##### 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, 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.
    
    41-1719250(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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
    
    
    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. Submission of Matters to a Vote of Security Holders
    
    
    20Item 5. Other Information
    
    
    20Item 6. Exhibits
    
    
    20SIGNATURES
    
    
    21Business Loan Agreement and related Promissory Note dated October 30, 2009Certification by CEO & CFO pursuant to Section 302Certification by CEO & CFO pursuant to Section 906
  Page 2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
  
  September 30, 2009
    
    
    March 31, 2009(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,792,867
    
    
    $
    3,276,299Short-term investments
    
    
    4,000,000
    
    
    
    4,500,000Accounts receivable, net
    
    
    1,196,518
    
    
    
    1,214,049Inventories
    
    
    486,269
    
    
    
    495,751Other
    
    
    326,278
    
    
    
    279,898Total current assets
    
    
    7,801,932
    
    
    
    9,765,997Property, plant, and equipment, net
    
    
    1,389,493
    
    
    
    1,401,229Intangible assets, net
    
    
    2,955,332
    
    
    
    3,378,648Prepaid pension asset
    
    
    86,687
    
    
    
    66,130Deferred tax assets
    
    
    79,367
    
    
    
    68,793Total assets
    
    $
    12,312,811
    
    
    $
    14,680,797
  Page 3




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September 30, 2009
    
    
    March 31, 2009(unaudited)Liabilities and Shareholders EquityCurrent liabilities:Current portion  deferred rent
    
    $
    35,000
    
    
    $
    35,000Accounts payable
    
    
    431,016
    
    
    
    604,593Income tax payable
    
    
    
    
    
    
    56,785Accrued liabilities:Compensation
    
    
    665,441
    
    
    
    983,052Other
    
    
    237,277
    
    
    
    248,568Total current liabilities
    
    
    1,368,734
    
    
    
    1,927,998Deferred rent  less current portion
    
    
    130,114
    
    
    
    147,576Accrued pension liability
    
    
    283,008
    
    
    
    296,646Total liabilities
    
    
    1,781,856
    
    
    
    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 September 30 and March 31,
2009
    
    
    149,465
    
    
    
    149,465Additional paid-in capital
    
    
    36,055,081
    
    
    
    35,763,619Accumulated deficit
    
    
    (25,653,784
    )
    
    
    (23,413,350
    )Accumulated other comprehensive
loss
    
    
    (19,807
    )
    
    
    (191,157
    )Total shareholders equity
    
    
    10,530,955
    
    
    
    12,308,577Total liabilities and shareholders equity
    
    $
    12,312,811
    
    
    $
    14,680,797
  Page 4




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Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    2,986,475
    
    
    $
    3,920,516
    
    
    $
    5,812,404
    
    
    $
    8,446,138Cost of goods sold
    
    
    535,074
    
    
    
    549,199
    
    
    
    1,087,044
    
    
    
    1,257,166Gross profit
    
    
    2,451,401
    
    
    
    3,371,317
    
    
    
    4,725,360
    
    
    
    7,188,972Operating expensesGeneral and administrative
    
    
    713,040
    
    
    
    918,394
    
    
    
    1,561,591
    
    
    
    1,957,108Research and development
    
    
    435,898
    
    
    
    327,978
    
    
    
    963,713
    
    
    
    733,498Selling and marketing
    
    
    1,968,054
    
    
    
    2,505,598
    
    
    
    4,025,342
    
    
    
    5,125,632Amortization
    
    
    211,503
    
    
    
    210,966
    
    
    
    423,316
    
    
    
    421,9413,328,495
    
    
    
    3,962,936
    
    
    
    6,973,962
    
    
    
    8,238,179Operating loss
    
    
    (877,094
    )
    
    
    (591,619
    )
    
    
    (2,248,602
    )
    
    
    (1,049,207
    )Other income (expense)Interest income
    
    
    24,230
    
    
    
    63,542
    
    
    
    55,629
    
    
    
    138,656Interest expense
    
    
    (1,788
    )
    
    
    (6,750
    )
    
    
    (9,694
    )
    
    
    (13,585
    )Foreign currency exchange gain (loss)
    
    
    (7,365
    )
    
    
    5,038
    
    
    
    (14,697
    )
    
    
    (732
    )Other, net
    
    
    2,000
    
    
    
    (4,687
    )
    
