Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
UPI > SEC Filings for UPI > Form 10-Q on 31-Jul-2014All Recent SEC Filings

Show all filings for UROPLASTY INC

Form 10-Q for UROPLASTY INC


31-Jul-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We recommend that you read this quarterly report on Form 10-Q in conjunction with our annual report on Form 10-K for the year ended March 31, 2014.

Forward-looking Statements

This Form 10-Q contains "forward-looking statements" relating to projections, plans, objectives, estimates, and other statements of future economic performance. These forward-looking statements are subject to known and unknown risks and uncertainties relating to our future performance that may cause our actual results, performance, or achievements, or industry results, to differ materially from those expressed or implied in any such forward-looking statements. Our business operates in highly competitive markets and our ability to achieve the results implied by our forward looking statements is subject to changes in general economic conditions, competition, reimbursement levels, customer and market preferences, government regulation, the impact of tax regulation, foreign exchange rate fluctuations, the degree of market acceptance of products, the uncertainties of potential litigation, as well as other risks and uncertainties detailed elsewhere herein and in our Annual Report filed on Form 10-K for the year ended March 31, 2014.

We do not undertake, nor assume any obligation, to update any forward-looking statement that we may make from time to time.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require us to make estimates and assumptions in certain circumstances that affect amounts reported. In preparing these consolidated financial statements, we have made our best estimates and judgments of certain amounts, giving due consideration to materiality.

We have identified in our Annual Report on Form 10-K for the year ended March 31, 2014, our "critical accounting policies," which are certain accounting policies that we consider important to the portrayal of our results of operations and financial position and which may require the application of a higher level of judgment by our management, and as a result are subject to an inherent level of uncertainty. Management made no significant changes to the Company's critical accounting policies during the three months ended June 30, 2014.

Overview

We are a medical device company that develops, manufactures and markets innovative, proprietary products for the treatment of voiding dysfunctions. Our primary focus is on two products: the Urgent PC® Neuromodulation System ("Urgent PC System"), which we believe is the only commercially available Food and Drug Administration ("FDA") cleared, minimally-invasive, neuromodulation system that delivers percutaneous tibial nerve stimulation ("PTNS") for office-based treatment of overactive bladder ("OAB") and the associated symptoms of urinary urgency, urinary frequency, and urge incontinence; and Macroplastique® Implants ("Macroplastique"), an injectable, urethral bulking agent for the treatment of adult female stress urinary incontinence primarily due to intrinsic sphincter deficiency ("ISD"). Our Urgent PC System has CE Mark for the treatment of OAB as well as the treatment of fecal incontinence. Macroplastique also has CE Mark for the treatment of adult female stress urinary incontinence as well as male stress incontinence, fecal incontinence, vocal cord rehabilitation and vesicoureteral reflux.

Page 14

Index
We believe physicians prefer our products because they offer effective therapies for patients that can be administered in office or outpatient surgical-based settings and, to the extent reimbursement is available, provide the physicians a profitable revenue stream. We believe patients prefer our products because they are minimally invasive treatment alternatives that do not have the side effects associated with pharmaceutical treatment options nor the higher adverse events associated with other alternate treatment options.

Our sales are and have been significantly influenced by the availability of third-party reimbursement for PTNS treatments. Effective January 2011, the American Medical Association ("AMA") granted a Category 1 Current Procedural Terminology ("CPT") code for PTNS treatments. As a result, we have continued to expand our U.S. field sales and support organization and as of June 30, 2014, we employed 43 sales representatives, 6 field based clinical support specialists and 5 Regional Sales Directors.

We have focused our efforts on expanding reimbursement coverage with Medicare carriers and private payers by instituting a comprehensive program to educate their medical directors regarding the clinical effectiveness, cost effectiveness and patient benefits of PTNS treatments using our Urgent PC System. As of July 15, 2014, regional Medicare carriers covering 40 states and the District of Columbia, with approximately 40 million covered lives, provide coverage for PTNS treatments. In addition, we estimate that private payers insuring approximately 133 million lives provide coverage for PTNS treatments. As of July 15, 2014, only one regional Medicare carrier representing 10 states, with approximately 10 million covered lives, did not provide for reimbursement coverage for PTNS treatments. Increasing coverage from private payers, as well as obtaining reimbursement from the sole regional Medicare carrier not to provide coverage for PTNS, is a key element of our strategy.

