##### 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 June 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, 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
    
    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
    
    
    19Item 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. (Removed and Reserved)
    
    
    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-32.1EX-99.1
  Page 2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1.

    FINANCIAL STATEMENTS
 
  
 June 30, 2010
    
    
    March 31, 2010AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,308,781
    
    
    $
    2,311,269Short-term investments
    
    
    6,000,000
    
    
    
    3,500,000Accounts receivable, net
    
    
    1,218,573
    
    
    
    1,287,440Inventories
    
    
    448,589
    
    
    
    341,497Income tax receivable
    
    
    
    
    
    
    23,820Other
    
    
    333,389
    
    
    
    237,321Total current assets
    
    
    9,309,332
    
    
    
    7,701,347Property, plant, and equipment, net
    
    
    1,134,454
    
    
    
    1,230,771Intangible assets, net
    
    
    2,322,328
    
    
    
    2,533,095Deferred tax assets
    
    
    100,530
    
    
    
    108,530Total assets
    
    $
    12,866,644
    
    
    $
    11,573,743
 
 See accompanying notes to the condensed consolidated financial statements. Page 3




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June 30, 2010
    
    
    March 31, 2010Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    571,531
    
    
    $
    485,594Current portion  deferred rent
    
    
    35,000
    
    
    
    35,000Income tax payable
    
    
    14,963
    
    
    
    10,000Accrued liabilities:Compensation
    
    
    786,962
    
    
    
    903,057Other
    
    
    304,818
    
    
    
    212,028Total current liabilities
    
    
    1,713,274
    
    
    
    1,645,679Deferred rent  less current portion
    
    
    103,693
    
    
    
    112,500Accrued pension liability
    
    
    590,705
    
    
    
    601,037Total liabilities
    
    
    2,407,672
    
    
    
    2,359,216Commitments and Contingencies
Shareholders equity:
    
    
    
    
    
    
    Common stock $.01 par value; 40,000,000
shares authorized, 15,887,440 and
14,946,540 shares issued and
outstanding at June 30, 2010 and
March 31, 2010, respectively
    
    
    158,874
    
    
    
    149,465Additional paid-in capital
    
    
    38,456,234
    
    
    
    36,178,126Accumulated deficit
    
    
    (27,546,469
    )
    
    
    (26,617,161
    )Accumulated other comprehensive loss
    
    
    (609,667
    )
    
    
    (495,903
    )Total shareholders equity
    
    
    10,458,972
    
    
    
    9,214,527Total liabilities and shareholders equity
    
    $
    12,866,644
    
    
    $
    11,573,743
 
 See accompanying notes to the condensed consolidated financial statements. Page 4




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Three Months EndedJune 30,2010
    
    
    2009Net sales
    
    $
    3,035,499
    
    
    $
    2,825,929Cost of goods sold
    
    
    510,696
    
    
    
    551,970Gross profit
    
    
    2,524,803
    
    
    
    2,273,959Operating expensesGeneral and administrative
    
    
    850,317
    
    
    
    848,551Research and development
    
    
    400,629
    
    
    
    527,815Selling and marketing
    
    
    1,988,526
    
    
    
    2,057,288Amortization
    
    
    210,768
    
    
    
    211,8133,450,240
    
    
    
    3,645,467Operating loss
    
    
    (925,437
    )
    
    
    (1,371,508
    )Other income (expense)Interest income
    
    
    13,628
    
    
    
    31,399Interest expense
    
    
    (1,947
    )
    
    
    (7,907
    )Foreign currency
exchange gain (loss)
    
    
    1,790
    
    
    
    (7,330
    )Other, net
    
    
    (192
    )
    
    
    (2,183
    )13,279
    
    
    
    13,979Loss before income taxes
    
    
    (912,158
    )
    
    
    (1,357,529
    )Income tax expense
    
    
    17,150
    
    
    
    8,245Net loss
    
    $
    (929,308
    )
    
    $
    (1,365,774
    )Basic and diluted loss per common share
    
    $
    (0.06
    )
    
    $
    (0.09
    )Weighted average common shares
outstanding:Basic and diluted
    
    
    15,307,000
    
    
    
    14,937,771
 
 See accompanying notes to the condensed consolidated financial statements. Page 5




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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
    )
    
    $
    9,214,527Share-based
consulting and
compensation
    
    
    51,900
    
    
    
    519
    
    
    
    75,748
    
    
    
    
    
    
    
    
    
    
    
    76,267Proceeds from
exercise of
warrants
    
    
    886,000
    
    
    
    8,860
    
    
    
    2,193,990
    
    
    
    
    
    
    
    
    
    
    
    2,202,850Proceeds from
exercise of stock
options
    
    
    3,000
    
    
    
    30
    
    
    
