---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2001

Commission File No. 000-20989

UROPLASTY, INC.
(Name of Small Business Issuer in its Charter)

|                                                                                 |  |                                                
|-------------------------------------------------------------------------------- |  | -----------------------------------------------
|Minnesota, U.S.A.
(State or other jurisdiction of
incorporation or organization) |  | 41-1719250
(I.R.S. Employer
Identification No.)

2718 Summer Street NE
Minneapolis, Minnesota 55413-2820
(Address of principal executive offices)

(612) 378-1180
(Issuers telephone number, including area code)

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.01 par value (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

YES [X] NO [    ]

The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold or the average bid and
asked prices of such stock as of July 23, 2001 was $8,813,203.

The number of shares outstanding of the issuers only class of common stock on
July 23, 2001 was 6,078,071.

Transitional Small Business Disclosure Format:

YES [    ] NO [X]

---

---



---



---



PART I. FINANCIAL INFORMATION




---

ITEM 1. FINANCIAL STATEMENTS

UROPLASTY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)

|       |                                     |                           |   |               |         |                |           |           |  | 
|------ | ----------------------------------- | ------------------------- | - | ------------- | ------- | -------------- | --------- | --------- |  | 
|       |                                     |                           |   | June 30, 2001 |         | March 31, 2001
|       |                                     |                           |   |               |         |               
|Assets
|      
|      
|      
|      
|       | Current assets:                    
|      
|      
|      
|      
|       |                                     | Cash and cash equivalents |   | $             | 762,886 |                | $         | 1,012,397
|      
|      
|      
|      
|       |                                     | Accounts receivable, net  |   |               | 937,260 |                |           | 983,450  
|      
|      
|      
|      
|       |                                     | Inventories               |   |               | 913,955 |                |           | 752,436  
|      
|      
|      
|      
|       |                                     | Other                     |   |               | 227,016 |                |           | 258,997  
|       |                                     |                           |   |               |         |               
|       | Total current assets                |                           |   | 2,841,117     |         |                | 3,007,280
|      
|      
|      
|      
|       | Property, plant, and equipment, net |                           |   | 840,049       |         |                | 902,189  
|      
|      
|      
|      
|       | Intangible assets, net              |                           |   | 94,143        |         |                | 101,232  
|       |                                     |                           |   |               |         |               
|       | Total assets                        |                           | $ | 3,775,309     |         | $              | 4,010,701
|       |                                     |                           |   |               |         |               



---



UROPLASTY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)

|                                     |                                            |                                                                                                                                                                    |   |               |            |                |           |            |   | 
|------------------------------------ | ------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ------------- | ---------- | -------------- | --------- | ---------- | - | 
|                                     |                                            |                                                                                                                                                                    |   | June 30, 2001 |            | March 31, 2001
|                                     |                                            |                                                                                                                                                                    |   |               |            |               
|Liabilities and
Shareholders Equity
|                                     | Current liabilities:                      
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Accounts payable                                                                                                                                                   |   | $             | 244,965    |                | $         | 213,288   
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Accrued liabilities                                                                                                                                                |   |               | 478,917    |                |           | 593,997   
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Current maturities long-term debt                                                                                                                                 |   |               | 44,861     |                |           | 46,557    
|                                     |                                            |                                                                                                                                                                    |   |               |            |               
|                                     | Total current liabilities                  |                                                                                                                                                                    |   | 768,743       |            |                | 853,842  
|                                    
|                                    
|                                    
|                                    
|                                     | Long-term debt less current maturities    |                                                                                                                                                                    |   | 415,385       |            |                | 438,335  
|                                     |                                            |                                                                                                                                                                    |   |               |            |               
|                                     | Total liabilities                          |                                                                                                                                                                    |   | 1,184,128     |            |                | 1,292,177
|                                     |                                            |                                                                                                                                                                    |   |               |            |               
|                                     | Shareholders equity:                     
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Common stock $.01 par value; 20,000,000
shares authorized, 6,049,071 and
6,041,071 shares issued and
outstanding at June 30, 2001 and
March 31, 2001, respectively |   |               | 60,491     |                |           | 60,411    
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Additional paid-in capital                                                                                                                                         |   |               | 6,011,146  |                |           | 5,999,398 
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Accumulated deficit                                                                                                                                                |   |               | (3,089,182 | )              |           | (2,954,456 | )
|                                    
|                                    
|                                    
|                                    
|                                     |                                            | Accumulated other comprehensive loss                                                                                                                               |   |               | (391,274   | )              |           | (386,829   | )
|                                     |                                            |                                                                                                                                                                    |   |               |            |               
|                                     | Total shareholders equity                 |                                                                                                                                                                    |   | 2,591,181     |            |                | 2,718,524
|                                     |                                            |                                                                                                                                                                    |   |               |            |               
|                                     | Total liabilities and shareholders equity |                                                                                                                                                                    | $ | 3,775,309     |            | $              | 4,010,701
|                                     |                                            |                                                                                                                                                                    |   |               |            |               