    
    (183
    )
    
    
    (4,687
    )17,077
    
    
    
    57,143
    
    
    
    31,055
    
    
    
    119,652Loss before income taxes
    
    
    (860,017
    )
    
    
    (534,476
    )
    
    
    (2,217,547
    )
    
    
    (929,555
    )Income tax expense
    
    
    14,642
    
    
    
    26,487
    
    
    
    22,887
    
    
    
    38,057Net loss
    
    $
    (874,659
    )
    
    $
    (560,963
    )
    
    $
    (2,240,434
    )
    
    $
    (967,612
    )Basic and diluted loss per common share
    
    $
    (0.06
    )
    
    $
    (0.04
    )
    
    $
    (0.15
    )
    
    $
    (0.06
    )Weighted average common shares
outstanding:Basic and diluted
    
    
    14,946,540
    
    
    
    14,916,540
    
    
    
    14,942,179
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    291,462
    
    
    
    
    
    
    
    
    
    
    
    291,462Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,240,434
    )
    
    
    171,350
    
    
    
    (2,069,084
    )Balance at
September 30, 2009
    
    
    14,946,540
    
    
    $
    149,465
    
    
    $
    36,055,081
    
    
    $
    (25,653,784
    )
    
    $
    (19,807
    )
    
    $
    10,530,955
  Page 6




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Six Months EndedSeptember 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (2,240,434
    )
    
    $
    (967,612
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    567,238
    
    
    
    566,949Loss on disposal of equipment
    
    
    186
    
    
    
    4,687Share-based consulting expense
    
    
    
    
    
    
    36,409Share-based compensation expense
    
    
    291,462
    
    
    
    453,592Deferred income taxes
    
    
    (3,249
    )
    
    
    (10,164
    )Deferred rent
    
    
    (17,500
    )
    
    
    (17,500
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    91,206
    
    
    
    537,959Inventories
    
    
    47,499
    
    
    
    (11,128
    )Other current assets and income tax receivable
    
    
    (102,998
    )
    
    
    (108,041
    )Accounts payable
    
    
    (185,406
    )
    
    
    (145,610
    )Accrued liabilities
    
    
    (348,381
    )
    
    
    (634,851
    )Accrued pension liability, net and income tax payable
    
    
    (58,492
    )
    
    
    (44,772
    )Net cash used in operating activities
    
    
    (1,958,869
    )
    
    
    (340,082
    )Cash flows from investing activities:Proceeds from sale of short-term investments
    
    
    2,500,000
    
    
    
    8,808,304Purchase of short-term investments
    
    
    (2,000,000
    )
    
    
    (7,891,373
    )Purchases of property, plant and equipment
    
    
    (61,334
    )
    
    
    (130,421
    )Proceeds from sale of property, plant and equipment
    
    
    2,000
    
    
    
    Net cash provided by investing activities
    
    
    440,666
    
    
    
    786,510Cash flows from financing activities:Repayment of debt obligations
    
    
    
    
    
    
    (455,913
    )Net cash used in financing activities
    
    
    
    
    
    
    (455,913
    )Effect of exchange rates on cash and cash equivalents
    
    
    34,771
    
    
    
    (194,967
    )Net decrease in cash and cash equivalents
    
    
    (1,483,432
    )
    
    
    (204,452
    )Cash and cash equivalents at beginning of period
    
    
    3,276,299
    
    
    
    3,880,044Cash and cash equivalents at end of period
    
    $
    1,792,867
    
    
    $
    3,675,592Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    6,145
    
    
    $
    13,612Cash paid during the period for income taxes
    
    
    105,877
    
    
    
    35,474
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1. Basis of Presentation
    2. Short-term Investments
  3. Accounts Receivable
  Page 8




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4. Inventories
  September 30, 2009
    
    
    March 31, 2009Raw materials
    
    $
    188,865
    
    
    $
    227,054Work-in-process
    
    
    40,249
    
    
    
    23,326Finished goods
    
    
    257,155
    
    
    
    245,371$
    486,269
    
    
    $
    495,751
 5. Intangible Assets
 Intangible Assets.
 GrossEstimated
    
    
    Carrying
    
    
    AccumulatedLives (Years)
    