We expect to continue to emphasize sales of our Urgent PC System in the United States and internationally. In fiscal 2014, we implemented new sales strategies and refocused the sales organization. We will continue to emphasize generating greater patient and physician awareness of our Urgent PC System, and on training physicians in the proper use and clinical benefits of our Urgent PC System for OAB. As part of this process, we intend to hire additional clinical support specialists in some of our markets during fiscal 2015 and plan to expand our call point beyond our historical focus on urologists. Specifically, we plan to expand our call point to include gynecologists, urogynecologists and the senior care market as we look to accelerate the growth of our Urgent PC System. We do not expect to see significant growth in our Macroplastique business, because we believe it is a small, mature market that is more competitively penetrated than the market for OAB treatment using PTNS.

Another key focus in fiscal 2015 will be investments in research and development to build our product pipeline. Our pilot clinical trial for fecal incontinence in the United States using our Urgent PC System is well underway, and we plan to investigate other potential indication expansions in the pelvic health area. We will also seek to expand our product portfolio through business development activities. Our focus will be on capitalizing upon our leverage at the call point created by our strong distribution channel.

Results of Operations

Three months ended June 30, 2014 compared to three months ended June 30, 2013.

Net Sales: During the three months ended June 30, 2014, consolidated net sales of $6,385,000 represented a $544,000, or a 9% increase, over net sales of $5,841,000 for the three months ended June 30, 2013. The increase in consolidated net sales for the three months ended June 30, 2014 was due to global sales growth of 19% of our Urgent PC System.

Net sales in the U.S. of our Urgent PC System increased 13% to $3,130,000 for the three months ended June 30, 2014, up from $2,773,000 for the same period last year. Net sales increased as a result of improved sales execution of our Urgent PC System within the U.S. resulting in new account conversions and higher utilization by our active customers. Urgent PC System sales to customers outside of the U.S. were $930,000 for the three months ended June 30, 2014, an increase of 48% from $627,000 in the same period last year. The increase in sales is attributed to the increase in adoption of the product by our customers, primarily in markets where we sell to hospitals directly.

Global sales of our Macroplastique product declined 4%, or $95,000, to $2,080,000 for the three months ended June 30, 2014. Net sales decreased as a result of continued focus on our Urgent PC System. Net sales in the U.S. of our Macroplastique product decreased 8%, or $115,000, to $1,373,000 for the three months ended June 30, 2014, compared to $1,488,000 for the three months ended June 20, 2013. Macroplastique sales to customers outside of the U.S. of $706,000 for the three months ended June 30, 2014 increased 3% from $686,000 for the same period last year. On a full year basis we expect Macroplastique revenue in fiscal 2015 to be flat with fiscal 2014, but we expect quarterly variations.

Page 15

Index
Net sales to customers in the U.S. of $4,532,000 during the three months ended June 30, 2014, represented an increase of $247,000, or 6%, over net sales of $4,285,000 for the three months ended June 30, 2013. Net sales to customers outside the U.S. for the three months ended June 30, 2014 increased 19% to $1,852,000, compared to $1,555,000 for the three months ended June 30, 2013.

Gross Profit: Gross profit was $5,593,000, or 87.6% of net sales during the three months ended June 30, 2014, and $5,093,000, or 87.2% of net sales for the three months ended June 30, 2013. The increase in gross profit percentage of 0.4% for the three month period is attributed primarily to the favorable impact from product mix.

General and Administrative Expenses (G&A): G&A expenses of $1,577,000 during the three months ended June 30, 2014, decreased $4,000 from $1,581,000 during the same period in 2013.

Research and Development Expenses (R&D): R&D expenses of $918,000 during the three months ended June 30, 2014, increased $431,000 from $487,000 during the same period in 2013. The increase is attributed primarily to severance expense, higher enrollments in human clinical studies and higher personnel costs.

Selling and Marketing Expenses (S&M): S&M expenses of $5,273,000 during the three months ended June 30, 2014, increased $646,000, from $4,627,000, during the same period in 2013. The increase is attributed primarily to a $513,000 increase in personnel costs, as all forty-three sales territories were staffed in the first quarter of this fiscal year, versus thirty-eight territories staffed a year ago, as well as the addition of six clinical specialists in the second half of fiscal 2014. Marketing costs also increased, due to spending for product promotion and education, advertising, trade shows and conventions.

Amortization of Intangibles: Amortization of intangibles was $8,000 and $7,000 for the three months ended June 30, 2014 and 2013, respectively.

Other Income (Expense): Other income (expense) includes interest income and foreign currency exchange gains and losses. Net other income was $4,000 and $7,000 for the three months ended June 30, 2014 and 2013, respectively.

Income Tax Expense: During the three months ended June 30, 2014 and 2013, we recorded income tax expense of $20,000 and $14,000, respectively. Income tax expense is attributed to our European subsidiaries and to the payment of minimum taxes in the U.S.