    8,370
    
    
    
    
    
    
    
    
    
    
    
    8,400Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (929,308
    )
    
    
    (113,764
    )
    
    
    (1,043,072
    )Balance at June 30,
2010
    
    
    15,887,440
    
    
    $
    158,874
    
    
    $
    38,456,234
    
    
    
    ($27,546,469
    )
    
    
    ($609,667
    )
    
    $
    10,458,972
 
 See accompanying notes to the condensed consolidated financial statements. Page 6




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Three Months EndedJune 30,2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (929,308
    )
    
    $
    (1,365,774
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    284,053
    
    
    
    284,040Loss on disposal of equipment
    
    
    192
    
    
    
    2,186Share-based consulting expense
    
    
    6,664
    
    
    
    Share-based compensation expense
    
    
    69,603
    
    
    
    172,649Deferred income taxes
    
    
    (2,147
    )
    
    
    (969
    )Deferred rent
    
    
    (8,750
    )
    
    
    (8,750
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    18,935
    
    
    
    (54,213
    )Inventories
    
    
    (127,155
    )
    
    
    30,618Other current assets and income tax receivable
    
    
    (76,681
    )
    
    
    (106,949
    )Accounts payable
    
    
    90,699
    
    
    
    (87,783
    )Accrued liabilities
    
    
    (9,192
    )
    
    
    (414,828
    )Accrued pension liability, net and income tax payable
    
    
    39,837
    
    
    
    35,291Net cash used in operating activities
    
    
    (643,250
    )
    
    
    (1,514,482
    )Cash flows from investing activities:Proceeds from sale of short-term investments
    
    
    500,000
    
    
    
    Purchase of short-term investments
    
    
    (3,000,000
    )
    
    
    (1,000,000
    )Purchases of property, plant and equipment
    
    
    (40,519
    )
    
    
    (16,487
    )Net cash used in investing activities
    
    
    (2,540,519
    )
    
    
    (1,016,487
    )Cash flows from financing activities:Proceeds from warrant and option exercise
    
    
    2,211,250
    
    
    
    Net cash provided by financing activities
    
    
    2,211,250
    
    
    
    Effect of exchange rates on cash and cash equivalents
    
    
    (29,969
    )
    
    
    18,319Net decrease in cash and cash equivalents
    
    
    (1,002,488
    )
    
    
    (2,512,650
    )Cash and cash equivalents at beginning of period
    
    
    2,311,269
    
    
    
    3,276,299Cash and cash equivalents at end of period
    
    $
    1,308,781
    
    
    $
    763,649Supplemental disclosure of cash flow information:Cash received(paid) during the period for income taxes
    
    $
    8,034
    
    
    $
    (7,908
    )
 
 See accompanying notes to the condensed consolidated financial statements. Page 7




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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, 2010
    
    
    March 31, 2010Raw materials
    
    $
    205,786
    
    
    $
    158,942Work-in-process
    
    
    30,427
    
    
    
    28,935Finished goods
    
    
    212,376
    
    
    
    153,620$
    448,589
    
    
    $
    341,497
 5. Intangible Assets
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net valueJune 30, 2010
    
    $
    5,472,512
    
    
    $
    3,150,184
    
    
    $
    2,322,328March 31, 2010
    
    
    5,472,512
    
    
    
    2,939,417
    
    
    
    2,533,095
  Remainder of 2011
    
    $
    632,0002012
    
    
    842,0002013
    
    
    842,0002014
    
    
    4,0002015 and beyond
    
    
    2,000$
    2,322,000
 6. Deferred Rent and Leasehold Improvements
  7. Comprehensive Loss
  Three Months EndedJune 30,2010
    
    
    2009Net loss
    
    $
    (929,308
    )
    
    $
    (1,365,774
    )Items of other comprehensive income (loss):Translation adjustment
    
    
    (132,475
    )
    
    
    115,951Pension related
    
    
    18,711
    
    
    
    (572
    )Comprehensive loss
    
    $
    (1,043,072
    )
    
    $
    (1,250,395
    )
 Page 9




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8. Net Loss per Common Share
  Number of UnvestedRestricted Stock/
    
    
    Range ofOptions/Warrants
    
    
    Exercise PricesJune 30, 2010
    
    
    2,172,925
    
    
    $
    0.71 to $5.19June 30, 2009
    
    
    4,489,260
    
    
    $
    0.69 to $5.30
 9. Credit Facilities
   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 June 30, 2010
    
    
    
  Page 10




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11. Share-based Compensation
    Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009Expected life in years
    
    
    6.08
    
    
    
    4.82Risk-free interest rate
    
    
    2.38
    %
    
    
    2.83
    %Expected volatility
    
    
    90.34
    %
    
    
    94.38
    %Expected dividend yield
    
    
    0
    
    
    