See accompanying notes to consolidated financial statements.



---



UROPLASTY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended June 30, 2001 and 2000
(Unaudited)

|                                            |                            |   |           |           |      |           |           | 
|------------------------------------------- | -------------------------- | - | --------- | --------- | ---- | --------- | --------- | 
|                                            |                            |   | 2001      |           | 2000
|                                            |                            |   |           |           |     
|Net sales                                   |                            | $ | 1,149,389 |           | $    | 1,479,043
|                                           
|                                           
|                                           
|                                           
|Cost of goods sold                          |                            |   | 179,872   |           |      | 298,341  
|                                            |                            |   |           |           |     
|Gross profit                                |                            |   | 969,517   |           |      | 1,180,702
|                                           
|                                           
|                                           
|                                           
|Operating expenses                         
|                                           
|                                           
|                                           
|                                           
|                                            | General and administrative |   |           | 272,610   |      |           | 329,089  
|                                           
|                                           
|                                           
|                                           
|                                            | Research and development   |   |           | 390,038   |      |           | 482,086  
|                                           
|                                           
|                                           
|                                           
|                                            | Selling and marketing      |   |           | 355,067   |      |           | 542,189  
|                                            |                            |   |           |           |     
|                                            |                            |   | 1,017,715 |           |      | 1,353,364
|                                            |                            |   |           |           |     
|Operating loss                              |                            |   | (48,198   | )         |      | (172,662  | )        
|                                            |                            |   |           |           |     
|Other expense, net                          |                            |   | (86,528   | )         |      | (3,276    | )        
|                                            |                            |   |           |           |     
|Net loss before income taxes                |                            |   | (134,726  | )         |      | (175,938  | )        
|                                           
|                                           
|                                           
|                                           
|Income tax expense                          |                            |   |          |           |      |         
|                                            |                            |   |           |           |     
|Net loss                                    |                            | $ | (134,726  | )         | $    | (175,938  | )        
|                                            |                            |   |           |           |     
|Basic loss per common share                 |                            | $ | (0.02     | )         | $    | (0.03     | )        
|                                           
|                                           
|                                           
|                                           
|Diluted loss per common share               |                            | $ | (0.02     | )         | $    | (0.03     | )        
|                                           
|                                           
|                                           
|                                           
|Weighted average common shares outstanding:
|                                           
|                                           
|                                           
|                                           
|                                            | Basic                      |   |           | 6,046,434 |      |           | 5,981,040 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Diluted                    |   |           | 6,046,434 |      |           | 5,981,040 | 

See accompanying notes to consolidated financial statements.



