##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended June 30, 2009
 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, 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 4.
    
    Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    20Item 1A.
    
    Risk Factors
    
    
    20Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3.
    
    Defaults upon Senior Securities
    
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20Item 5.
    
    Other Information
    
    
    20Item 6.
    
    Exhibits
    
    
    20SIGNATURES
    
    
    21Certifications by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 302
    
    
    22Certifications by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906
    
    
    24EX-31.1EX-32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
  
  June 30, 2009(unaudited)
    
    
    March 31, 2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    763,649
    
    
    $
    3,276,299Short-term investments
    
    
    5,500,000
    
    
    
    4,500,000Accounts receivable, net
    
    
    1,327,112
    
    
    
    1,214,049Inventories
    
    
    491,252
    
    
    
    495,751Other
    
    
    392,241
    
    
    
    279,898Total current assets
    
    
    8,474,254
    
    
    
    9,765,997Property, plant, and equipment, net
    
    
    1,388,109
    
    
    
    1,401,229Intangible assets, net
    
    
    3,166,835
    
    
    
    3,378,648Prepaid pension asset
    
    
    83,405
    
    
    
    66,130Deferred tax assets
    
    
    74,172
    
    
    
    68,793Total assets
    
    $
    13,186,775
    
    
    $
    14,680,797
  Page 3




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##### Table of Contents



June 30, 2009(unaudited)
    
    
    March 31, 2009Liabilities and Shareholders EquityCurrent liabilities:Current portion  deferred rent
    
    $
    35,000
    
    
    $
    35,000Accounts payable
    
    
    527,655
    
    
    
    604,593Income tax payable
    
    
    61,776
    
    
    
    56,785Accrued liabilities:Compensation
    
    
    626,188
    
    
    
    983,052Other
    
    
    208,136
    
    
    
    248,568Total current liabilities
    
    
    1,458,755
    
    
    
    1,927,998Deferred rent  less current portion
    
    
    138,921
    
    
    
    147,576Accrued pension liability
    
    
    358,268
    
    
    
    296,646Total liabilities
    
    
    1,955,944
    
    
    
    2,372,220Commitments and Contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock $.01 par value;
40,000,000
shares authorized, 14,946,540
shares issued and outstanding
at June 30 and
March 31, 2009
    
    
    149,465
    
    
    
    149,465Additional paid-in capital
    
    
    35,936,268
    
    
    
    35,763,619Accumulated deficit
    
    
    (24,779,124
    )
    
    
    (23,413,350
    )Accumulated other comprehensive
loss
    
    
    (75,778
    )
    
    
    (191,157
    )Total shareholders equity
    
    
    11,230,831
    
    
    
    12,308,577Total liabilities and shareholders equity
    
    $
    13,186,775
    
    
    $
    14,680,797
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Three Months EndedJune 30,2009
    
    
    2008Net sales
    
    $
    2,825,929
    
    
    $
    4,525,622Cost of goods sold
    
    
    551,970
    
    
    
    707,967Gross profit
    
    
    2,273,959
    
    
    
    3,817,655Operating expensesGeneral and administrative
    
    
    848,551
    
    
    
    1,038,714Research and development
    
    
    527,815
    
    
    
    405,519Selling and marketing
    
    
    2,057,288
    
    
    
    2,620,035Amortization
    
    
    211,813
    
    
    
    210,9753,645,467
    
    
    
    4,275,243Operating loss
    
    
    (1,371,508
    )
    
    
    (457,588
    )Other income (expense)Interest income
    
    
    31,399
    
    
    
    75,115Interest expense
    
    
    (7,907
    )
    
    
    (6,834
    )Foreign currency exchange loss
    
    
    (7,330
    )
    
    
    (5,770
    )Other, net
    
    
    (2,183
    )
    
    
    13,979
    
    
    
    62,511Loss before income taxes
    
    
    (1,357,529
    )
    