    0Weighted-average fair value
    
    $
    3.69
    
    
    $
    0.61
   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
    
    
    86,525
    
    
    
    4.95Options exercised
    
    
    3,000
    
    
    
    2.80Outstanding at June 30, 2010
    
    
    2,121,025
    
    
    $
    3.21
    
    
    
    3.86
    
    
    $
    3,521,000Exercisable at June 30, 2010
    
    
    1,933,662
    
    
    $
    3.26
    
    
    
    3.74
    
    
    $
    3,115,000
   Page 11




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Weighted
    
    
    Weighted average
    
    
    AggregateNumber of
    
    
    average grant
    
    
    remaining life in
    
    
    intrinsicShares
    
    
    date fair value
    
    
    years
    
    
    valueBalance at March 31, 2010
    
    
    Shares granted
    
    
    51,900
    
    
    $
    4.94Shares vested
    
    
    
    
    
    
    Balance at June 30, 2010
    
    
    51,900
    
    
    $
    4.94
    
    
    
    2.44
    
    
    $
    256,386
  12. Savings and Retirement Plans
    Three Months EndedJune 30,2010
    
    
    2009Gross service cost
    
    $
    23,094
    
    
    $
    15,408Interest cost
    
    
    27,374
    
    
    
    22,438Expected return on assets
    
    
    (11,990
    )
    
    
    1,302Amortization
    
    
    4,035
    
    
    
    (108
    )Net periodic retirement cost
    
    $
    42,513
    
    
    $
    39,040
  Three months EndedJune 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
    %
    
    
    3
    %Individual
    
    
    0-3
    %
    
    
    0-3
    %
 Page 12




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13. Foreign Currency Translation
   14. Business Segment Information
 Segment Reporting,
  All OtherUnited
    
    
    United
    
    
    ForeignStates
    
    
    Kingdom
    
    
    Countries
    
    
    ConsolidatedJune 30, 2010
    
    $
    1,622,018
    
    
    $
    387,241
    
    
    $
    1,026,240
    
    
    $
    3,035,499June 30, 2009
    
    
    1,459,738
    
    
    
    355,701
    
    
    
    1,010,490
    
    
    
    2,825,929
  United
    
    
    United
    
    
    TheStates
    
    
    Kingdom
    
    
    Netherlands
    
    
    ConsolidatedJune 30, 2010
    
    $
    514,536
    
    
    $
    2,830
    
    
    $
    617,088
    
    
    $
    1,134,454
  15. Income Tax Expense
  Page 13




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16. Recently Issued Accounting Standards
  17. Subsequent events
  Page 14




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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
   Overview
 ® ®
    Page 15




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The Journal of Urology ®
   Results of Operations
 Three months ended June 30, 2010 compared to three months ended June 30, 2009
        Page 16




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Page 17




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Three Months EndedJune 30,2010
    
    
    2009Gross ProfitGAAP gross profit
    
    $
    2,524,803
    
    
    $
    2,273,959% of sales
    
    
    83
    %
    
    
    80
    %Share-based compensation
    
    
    4,484
    
    
    
    13,544Depreciation expense
    
    
    15,698
    
    
    
    14,150Non-GAAP gross profit
    
    
    2,544,985
    
    
    
    2,301,653Operating ExpensesGAAP operating expenses
    
    
    3,450,240
    
    
    
    3,645,467Share-based compensation
    
    
    71,783
    
    
    
    159,105Depreciation expense
    
    
    57,587
    
    
    
    58,077Amortization expense
    
    
    210,768
    
    
    
    211,813Non-GAAP operating expenses
    
    
    3,110,102
    
    
    
    3,216,472Operating LossGAAP operating loss
    
    
    (925,437
    )
    
    
    (1,371,508
    )Share-based compensation
    
    
    76,267
    
    
    
    172,649Depreciation expense
    
    
    73,285
    
    
    
    72,227Amortization expense
    
    
    210,768
    
    
    
    211,813Non-GAAP operating loss
    
    $
    (565,117
    )
    
    $
    (914,819
    )
 Liquidity and Capital Resources
 Cash Flows
     Sources of Liquidity
  Page 18




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Commitments and Contingencies.
   
 ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
  
 ITEM 4. Controls and Procedures
 Disclosure Controls and Procedures
  Page 19




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Internal Control Over Financial Reporting.
  
 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
     Page 20




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SIGNATURES
  UROPLASTY, INC.Date:  August 10, 2010
    By:
    /s/ DAVID B. KAYSENDavid B. KaysenPresident and Chief Executive OfficerDate:  August 10, 2010
    By:
    /s/ MAHEDI A. JIWANIMahedi A. JiwaniChief Financial Officer Page 21