---



UROPLASTY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended June 30, 2001 and 2000
(Unaudited)

|                                                      |                                                                   |                      |           |          |          |      |           |          |          |  
|----------------------------------------------------- | ----------------------------------------------------------------- | -------------------- | --------- | -------- | -------- | ---- | --------- | -------- | -------- | -
|                                                      |                                                                   |                      |           | 2001     |          | 2000
|                                                      |                                                                   |                      |           |          |          |     
|Cash flows from operating activities:                
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net loss                                                          |                      | $         | (134,726 | )        |      | $         | (175,938 | )       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Adjustments to reconcile net loss to net cash used in operations:
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Depreciation and amortization                                     |                      |           | 37,146   |          |      |           | 50,429   |         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Loss on disposal of assets                                        |                      |           | 1,789    |          |      |           |         |         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Stock-based consulting expense                                    |                      |           | 3,828    |          |      |           |         |         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Changes in operating assets and liabilities:                     
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                   | Accounts receivable  |           |          | 46,190   |      |           |          | (57,508  | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                   | Inventories          |           |          | (161,519 | )    |           |          | (106,028 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                   | Other current assets |           |          | 31,981   |      |           |          | 158,073  |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                   | Accounts payable     |           |          | 31,677   |      |           |          | (82,105  | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                   | Accrued liabilities  |           |          | (115,080 | )    |           |          | (23,628  | )
|                                                      |                                                                   |                      |           |          |          |     
|Net cash used in operating activities                 |                                                                   |                      | (258,714  | )        |          |      | (236,705  | )       
|                                                      |                                                                   |                      |           |          |          |     
|Cash flows from investing activities:                
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Payments for property, plant and equipment                        |                      |           | (2,402   | )        |      |           | (9,369   | )       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Payments relating to intangible assets                            |                      |           |         |          |      |           | (17,750  | )       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Redemption of marketable securities                               |                      |           |         |          |      |           | 750,000  |         
|                                                      |                                                                   |                      |           |          |          |     
|Net cash (used in) provided by investing activities   |                                                                   |                      | (2,402    | )        |          |      | 722,881   |         
|                                                      |                                                                   |                      |           |          |          |     
|Cash flows from financing activities:                
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Repayment of long-term debt                                       |                      |           | (11,491  | )        |      |           | (12,063  | )       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Net proceeds from issuance of stock                               |                      |           | 8,000    |          |      |           | 5,000    |         
|                                                      |                                                                   |                      |           |          |          |     
|Net cash used in financing activities                 |                                                                   |                      | (3,491    | )        |          |      | (7,063    | )       
|                                                      |                                                                   |                      |           |          |          |     
|Effect of exchange rates on cash and cash equivalents |                                                                   |                      | 15,096    |          |          |      | (11,409   | )       
|                                                      |                                                                   |                      |           |          |          |     
|Net (decrease) increase in cash and cash equivalents  |                                                                   |                      | (249,511  | )        |          |      | 467,704   |         
|                                                     
|                                                     
|                                                     
|                                                     
|Cash and cash equivalents at beginning of period      |                                                                   |                      | 1,012,397 |          |          |      | 1,553,093 |         
|                                                      |                                                                   |                      |           |          |          |     
|Cash and cash equivalents at end of period            |                                                                   | $                    | 762,886   |          |          | $    | 2,020,797 |         
|                                                      |                                                                   |                      |           |          |          |     
|Supplemental disclosure of Cash Flow information:    
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash paid during the year for interest                            |                      | $         | 6,457    |          |      | $         | 7,551    |         
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash paid during the year for income taxes                        |                      |           |         |          |      |           |         |         

See accompanying notes to consolidated financial statements.



---



UROPLASTY, INC. AND SUBSIDIARIES
Notes to the Interim Consolidated Financial Statements

1.      Basis of Presentation

The consolidated financial statements included in this Form 10-QSB have been
prepared by Uroplasty, Inc. (Uroplasty or the Company), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted, pursuant to such rules and regulations, although management believes
the disclosures are adequate to make the information presented not misleading.
The consolidated results of operations for any interim period are not
necessarily indicative of results for a full year. These consolidated
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Companys Annual Report on Form
10-KSB for the year ended March 31, 2001.

