MINNEAPOLIS, Aug. 10 /PRNewswire-FirstCall/ -- Uroplasty, Inc. today reported sales of $1.8 million for the first quarter of fiscal 2007 ended June 30, 2006, up 7%, or $119,000, from $1.6 million for the same quarter in the prior year. Net loss for the quarter was $1.2 million, or $0.18 per diluted share, compared to a net loss for the same quarter in the prior year of $1.5 million, or $0.23 per diluted share.
David B. Kaysen, Uroplasty’s President and CEO said, “We are gaining sales momentum in the U.S. with our five employed regional sales managers and a now fully-trained group of 45 independent sales representatives. Even though we are about two months behind our internal targets for building our U.S. sales organization, six percent of our first quarter revenues are from sales to U.S. customers, compared to no such revenues in the same period last year. We expect U.S. sales to grow significantly during the balance of fiscal 2007 on the strength of our I-STOP sling and the expected second fiscal quarter introduction of the our second generation model of the Urgent PC neurostimulation device.”
Kaysen added that, “Revenues outside of the U.S. met or exceeded our internal forecast for the quarter. In late July, we introduced our second generation Urgent PC into our distribution network and the response to date has been positive. In these markets, we anticipate revenue growth from the Urgent PC, together with the I-STOP in the U.K., over the balance of fiscal 2007.”
Kaysen continued, “We are meeting our internal forecasted plans for Macroplastique sales outside of the U.S. In the U.S., we await completion of the FDA review of our Macroplastique pre-market approval application for the treatment of female stress urinary incontinence.”
Results of Operations
Three-month period ended June 30, 2006 compared to three-month period ended June 30, 2005
Net Sales: In the first quarter ended June 30, 2006, net sales were $1.8 million, representing an $119,000 or 7% increase when compared to net sales of $1.6 million for the quarter ended June 30, 2005. Excluding the impact of fluctuations in foreign currency exchange rates, sales increased by approximately 4%. A 9% decline in sales of Macroplastique products was more than offset by sales of the Urgent PC and an increase in sales of the I-STOP. In the first quarter ended June 30, 2005, we had no sales of the Urgent PC and had minimal sales of the I-STOP.
We attribute the decline in sales of the Macroplastique products primarily due to adverse changes in the reimbursement policies of the insurers and the increase in pricing competition. We expect this to adversely impact our future sales in those markets. In response, we have implemented targeted volume price reductions, have stepped up training workshops targeted to our sales personnel, distributors and key incontinence surgeons, and are sponsoring scientific podium presentations and seminars at key international incontinence congresses. We cannot assure that these initiatives will increase Macroplastique sales.
Gross Profit: Gross profit was $1.2 million for both quarters ended June 30, 2006 and 2005, or 69% and 74% of net sales in the respective periods. We attribute the decline in gross profit percent primarily to lower manufacturing capacity utilization due to decline in Macroplastique sales, duplicate manufacturing facilities in the U.S. pending completion of our relocation to our new corporate headquarters, higher costs for our new facility and an increase in personnel-related costs. We expect to relocate the remaining operations to our new corporate headquarters in the third quarter of our current fiscal year after quality and regulatory qualifications of our new manufacturing facility.
General and Administrative Expenses (G&A): G&A expenses increased from $691,000 during the first quarter of fiscal 2006 to $884,000 during the first quarter of fiscal 2007. Included in the fiscal 2007 first quarter is a $266,000 non-cash, FAS 123(R) charge for share-based employee compensation. Excluding this charge, G&A expenses declined by $73,000, primarily because fiscal 2005 first quarter contained certain charges related to the installation of our new information system.
Research and Development Expenses (R&D): R&D expenses increased from $631,000 during the first quarter of fiscal 2006 to $675,000 during the first quarter of fiscal 2007. Included in the fiscal 2007 first quarter is a $11,000 non-cash, FAS 123(R) charge for share-based employee compensation. Excluding this charge, R&D expenses increased by $33,000. We attribute the increase primarily to the increase in spending for clinical trials and testing.
Selling and Marketing Expenses (S&M): S&M expenses increased from $664,000 during the first quarter of fiscal 2006 to $1,233,000 during the first quarter of fiscal 2007. Included in the fiscal 2007 first quarter is a $22,000 non-cash, FAS 123(R) charge for share-based employee compensation. Excluding this charge, S&M expenses increased by $547,000. We attribute the increase to the $360,000 increase in compensation-related costs, primarily for our U.S. direct sales force and marketing organization, $110,000 for increase in travel-related costs and an increase in other costs to support our expanded organization and marketing activities.
