,000
    
    
    
    46,000
    
    
    
    14,871,059
    
    
    
    
    
    
    
    
    
    
    
    14,917,059Share-based consulting and compensation
    
    
    70,025
    
    
    
    701
    
    
    
    147,991
    
    
    
    
    
    
    
    
    
    
    
    148,692Proceeds from exercise of warrants
    
    
    886,000
    
    
    
    8,860
    
    
    
    2,190,322
    
    
    
    
    
    
    
    
    
    
    
    2,199,182Proceeds from exercise of stock options, net of 1,608
shares returned for payment of related income taxes
    
    
    23,892
    
    
    
    239
    
    
    
    76,486
    
    
    
    
    
    
    
    
    
    
    
    76,725Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,851,980
    )
    
    
    (11,474
    )
    
    
    (1,863,454
    )Balance at September 30, 2010
    
    
    20,526,457
    
    
    $
    205,265
    
    
    $
    53,463,984
    
    
    $
    (28,469,141
    )
    
    $
    (507,377
    )
    
    $
    24,692,731




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##### Table of Contents



Six Months EndedSeptember 30,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (1,851,980
    )
    
    $
    (2,240,434
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    567,576
    
    
    
    567,238Loss on disposal of equipment
    
    
    192
    
    
    
    186Share-based consulting expense
    
    
    8,202
    
    
    
    Share-based compensation expense
    
    
    140,490
    
    
    
    291,462Deferred income taxes
    
    
    (4,925
    )
    
    
    (3,249
    )Deferred rent
    
    
    (17,614
    )
    
    
    (17,462
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (187,514
    )
    
    
    91,206Inventories
    
    
    (125,674
    )
    
    
    47,499Other current assets and income tax receivable
    
    
    (57,949
    )
    
    
    (102,998
    )Accounts payable
    
    
    1,196
    
    
    
    (185,406
    )Accrued liabilities
    
    
    94,179
    
    
    
    (348,419
    )Accrued pension liability, net and income tax payable
    
    
    (48,246
    )
    
    
    (58,492
    )Net cash used in operating activities
    
    
    (1,482,067
    )
    
    
    (1,958,869
    )Cash flows from investing activities:Proceeds from sale of short-term investments
    
    
    2,500,000
    
    
    
    2,500,000Purchase of short-term investments
    
    
    (5,000,000
    )
    
    
    (2,000,000
    )Purchases of property, plant and equipment
    
    
    (94,506
    )
    
    
    (61,334
    )Purchases of intangible assets
    
    
    (11,300
    )
    
    
    Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    2,000Net cash (used in) provided by investing activities
    
    
    (2,605,806
    )
    
    
    440,666Cash flows from financing activities:Net proceeds from public offering of common stock
    
    
    14,917,059
    
    
    
    Net proceeds from warrant and option exercise
    
    
    2,275,906
    
    
    
    Net cash provided by financing activities
    
    
    17,192,965
    
    
    
    Effect of exchange rates on cash and cash equivalents
    
    
    (28,674
    )
    
    
    34,771Net increase(decrease) in cash and cash equivalents
    
    
    13,076,418
    
    
    
    (1,483,432
    )Cash and cash equivalents at beginning of period
    
    
    2,311,269
    
    
    
    3,276,299Cash and cash equivalents at end of period
    
    $
    15,387,687
    
    
    $
    1,792,867Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    
    
    
    $
    6,145Cash received(paid) during the period for income taxes
    
    
    248
    
    
    
    (105,877
    )
 
    Table of Contents    
 
 1. Basis of Presentation
    2. Short-term Investments
 Fair Value Measurements and Disclosures
 3. Accounts Receivable




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##### Table of Contents



4. Inventories
  September 30, 2010
    
    
    March 31, 2010Raw materials
    
    $
    160,680
    
    
    $
    158,942Work-in-process
    
    
    42,913
    
    
    
    28,935Finished goods
    
    
    268,991
    
    
    
    153,620$
    472,584
    
    
    $
    341,497
 5. Intangible Assets
  Gross carrying
    
    
    Accumulatedamount
    
    
    amortization
    
    
    Net valueSeptember 30, 2010
    
    $
    5,483,812
    
    
    $
    3,360,867
    
    
    $
    2,122,945March 31, 2010
    
    $
    5,472,512
    
    
    $
    2,939,417
    
    
    $
    2,533,095
  Remainder of 2011
    
    $
    422,0002012
    
    
    844,0002013
    
    
    844,0002014
    
    
    6,0002015 and beyond
    
    
    7,000$
    2,123,000
 6. Deferred Rent and Leasehold Improvements
 Leases




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7. Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net loss
    
    $
    (922,672
    )
    
    $
    (874,659
    )
    