    
    (395,077
    )Income tax expense
    
    
    8,245
    
    
    
    11,571Net loss
    
    $
    (1,365,774
    )
    
    $
    (406,648
    )Basic and diluted loss per common share
    
    $
    (0.09
    )
    
    $
    (0.03
    )Weighted average common shares outstanding:Basic and diluted
    
    
    14,937,771
    
    
    
    14,916,540
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AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (loss)
    
    
    EquityBalance at March
31, 2009
    
    
    14,946,540
    
    
    $
    149,465
    
    
    $
    35,763,619
    
    
    $
    (23,413,350
    )
    
    $
    (191,157
    )
    
    $
    12,308,577Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    172,649
    
    
    
    
    
    
    
    
    
    
    
    172,649Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,365,774
    )
    
    
    115,379
    
    
    
    (1,250,395
    )Balance at June 30,
2009
    
    
    14,946,540
    
    
    $
    149,465
    
    
    $
    35,936,268
    
    
    $
    (24,779,124
    )
    
    $
    (75,778
    )
    
    $
    11,230,831
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Three Months EndedJune 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (1,365,774
    )
    
    $
    (406,648
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    284,040
    
    
    
    280,822Loss on disposal of equipment
    
    
    2,186
    
    
    
    Share-based consulting expense
    
    
    
    
    
    
    16,029Share-based compensation expense
    
    
    172,649
    
    
    
    266,962Deferred income taxes
    
    
    (969
    )
    
    
    (2,637
    )Deferred rent
    
    
    (8,750
    )
    
    
    (8,750
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (54,213
    )
    
    
    129,863Inventories
    
    
    30,618
    
    
    
    32,627Other current assets
    
    
    (106,949
    )
    
    
    (167,223
    )Accounts payable
    
    
    (87,783
    )
    
    
    (208,510
    )Accrued liabilities
    
    
    (414,828
    )
    
    
    (784,377
    )Accrued pension liability, net and income tax payable
    
    
    35,291
    
    
    
    48,922Net cash used in operating activities
    
    
    (1,514,482
    )
    
    
    (802,920
    )Cash flows from investing activities:Proceeds from sale of short-term investments
    
    
    
    
    
    
    4,500,000Purchase of short-term investments
    
    
    (1,000,000
    )
    
    
    (2,542,267
    )Purchases of property, plant and equipment
    
    
    (16,487
    )
    
    
    (50,750
    )Net cash (used in) provided by investing activities
    
    
    (1,016,487
    )
    
    
    1,906,983Cash flows from financing activities:Repayment of debt obligations
    
    
    
    
    
    
    (58,187
    )Net cash used in financing activities
    
    
    
    
    
    
    (58,187
    )Effect of exchange rates on cash and cash equivalents
    
    
    18,319
    
    
    
    6,314Net (decrease) increase in cash and cash equivalents
    
    
    (2,512,650
    )
    
    
    1,052,190Cash and cash equivalents at beginning of period
    
    
    3,276,299
    
    
    
    3,880,044Cash and cash equivalents at end of period
    
    $
    763,649
    
    
    $
    4,932,234Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    
    
    
    $
    6,850Cash paid during the period for income taxes
    
    
    7,908
    
    
    
    19,759
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1. Basis of Presentation
    2. Short-term Investments
  3. Accounts Receivable
  Page 8




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4. Inventories
  June 30, 2009
    
    
    March 31, 2009Raw materials
    
    $
    238,607
    
    
    $
    227,054Work-in-process
    
    
    32,990
    
    
    
    23,326Finished goods
    
    
    219,655
    
    
    
    245,371$
    491,252
    
    
    $
    495,751
 5. Intangible Assets
 Intangible Assets.
 GrossEstimated
    
    
    Carrying
    
    
    AccumulatedLives (Years)
    