Other Income (Expense): Other income (expense) includes interest income, interest expense, warrant expense or benefit, foreign currency exchange gains and losses and other non-operating costs when incurred. Our financial results are subject to material fluctuations based on changes in currency exchange rates. Other income (expense) was $372,000 and $(665,000) for the first quarters ended June 30, 2006 and 2005, respectively.
As a result of the suspension of the exercise of the 706,218 warrants we originally issued in July 2002, in April 2005, we granted a like number of new common stock purchase warrants to the holders of the expired warrants. The new warrants will be exercisable at $2.00 per share for 90 days after the effective date of the registration statement covering the shares underlying these warrants. As of June 30, 2006, the Securities and Exchange Commission had not declared this registration statement effective. In April 2005, we recognized a liability and a charge to equity of approximately $1.4 million associated with the grant of these new warrants. The Company determined the fair value of these warrants using the Black-Scholes option-pricing model. We have since reduced the reported liability by approximately $1,062,000 due to the decrease in the fair value of these warrants from their date of issuance through June 30, 2006. We recorded a warrant benefit of $328,000 for the three months ended June 30, 2006 and a warrant expense of $686,000 for the three months ended June 30, 2005. We will continue to remeasure the value of this liability in relation to its fair value and adjust accordingly until such time as the warrants are exercised or expire.
We recognize exchange gains and losses primarily as a result of fluctuations in currency rates between the U.S. dollar (the functional reporting currency) and the euro and British pound (currencies of our subsidiaries), as well as their effect on the dollar denominated short-term intercompany obligations between us and our foreign subsidiaries. We recognized foreign currency gains (losses) of $26,000 and $(1,000) for the first quarters ended June 30, 2006 and 2005, respectively.
Income Tax Expense: Our Dutch subsidiaries recorded income tax expense of $31,000 and $37,000 for the quarters ended June 30, 2006 and 2005, respectively. For fiscal 2007, the Dutch income tax rate is 25.5% for euro 22,689 (approximately $29,000) of profit and 29.6% for amounts above euro 22,689 compared to 27% and 31.5% in fiscal 2006, respectively.
Non-GAAP Financial Measures: In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), our discussion of the results of operations above contains non-GAAP financial measures that exclude the effects of share-based compensation and the requirements of FAS 123(R). The non-GAAP financial measures used by management and disclosed by us exclude the income statement effects of share- based compensation and the effects of FAS 123(R). The non-GAAP financial measures disclosed by us should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the consolidated financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. 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 above to the most directly comparable GAAP financial measures.
Because we excluded new requirements under FAS 123(R) in some of our discussion above, these financial measures are treated as a “non-GAAP financial measure” under Securities and Exchange Commission rules. Management uses our non-GAAP financial measures for internal managerial purposes, including as a means to compare period-to-period results on a consolidated basis and as a means to evaluate our results on a consolidated basis compared to those of other companies.
We disclose this information to the public to enable investors who wish to more easily assess our performance on the same basis applied by management and to ease comparison on both a GAAP and non-GAAP basis among peer companies.
UROPLASTY, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, 2006 2005 Net sales $1,764,210 $1,645,653 Cost of goods sold 555,516 420,828 Gross profit 1,208,694 1,224,825 Operating expenses General and administrative 884,109 690,564 Research and development 674,954 630,598 Selling and marketing 1,232,587 664,033 2,791,650 1,985,195 Operating loss (1,582,956) (760,370) Other income (expense) Interest income 19,507 27,380 Interest expense (5,982) (4,809) Warrant benefit (expense) 327,732 (686,295) Foreign currency exchange gain (loss) 26,411 (1,199) Other 4,800 - 372,468 (664,923) Loss before income taxes (1,210,488) (1,425,293) Income tax expense 30,751 37,020 Net loss $(1,241,239) $(1,462,313) Basic and diluted loss per common share $(0.18) $(0.23) Weighted average common shares outstanding: Basic and diluted 6,952,167 6,351,245 UROPLASTY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2006 March 31, 2006 (unaudited) Assets Current assets: Cash and cash equivalents $1,394,306 $1,563,433 Short-term investments - 1,137,647 Accounts receivable, net 936,816 716,587 Income tax receivable 170,290 270,934 Inventories 731,663 757,062 Other 415,107 353,178 Total current assets 3,648,182 4,798,841 Property, plant, and equipment, net 1,445,778 1,079,438 Intangible assets, net 385,067 411,604 Deferred tax assets 139,505 111,361 Total assets $5,618,532 $6,401,244 