The consolidated financial statements presented herein as of June 30, 2001 and
for the three month period ended June 30, 2001 and 2000 reflect, in the opinion
of management, all material adjustments consisting only of normal recurring
adjustments necessary for a fair presentation of the consolidated financial
position, consolidated results of operations and consolidated cash flows for
the interim periods.

2.      Nature of Business

The Company is currently selling its products outside of the United States and
is undertaking clinical trials in the United States. Based on the Companys
current plans, it is anticipated that the Company will launch its products in
the US after obtaining FDA approval. Completing clinical trials and obtaining
FDA approval is a costly and time consuming process. Management believes that
the Companys ability to manage cash, if required, through a less aggressive
clinical trial schedule should provide adequate cash flows to fund the
Companys obligations through mid 2002. In the event the Company were not to
generate adequate cash flows from operations or financing activities, the
Companys US market launch could be delayed. Ultimately, the Company will need
to achieve profitability and positive cash flows from operations or obtain
additional debt or equity financing to fund its operations.

3.      Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market (net realizable value) and consist of the following:

|                |  |               |         |                |   |         |  | 
|--------------- |  | ------------- | ------- | -------------- | - | ------- |  | 
|                |  | June 30, 2001 |         | March 31, 2001
|                |  |               |         |               
|Raw materials   |  | $             | 157,761 |                | $ | 82,827 
|               
|               
|               
|               
|Work-in-process |  |               | 390,766 |                |   | 337,077
|               
|               
|               
|               
|Finished goods  |  |               | 365,428 |                |   | 332,532
|                |  |               |         |               
|                |  | $             | 913,955 |                | $ | 752,436
|                |  |               |         |               

4.      Comprehensive
loss consists of net loss, net unrealized gains (losses) on marketable securities, and the translation adjustment as follows:

|         |  |                    |          |      |  |   |          |  
|-------- |  | ------------------ | -------- | ---- |  | - | -------- | -
|         |  | Three Months Ended
|         |  | June 30           
|         |  |                   
|         |  | 2001               |          | 2000
|         |  |                    |          |     
|Net loss |  | $                  | (134,726 | )    |  | $ | (175,938 | )



---



|                                   |   |                    |          |        |   |   |          |        
|---------------------------------- | - | ------------------ | -------- | ------ | - | - | -------- | -------
|                                   |   | Three Months Ended
|                                   |   | June 30           
|                                   |   |                   
|                                   |   | 2001               |          | 2000  
|                                   |   |                    |          |       
|Items of other comprehensive loss:
|                                  
|                                  
|                                  
|                                  
|Translation adjustment             |   |                    |          | (4,445 | ) |   |          | (15,708
|                                   |   |                    |          |       
|Total comprehensive loss           | $ |                    | (139,171 | )      |   | $ | (191,646 | )      
|                                   |   |                    |          |       

5.      Reconciliation of Net Loss and Share Amounts Used in EPS Calculation

Basic loss per common share is calculated by dividing net loss by the
weighted-average common shares outstanding during the period. Diluted loss per
common share for the three months ended June 30, 2001 and 2000 was calculated
using the treasury-stock method to compute the weighted average common stock
outstanding assuming the conversion of dilutive potential common shares.

|                            |               |                  |  |              |           |            |  |              |  |              |  |   |           |  
|--------------------------- | ------------- | ---------------- |  | ------------ | --------- | ---------- |  | ------------ |  | ------------ |  | - | --------- | -
|                            |               |                  |  | Basic loss   |           |            |  |              |  | Diluted loss
|                            |               |                  |  | per share    |           | Effect of  |  | per share   
|                            |               |                  |  | to common    |           | dilutive   |  | to common   
|                            |               |                  |  | shareholders |           | securities |  | shareholders
|                            |               |                  |  |              |           |            |  |             
|For the three months ended:
|                           
|                           
|                           
|                           
|                            | June 30, 2001
|                           
|                           
|                           
|                           
|                            |               | Net loss         |  | $            | (134,726  | )          |  |              |  |             |  | $ | (134,726  | )
|                           
|                           
|                           
|                           
|                            |               | Shares           |  |              | 6,046,434 |            |  |              |  |             |  |   | 6,046,434 |  
|                            |               |                  |  |              |           |            |  |              |  |             
|                            |               | Per share amount |  | $            | (0.02     | )          |  |              |  |             |  | $ | (0.02     | )
|                           
|                           
|                           
|                           
|                            | June 30, 2000
|                           
|                           
|                           
|                           
|                            |               | Net loss         |  | $            | (175,938  | )          |  |              |  |             |  | $ | (175,938  | )
|                           
|                           
|                           
|                           
|                            |               | Shares           |  |              | 5,981,040 |            |  |              |  |             |  |   | 5,981,040 |  
|                            |               |                  |  |              |           |            |  |              |  |             
|                            |               | Per share amount |  | $            | (0.03     | )          |  |              |  |             |  | $ | (0.03     | )