    
    Amount
    
    
    Amortization
    
    
    Net valueJune 30, 2009Patents and inventions
    
    
    6
    
    
    $
    5,472,512
    
    
    $
    2,305,677
    
    
    $
    3,166,835March 31, 2009Patents and inventions
    
    
    6
    
    
    $
    5,472,512
    
    
    $
    2,093,864
    
    
    $
    3,378,648
  Remainder of 2010
    
    $
    634,0002011
    
    
    843,0002012
    
    
    842,0002013
    
    
    842,0002014
    
    
    4,0002015 and beyond
    
    
    2,000$
    3,167,000
 6. Deferred Rent and Leasehold Improvements
  Page 9




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7. Comprehensive Loss
  Three Months EndedJune 30,2009
    
    
    2008Net loss
    
    $
    (1,365,774
    )
    
    $
    (406,648
    )Items of other comprehensive income (loss):Accumulated translation adjustment
    
    
    115,951
    
    
    
    8,870Pension related
    
    
    (572
    )
    
    
    21Comprehensive loss
    
    $
    (1,250,395
    )
    
    $
    (397,757
    )
  8. Net Loss per Common Share
  Number of Restricted
    
    
    Range ofStock/Options/Warrants
    
    
    Exercise PricesFor the three months ended:June 30, 2009
    
    
    4,489,260
    
    
    $
    0.69 to $5.30June 30, 2008
    
    
    4,324,528
    
    
    $
    1.82 to $5.30
 9. Credit Facilities
   10. Warrants
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11. Share-based Compensation
    Three Months Ended
    
    
    Three Months EndedJune 30, 2009
    
    
    June 30, 2008Expected life in years
    
    
    4.82
    
    
    
    4.31Risk-free interest rate
    
    
    2.83
    %
    
    
    3.35
    %Expected volatility
    
    
    94.38
    %
    
    
    82.41
    %Expected dividend yield
    
    
    0
    
    
    
    0Weighted-average fair value
    
    $
    0.61
    
    
    $
    2.01
   WeightedWeighted
    
    
    average
    
    
    AggregateNumber of
    
    
    average
    
    
    remaining life
    
    
    intrinsicshares
    
    
    exercise price
    
    
    in years
    
    
    valueOptions outstanding at March 31, 2009
    
    
    2,134,500
    
    
    $
    3.93
    
    
    
    
    
    
    $
    Options granted
    
    
    305,000
    
    
    
    0.85Options exercised
    
    
    
    
    
    
    Options cancelled
    
    
    (17,168
    )
    
    
    3.08Options outstanding at June 30, 2009
    
    
    2,422,332
    
    
    $
    3.55
    
    
    
    3.92
    
    
    $
    750Exercisable at June 30, 2009
    
    
    2,055,827
    
    
    $
    3.82
    
    
    
    3.84
    
    
    $
    250
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Weighted
    
    
    Weightedaverage grant
    
    
    average
    
    
    AggregateNumber of
    
    
    date fair
    
    
    remaining life
    
    
    intrinsicShares
    
    
    value
    
    
    in years
    
    
    valueBalance at March 31, 2009
    
    
    14,000
    
    
    $
    3.15
    
    
    
    0.16
    
    
    $
    44,100Shares granted
    
    
    
    
    
    
    Shares vested
    
    
    14,000
    
    
    
    3.15Shares cancelled
    
    
    
    
    
    
    Balance at June 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  12. Savings and Retirement Plans
    Three Months EndedJune 30,2009
    
    
    2008Gross service cost
    
    $
    15,408
    
    
    $
    18,162Interest cost
    
    
    22,438
    
    
    
    25,740Expected return on assets
    
    
    1,302
    
    
    
    4,333Amortization
    
    
    (108
    )
    