UROPLASTY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2006 March 31, 2006 (unaudited) Liabilities and Shareholders’ Equity Current liabilities: Current maturities - long-term debt $43,998 $41,658 Current maturities - deferred rent 35,000 - Notes payable 185,426 - Accounts payable 552,704 506,793 Accrued liabilities 632,197 917,981 Warrant liability 337,624 665,356 Total current liabilities 1,786,949 2,131,788 Long-term debt - less current maturities 400,101 389,241 Deferred rent - less current maturities 239,433 - Accrued pension liability 573,267 473,165 Total liabilities 2,999,750 2,994,194 Shareholders’ equity: Common stock $.01 par value; 20,000,000 shares authorized, 6,965,206 and 6,937,786 shares issued and outstanding at June 30 and March 31, 2006, respectively 69,652 69,378 Additional paid-in capital 15,199,298 14,831,787 Accumulated deficit (12,275,339) (11,034,100) Accumulated other comprehensive loss (374,829) (460,015) Total shareholders’ equity 2,618,782 3,407,050 Total liabilities and shareholders’ equity $5,618,532 $6,401,244
Uroplasty, Inc., headquartered in Minnetonka, Minnesota, with wholly-owned subsidiaries in The Netherlands and the United Kingdom, is a medical device company that develops, manufactures and markets innovative, proprietary products for the treatment of voiding dysfunctions, including urinary and fecal incontinence, overactive bladder and vesicoureteral reflux.
The Urgent(R) PC Neuromodulation System is a proprietary, minimally invasive nerve stimulation device designed for office-based treatment of overactive bladder symptoms of urge incontinence, urinary urgency and urinary frequency. Application of neuromodulation therapy targets specific nerve tissue and disrupts the signals that lead to the symptoms of overactive bladder. Uroplasty sells the Urgent PC system in the United States, in Canada and in countries recognizing the CE mark. Outside the United States, the Urgent PC is also indicated for the treatment of fecal incontinence.
The I-STOP (TM) Mid-Urethral Sling is a biocompatible, tension-free sling used to treat female stress urinary incontinence. The I-STOP sling provides a hammock-like support for the urethra to prevent urine leakage associated with activities such as coughing, laughing, lifting or jumping. Uroplasty sells the I-STOP Sling in the United Kingdom and in the United States.
Macroplastique(R) Implants, Uroplasty’s patented soft tissue bulking agent, is used to treat both female and male urinary incontinence and to treat vesicoureteral reflux in children. When Macroplastique is injected into tissue, it stabilizes and “bulks” the tissue, providing the surrounding muscles with increased capability to control the flow of urine. Additionally, Uroplasty markets soft tissue bulking agents for specific indications such as PTQ(TM) Implants for the treatment of fecal incontinence, VOX(R) Implants for the treatment of vocal cord rehabilitation and Bioplastique(R) for augmentation or restoration of soft tissue defects in plastic surgery indications. Uroplasty’s bulking products are sold outside the United States.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. This press release contains forward-looking statements, which reflect our views regarding future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those identified below, which could cause actual results to differ materially from historical results or those anticipated. The words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions, which indicate future events and trends, identify forward-looking statements. Actual future results and trends may differ materially from historical results or those anticipated depending upon a variety of factors, including, but not limited to: the effect of government regulation, including when and if we receive approval for marketing products in the United States; the impact of international currency fluctuations on our cash flows and operating results; the impact of technological innovation and competition; acceptance of our products by physicians and patients, our historical reliance on a single product for most of our current sales; our ability to commercialize our recently licensed product lines; our intellectual property and the ability to prevent competitors from infringing our rights; the ability to receive third party reimbursement for our products; the results of clinical trials; our continued losses and the possible need to raise additional capital in the future; our ability to manage our international operations; our ability to hire and retain key technical and sales personnel; our dependence on key suppliers; future changes in applicable accounting rules; and volatility in our stock price. Despite our internal projections, we cannot assure that our revenues will actually increase or that we will achieve profitability.
FOR FURTHER INFORMATION: visit Uroplasty’s web page at http://www.uroplasty.com or contact David B. Kaysen, President and CEO at 952-426-6140 or Mahedi A. Jiwani, Vice President, CFO & Treasurer at 952-426-6152 UROPLASTY, INC. 5420 Feltl Road Minnetonka, Minnesota 55343 Fax: 952.426.6199
Uroplasty, Inc.
CONTACT: David B. Kaysen, President and CEO, +1-952-426-6140, or, MahediA. Jiwani, Vice President, CFO & Treasurer, +1-952-426-6152, both ofUroplasty, Inc.
Web site: http://www.uroplasty.com/