    
    Amount
    
    
    Amortization
    
    
    Net valueSeptember 30, 2009Patents and inventions
    
    
    6
    
    
    $
    5,472,512
    
    
    $
    2,517,180
    
    
    $
    2,955,332March 31, 2009Patents and inventions
    
    
    6
    
    
    $
    5,472,512
    
    
    $
    2,093,864
    
    
    $
    3,378,648
  Remainder of 2010
    
    $
    422,0002011
    
    
    843,0002012
    
    
    842,0002013
    
    
    842,0002014
    
    
    4,0002015 and beyond
    
    
    2,000$
    2,955,000
 6. Deferred Rent and Leasehold Improvements
  Page 9




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7. Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (874,659
    )
    
    $
    (560,963
    )
    
    $
    (2,240,434
    )
    
    $
    (967,612
    )Items of other comprehensive income (loss):Accumulated translation adjustment
    
    
    60,116
    
    
    
    (326,738
    )
    
    
    176,067
    
    
    
    (317,868
    )Pension related
    
    
    (4,146
    )
    
    
    11,774
    
    
    
    (4,717
    )
    
    
    11,795Comprehensive loss
    
    $
    (818,689
    )
    
    $
    (875,927
    )
    
    $
    (2,069,084
    )
    
    $
    (1,273,685
    )
  8. Net Loss per Common Share
  Number of Restricted
    
    Range ofStock/Options/Warrants
    
    Exercise PricesFor the six months ended:September 30, 2009
    
    
    4,555,928
    
    
    $0.69 to $5.30September 30, 2008
    
    
    4,340,361
    
    
    $1.82 to $5.30
 9. Credit Facilities
 
 10. Warrants
   11. Share-based Compensation
  Page 10




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Six months Ended
    
    
    Six months EndedSeptember 30, 2009
    
    
    September 30, 2008Expected life in years
    
    
    4.83
    
    
    
    4.08Risk-free interest rate
    
    
    2.74
    %
    
    
    3.16
    %Expected volatility
    
    
    94.21
    %
    
    
    82.76
    %Expected dividend yield
    
    
    0
    
    
    
    0Weighted-average fair value
    
    $
    0.60
    
    
    $
    1.90
   WeightedWeighted
    
    
    average
    
    
    AggregateNumber of
    
    
    average
    
    
    remaining life
    
    
    intrinsicshares
    
    
    exercise price
    
    
    in years
    
    
    valueOptions outstanding at March 31, 2009
    
    
    2,134,500
    
    
    $
    3.93
    
    
    
    4.02
    
    
    $
    Options granted
    
    
    380,000
    
    
    
    0.83Options exercised
    
    
    Options cancelled
    
    
    (25,500
    )
    
    
    3.03Options outstanding at September 30, 2009
    
    
    2,489,000
    
    
    $
    3.47
    
    
    
    3.72
    
    
    $
    162,550Exercisable at September 30, 2009
    
    
    2,178,328
    
    
    $
    3.73
    
    
    
    3.63
    
    
    $
    78,683
   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 September 30, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Page 11




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12. Savings and Retirement Plans
    Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross service cost
    
    $
    16,179
    
    
    $
    17,494
    
    
    $
    31,586
    
    
    $
    35,657Interest cost
    
    
    23,614
    
    
    
    24,778
    
    
    
    46,053
    
    
    
    50,518Expected return on assets
    
    
    1,306
    
    
    
    4,187
    
    
    
    2,609
    
    
    
    8,520Amortization
    
    
    (113
    )
    
    
    1,044
    
    
    
    (221
    )
    
    
    2,127Net periodic retirement cost
    
    $
    40,986
    
    
    $
    47,503
    
    
    $
    80,027
    
    
    $
    96,822
  Six months EndedSeptember 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
    %
   13. Foreign Currency Translation
  Page 12




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14. Business Segment Information
 Segment Reporting,
  United
    
    The
    
    UnitedStates
    
    Netherlands
    
    Kingdom
    
    ConsolidatedThree months ended September 30, 2009Sales to customers
    
    $
    1,503,716
    
    
    $
    1,054,748
    
    
    $
    428,011
    
    
    $
    2,986,475Six months ended September 30, 2009Sales to customers
    
    $
    2,963,454
    
    
    $
    2,065,238
    
    
    $
    783,712
    
    
    $
    5,812,404Long-lived assets at September 30, 2009
    
    
    3,581,315
    
    
    
    759,444
    
    
    
    90,753
    
    
    