    
    1,083Net periodic retirement cost
    
    $
    39,040
    
    
    $
    49,318
  Three Months EndedJune 30,2009
    
    
    2008Discount rate
    
    
    6.60-6.70
    %
    
    
    6.10-6.70
    %Expected return on assets
    
    
    5.00-6.60
    %
    
    
    5.00-6.10
    %Expected rate of increase in future compensation:General
    
    
    3
    %
    
    
    3
    %Individual
    
    
    0-3
    %
    
    
    0-3
    %
 Page 12




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13. Foreign Currency Translation
   14. Business Segment Information
 Disclosures about Segments of an Enterprise and Related Information,
  United
    
    The
    
    UnitedStates
    
    Netherlands
    
    Kingdom
    
    ConsolidatedThree months ended June 30, 2009Sales to customers
    
    $
    1,459,738
    
    
    $
    1,010,490
    
    
    $
    355,701
    
    
    $
    2,825,929Long-lived assets at June 30, 2009
    
    
    3,812,568
    
    
    
    737,753
    
    
    
    88,028
    
    
    
    4,638,349Three months ended June 30, 2008Sales to customers
    
    $
    2,213,097
    
    
    $
    1,726,029
    
    
    $
    586,496
    
    
    $
    4,525,622Long-lived assets at June 30, 2008
    
    
    4,751,653
    
    
    
    854,613
    
    
    
    36,546
    
    
    
    5,642,812
  15. Income Tax Expense
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16. Recently Issued Accounting Standards
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles. The Hierarchy of Generally Accepted Accounting Principles TM
 Subsequent Events.
 Employers Disclosures about Postretirement
Benefit Plan Assets.
 Determination of the Useful Life of Intangible
Assets, 
 Business Combinations Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies,
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Noncontrolling Interest in Consolidated Financial
Statements  An Amendment of ARB 51
 17. 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, 2009.
 Forward-looking Statements
   Critical Accounting Policies
   Overview
 ® ®
 Page 15




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##### Table of Contents



Journal of Urology
   Results of Operations
 Three months ended June 30, 2009 compared to three months ended June 30, 2008
     Page 16




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Page 17




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Three Months EndedJune 30,2009
    
    
    2008Gross ProfitGAAP gross profit
    
    $
    2,273,959
    
    
    $
    3,817,655% of sales
    
    
    80
    %
    
    
    84
    %SFAS 123 (R) share-based compensation
    
    
    13,544
    
    
    
    16,375Depreciation expense
    
    
    14,150
    
    
    
    12,790Non-GAAP gross profit
    
    
    2,301,653
    
    
    
    3,846,820Operating ExpensesGAAP operating expenses
    
    
    3,645,467
    
    
    
    4,275,243SFAS 123 (R) share-based compensation
    
    
    159,105
    
    
    
    266,616Depreciation expense
    
    
    58,077
    
    
    
    57,057Amortization expense
    
    
    211,813
    
    
    
    210,975Non-GAAP operating expenses
    
    
    3,216,472
    
    
    
    3,740,595Operating LossGAAP operating loss
    
    
    (1,371,508
    )
    
    
    (457,588
    )SFAS 123 (R) share-based compensation
    
    
    172,649
    
    
    
    282,991Depreciation expense
    
    
    72,227
    
    
    
    69,847Amortization expense
    
    
    211,813
    
    
    
    210,975Non-GAAP operating income (loss)
    
    $
    (914,819
    )
    
    $
    106,225
 Liquidity and Capital Resources
 Cash Flows
     Sources of Liquidity
  Page 18




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
  Commitments and Contingencies.
   
 ITEM 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control Over Financial Reporting.
  Page 19




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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.
    
    Submission of Matters to a Vote of Security Holders
  
 ITEM 5.
    
    Other Information
  
 ITEM 6.
    
    Exhibits
    Page 20




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SIGNATURES
  UROPLASTY, INC.Date:  August 3, 2009
    By:
    /s/ DAVID B. KAYSENDavid B. KaysenPresident and Chief Executive OfficerDate:  August 3, 2009
    By:
    /s/ MAHEDI A. JIWANIMahedi A. JiwaniChief Financial Officer Page 21