Non-GAAP Financial Measures: The following table reconciles our operating loss calculated in accordance with accounting principles generally accepted in the U.S. ("GAAP") to non-GAAP financial measures that exclude non-cash charges for share-based compensation, depreciation and amortization from gross profit, operating expenses and operating loss. The non-GAAP financial measures used by management and disclosed by us are not a substitute for, or superior to, financial measures and consolidated financial results calculated in accordance with GAAP, and you should carefully evaluate our reconciliations to non-GAAP. We may calculate our non-GAAP financial measures differently from similarly titled measures used by other companies. Therefore, our non-GAAP financial measures may not be comparable to those used by other companies. We have described the reconciliations of each of our non-GAAP financial measures described above to the most directly comparable GAAP financial measures.

We use these non-GAAP financial measures, and in particular non-GAAP operating loss, for internal managerial purposes because we believe such measures are one important indicator of the strength and the operating performance of our business. Analysts and investors frequently ask us for this information. We believe that they use these measures to evaluate the overall operating performance of companies in our industry, including as a means of comparing period-to-period results and as a means of evaluating our results with those of other companies.

Our non-GAAP operating loss during the three months ended June 30, 2014 and 2013 was approximately $1,778,000 and $1,499,000 respectively. The increase in non-GAAP operating loss for the three months ended June 30, 2014 over the corresponding period a year ago is attributed to the increase in operating spending, offset partially by the increase in net sales and gross profit.

Page 16

Index
Expense Adjustments Share-based Amortization of Three-Months Ended GAAP Expense Depreciation Intangibles Non-GAAP June 30, 2014
Gross profit $ 5,593,000 $ 13,000 $ 5,000 $ - $ 5,611,000 % of net sales 87.6 % 87.9 % Operating expenses
General and administrative 1,577,000 (212,000 ) (39,000 ) - 1,326,000 Research and development 909,000 (18,000 ) (1,000 ) - 890,000 Selling and marketing 5,273,000 (80,000 ) (20,000 ) - 5,173,000 Amortization 8,000 - - (8,000 ) - 7,767,000 (310,000 ) (60,000 ) (8,000 ) 7,389,000

Operating loss $ (2,174,000 ) $ 323,000 $ 65,000 $ 8,000 $ (1,778,000 )

June 30, 2013
Gross profit $ 5,093,000 $ 8,000 $ 9,000 $ - $ 5,110,000 % of net sales 87.2 % 87.5 % Operating expenses
General and administrative 1,581,000 79,000 (51,000 ) - 1,609,000 Research and development 480,000 (14,000 ) (1,000 ) - 465,000 Selling and marketing 4,627,000 (73,000 ) (19,000 ) - 4,535,000 Amortization 7,000 - - (7,000 ) - 6,695,000 (8,000 ) (71,000 ) (7,000 ) 6,609,000

Operating loss $ (1,602,000 ) $ 16,000 $ 80,000 $ 7,000 $ (1,499,000 )

Liquidity and Capital Resources

Cash Flows.

At June 30, 2014, our cash and cash equivalents and short-term investments balances totaled $10,621,690.

At June 30, 2014, we had working capital of approximately $10,885,000.

For the three months ended June 30, 2014, we used $1,505,000 of cash in operating activities, compared to $685,000 of cash used during the three months ended June 30, 2013. We used this cash primarily to fund the operating loss, net of non-cash charges for depreciation, amortization of intangibles and share-based compensation, of $1,780,000 during the three months ended June 30, 2014, and $1,500,000 during the three months ended June 30, 2013.

During the three months ended June 30, 2014, and 2013, we generated $3,000,000 and $1,800,000, respectively, of net cash from the maturity of marketable securities.

For the three months ended June 30, 2014, we used $53,000 to purchase property, plant and equipment compared with approximately $190,000 for the same period a year ago. The decrease is related to the purchase of new computer equipment for our sales force which occurred in the first quarter of fiscal 2014.

Sources of Liquidity.

We believe the $10,622,000 of cash and short-term investments we maintained at June 30, 2014, is adequate to meet our needs for the next twelve months, and depending upon our cash from operations and profitability, substantially longer.

Page 17

Index
Commitments and Contingencies.

We discuss our commitments and contingencies in our Annual Report on Form 10-K for the year ended March 31, 2014. Our operating lease commitments include a long-term lease with Liberty Property Limited Partnership for an 18,258 square foot facility for our U.S. headquarters located at 5420 Feltl Road, Minnetonka, Minnesota. The lease, which had an original expiration date of in April 2014, was amended in January 2014. The amended lease begins on May 1, 2014, has a term of 62 months and requires average annual minimum lease payments of approximately $154,000.

  Add UPI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for UPI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.