    $
    (1,851,980
    )
    
    $
    (2,240,434
    )Items of other
comprehensive income
(loss):Translation adjustment
    
    
    131,973
    
    
    
    60,116
    
    
    
    (502
    )
    
    
    176,067Pension related
    
    
    (29,683
    )
    
    
    (4,146
    )
    
    
    (10,972
    )
    
    
    (4,717
    )Comprehensive loss
    
    $
    (820,382
    )
    
    $
    (818,689
    )
    
    $
    (1,863,454
    )
    
    $
    (2,069,084
    )
  8. Net Loss per Common Share
  Number of unvestedrestricted stock/
    
    
    Range ofoptions/warrants
    
    
    exercise pricesSeptember 30, 2010
    
    
    2,171,925
    
    
    $
    0.71 to $5.19September 30, 2009
    
    
    4,555,928
    
    
    $
    0.69 to $5.30
 9. Credit Facilities




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##### Table of Contents



10. Warrants
  WeightedaverageNumber of
    
    
    exerciseshares
    
    
    priceOutstanding at March 31, 2010
    
    
    2,066,928
    
    
    $
    3.78Warrants expired
    
    
    1,180,928
    
    
    
    4.75Warrants exercised
    
    
    886,000
    
    
    
    2.49Outstanding at September 30, 2010
    
    
    
  11. Share-based Compensation
  Compensation  Stock Compensation
  Six Months Ended
    
    
    Six Months EndedSeptember 30, 2010
    
    
    September 30, 2009Expected life in years
    
    
    6.05
    
    
    
    4.83Risk-free interest rate
    
    
    2.20
    %
    
    
    2.74
    %Expected volatility
    
    
    90.99
    %
    
    
    94.21
    %Expected dividend yield
    
    
    0
    
    
    
    0Weighted-average fair value
    
    $
    3.50
    
    
    $
    0.60




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##### Table of Contents



Weighted
    
    
    Weightedaverage
    
    
    average
    
    
    AggregateNumber of
    
    
    exercise
    
    
    remaining
    
    
    intrinsicshares
    
    
    price
    
    
    life in years
    
    
    valueOutstanding at March 31, 2010
    
    
    2,037,500
    
    
    $
    3.14
    
    
    
    4.00
    
    
    $
    506,000Options granted
    
    
    129,900
    
    
    
    4.70Options exercised
    
    
    25,500
    
    
    
    3.31Options surrendered
    
    
    40,000
    
    
    
    4.02Outstanding at September 30, 2010
    
    
    2,101,900
    
    
    $
    3.21
    
    
    
    3.78
    
    
    $
    3,470,000Exercisable at September 30, 2010
    
    
    1,873,664
    
    
    $
    3.24
    
    
    
    3.60
    
    
    $
    3,046,000
   Weighted
    
    
    Weighted average
    
    
    AggregateNumber of
    
    
    average grant
    
    
    remaining life in
    
    
    intrinsicShares
    
    date fair value

    
    years
    
    valueBalance at March 31, 2010
    
    
    Shares granted
    
    
    70,025
    
    
    $
    4.74Shares vested
    
    
    
    
    
    
    Balance at September 30, 2010
    
    
    70,025
    
    
    $
    4.74
    
    
    
    1.74
    
    
    $
    330,000
   12. Savings and Retirement Plans




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Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross service cost
    
    $
    23,370
    
    
    $
    16,179
    
    
    
    46,463
    
    
    $
    31,586Interest cost
    
    
    27,895
    
    
    
    23,614
    
    
    
    55,269
    
    
    
    46,053Expected return on assets
    
    
    (12,291
    )
    
    
    1,306
    
    
    
    (24,280
    )
    
    
    2,609Amortization
    
    
    4,160
    
    
    
    (113
    )
    
    
    8,196
    
    
    
    (221
    )Net periodic retirement cost
    
    $
    43,134
    
    
    $
    40,986
    
    
    $
    85,648
    
    
    $
    80,027
  Six Months EndedSeptember 30,2010
    
    
    2009Discount rate
    
    
    4.70-5.50
    %
    
    
    6.60-6.70
    %Expected return on assets
    
    
    4.70-5.00
    %
    
    
    5.00-6.60
    %Expected rate of increase in future
compensation:General
    
    
    3.00
    %
    
    
    3.00
    %Individual
    
    
    0.00-3.00
    %
    
    
    0.00-3.00
    %
  13. Equity Offering
  14. Foreign Currency Translation
   15. Business Segment Information
 Segment Reporting,