    4,431,512Three months ended September 30, 2008Sales to customers
    
    $
    2,218,587
    
    
    $
    1,179,408
    
    
    $
    522,521
    
    
    $
    3,920,516Six months ended September 30, 2008Sales to customers
    
    $
    4,431,684
    
    
    $
    2,905,437
    
    
    $
    1,109,017
    
    
    $
    8,446,138Long-lived assets at September 30, 2008
    
    
    4,550,692
    
    
    
    772,626
    
    
    
    38,714
    
    
    
    5,362,032
  15. Income Tax Expense
   Page 13




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16. Recently Issued Accounting Standards
  The FASB Accounting Codification and the Hierarchy of
Generally Accepted Accounting Principles. The
Hierarchy of Generally Accepted Accounting Principles, TM
 Subsequent Events.
  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, 2009.
 Forward-looking Statements
   Critical Accounting Policies
   Overview
 ® ®
    Page 15




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The Journal of
Urology®
    Results of Operations
 Three and six months ended September 30, 2009 compared to three and six months ended September 30,
2008
       Page 16




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Page 17




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Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Gross ProfitGAAP gross profit
    
    $
    2,451,401
    
    
    $
    3,371,317
    
    
    $
    4,725,360
    
    
    $
    7,188,972% of sales
    
    
    82
    %
    
    
    86
    %
    
    
    81
    %
    
    
    85
    %Share-based compensation
    
    
    4,903
    
    
    
    8,879
    
    
    
    18,448
    
    
    
    25,253Depreciation expense
    
    
    14,150
    
    
    
    13,057
    
    
    
    28,299
    
    
    
    25,847Non-GAAP gross profit
    
    
    2,470,454
    
    
    
    3,393,253
    
    
    
    4,772,107
    
    
    
    7,240,072Operating ExpensesGAAP operating expenses
    
    
    3,328,495
    
    
    
    3,962,936
    
    
    
    6,973,962
    
    
    
    8,238,179Share-based compensation
    
    
    113,909
    
    
    
    198,131
    
    
    
    273,014
    
    
    
    464,748Depreciation expense
    
    
    57,546
    
    
    
    62,104
    
    
    
    115,623
    
    
    
    119,161Amortization expense
    
    
    211,503
    
    
    
    210,966
    
    
    
    423,316
    
    
    
    421,941Non-GAAP operating expenses
    
    
    2,945,537
    
    
    
    3,491,735
    
    
    
    6,162,009
    
    
    
    7,232,329Operating LossGAAP operating loss
    
    
    (877,094
    )
    
    
    (591,619
    )
    
    
    (2,248,602
    )
    
    
    (1,049,207
    )Share-based compensation
    
    
    118,812
    
    
    
    207,010
    
    
    
    291,462
    
    
    
    490,001Depreciation expense
    
    
    71,696
    
    
    
    75,161
    
    
    
    143,922
    
    
    
    145,008Amortization expense
    
    
    211,503
    
    
    
    210,966
    
    
    
    423,316
    
    
    
    421,941Non-GAAP operating income (loss)
    
    $
    (475,083
    )
    
    $
    (98,482
    )
    
    $
    (1,389,902
    )
    
    $
    7,743
 Liquidity and Capital Resources
 Cash Flows
     Page 18




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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.
  Page 19




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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.
    
    Submission of Matters to a Vote of Security Holders
  Votes
    
    Votes
    
    Votes
    
    
    
    
    
    BrokerFor
    
    Against
    
    Withheld
    
    Abstentions
    
    Non-VotesProposal 1 
Election of
Directors:Lee A. Jones
    
    
    13,226,616
    
    
    
    
    
    
    
    147,631
    
    
    
    
    
    
    
    David B. Kaysen
    
    
    13,224,996
    
    
    
    
    
    
    
    149,251
    
    
    
    
    
    
    
    
 
 ITEM 5.
    
    Other Information
  
 ITEM 6.
    
    Exhibits
     Page 20




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##### Table of Contents



SIGNATURES
  UROPLASTY, INC.Date: November 2, 2009
    
    By:
    
    /s/ DAVID B. KAYSENDavid B. KaysenPresident and Chief Executive OfficerDate: November 2, 2009
    
    By:
    
    /s/ MAHEDI A. JIWANIMahedi A. JiwaniChief Financial Officer
 Page 21