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##### Table of Contents



All OtherUnited
    
    
    United
    
    
    ForeignStates
    
    
    Kingdom
    
    
    Countries
    
    
    ConsolidatedThree months ended September 30,
2010
    
    $
    1,843,808
    
    
    $
    349,151
    
    
    $
    1,051,864
    
    
    $
    3,244,823Three months ended September 30,
2009
    
    $
    1,503,716
    
    
    $
    428,011
    
    
    $
    1,054,748
    
    
    $
    2,986,475Six months ended September 30, 2010
    
    $
    3,465,826
    
    
    $
    736,392
    
    
    $
    2,078,104
    
    
    $
    6,280,322Six months ended September 30, 2009
    
    $
    2,963,454
    
    
    $
    783,712
    
    
    $
    2,065,238
    
    
    $
    5,812,404
  United
    
    
    United
    
    
    TheStates
    
    
    Kingdom
    
    
    Netherlands
    
    
    ConsolidatedSeptember 30, 2010
    
    $
    502,221
    
    
    $
    2,650
    
    
    $
    681,502
    
    
    $
    1,186,373
  16. Income Tax Expense
     Income Taxes




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##### Table of Contents



17. Recently Issued Accounting Standards
 Fair Value Measurements and Disclosures : Improving Disclosures about Fair
Value Measurements
 18. Subsequent events
  
 ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 We recommend that you read this Report on Form 10-Q in conjunction with our Annual Report on Form
10-K for the year ended March 31, 2010.
 Forward-looking Statements
   Critical Accounting Policies




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##### Table of Contents



Overview
 ® ®
       Results of Operations
 Three and six months ended September 30, 2010 compared to three and six months ended September 30,
2009
 Net Sales




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##### Table of Contents



Gross Profit
 General and Administrative Expenses (G&A):
 Research and Development Expenses (R&D):
 Selling and Marketing Expenses (S&M):




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##### Table of Contents



Amortization of Intangibles
 Other Income (Expense):
  Income Tax Expense
 Non-GAAP Financial Measures




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Gross ProfitGAAP gross profit
    
    $
    2,650,354
    
    
    $
    2,451,401
    
    
    $
    5,175,157
    
    
    $
    4,725,360% of sales
    
    
    82
    %
    
    
    82
    %
    
    
    82
    %
    
    
    81
    %Share-based compensation
    
    
    4,184
    
    
    
    4,903
    
    
    
    8,667
    
    
    
    18,448Depreciation expense
    
    
    15,766
    
    
    
    14,150
    
    
    
    31,464
    
    
    
    28,299Non-GAAP gross profit
    
    
    2,670,304
    
    
    
    2,470,454
    
    
    
    5,215,288
    
    
    
    4,772,107Operating ExpensesGAAP operating expenses
    
    
    3,597,478
    
    
    
    3,328,495
    
    
    
    7,047,718
    
    
    
    6,973,962Share-based compensation
    
    
    68,241
    
    
    
    113,909
    
    
    
    140,024
    
    
    
    273,014Depreciation expense
    
    
    57,074
    
    
    
    57,546
    
    
    
    114,662
    
    
    
    115,623Amortization expense
    
    
    210,682
    
    
    
    211,503
    
    
    
    421,450
    
    
    
    423,316Non-GAAP operating expenses
    
    
    3,261,481
    
    
    
    2,945,537
    
    
    
    6,371,582
    
    
    
    6,162,009Operating LossGAAP operating loss
    
    
    (947,124
    )
    
    
    (877,094
    )
    
    
    (1,872,561
    )
    
    
    (2,248,602
    )Share-based compensation
    
    
    72,425
    
    
    
    118,812
    
    
    
    148,692
    
    
    
    291,462Depreciation expense
    
    
    72,840
    
    
    
    71,696
    
    
    
    146,126
    
    
    
    143,922Amortization expense
    
    
    210,682
    
    
    
    211,503
    
    
    
    421,450
    
    
    
    423,316Non-GAAP operating loss
    
    $
    (591,177
    )
    
    $
    (475,083
    )
    
    $
    (1,156,293
    )
    
    $
    (1,389,902
    )
 Liquidity and Capital Resources
 Cash Flows




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##### Table of Contents



Sources of Liquidity
     Commitments and Contingencies.
   
 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  
 ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting.




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1A. Risk Factors
  
 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 ITEM 3. Defaults upon Senior Securities
  
 ITEM 4. (Removed and Reserved)
 
 ITEM 5. Other Information
  
 ITEM 6. Exhibits




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##### Table of Contents



SIGNATURES
  UROPLASTY, INC.Date:  October 27, 2010
    By:
    /s/ DAVID B. KAYSENDavid B. KaysenPresident and Chief Executive OfficerDate:  October 27, 2010
    By:
    /s/ MAHEDI A. JIWANIMahedi A. JiwaniChief Financial Officer