Options and warrants to purchase 1,171,200 shares of common stock at per share
amounts ranging from $.50 to $3.50 per share were outstanding at June 30, 2001
but were not included in the computation of diluted earnings per share because
net loss realized during the quarter would cause the potential common shares to
have an anti-dilutive effect. The options expire from August 2001 to June 2006.
At June 30, 2000 options and warrants to purchase 1,195,400 shares of common
stock at per share amounts ranging from $.50 to $3.50 per share were
outstanding but were not included in the computation of diluted earnings per
share because net loss realized during the quarter would cause the potential
common shares to have an anti-dilutive effect.

6.      Legal Proceeding

In Item 1 of Part II of this filing the legal proceedings of the Company are
listed. The Company has not accrued for potential losses on these cases as the
likelihood of a loss is not probable and the amount in the event of a loss
cannot be reasonably estimated.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward-looking Statements

The Registrant may from time to time make written or oral forward-looking
statements, including statements contained in this filing by the Company with
the Securities and Exchange Commission and in its reports to stockholders, as
well as elsewhere. Forward-looking statements are statements such as those
contained in projections, plans, objectives, estimates, statements of future
economic performance, and assumptions related to any of the foregoing, and may
be identified by the use of forward-looking terminology, such as may,
expect, anticipate, estimate, goal, continue, or other comparable
terminology. By their very nature, forward-looking statements are subject to
known and unknown risks and



---



uncertainties relating to the Companys future performance that may cause the
actual results, performance, or achievements of the Company, or industry
results, to differ materially from those expressed or implied in any such
forward-looking statements. Any such statement is qualified by reference to
the following cautionary statements.

The Registrants business operates in highly competitive markets and is subject
to changes in general economic conditions, competition, 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 from time to time in the Registrants Securities
and Exchange Commission filings.

In this filing, the following section entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations contains
forward-looking statements. Various factors and risks (not all of which are
identifiable at this time) could cause the Companys results, performance, or
achievements to differ materially from that contained in the Companys
forward-looking statements, and investors are cautioned that any
forward-looking statement contained herein or elsewhere is qualified by and
subject to the warnings and cautionary statements contained above and in the
Companys other filings with the Securities and Exchange Commission.

The Company does not undertake and assumes no obligation to update any
forward-looking statement that may be made from time to time by or on behalf of
the Company.

Overview

Uroplasty, Inc. develops, manufactures, and/or markets medical products in
certain segments of the urology, wound care, and plastic surgery markets.
Products sold by the Company are subject to regulation by the U.S. FDA and/or
various regulating agencies in countries outside the U.S. Existing sales have
been, and future sales growth is expected to be, derived from Macroplastique
and related ancillary products designed for use by urologists, gynecologists,
and uro-gynecologists for the primary treatment of SUI and for the treatment of
VUR (backflow of urine from the bladder to the kidneys). Macroplastique is
comprised of soft, irregularly textured, vulcanized, medical grade silicone
elastomer implants suspended in a biocompatible carrier solution. When
injected via a minimally invasive procedure in the soft tissue of the
mid-urethra and bladder neck (in the case of SUI), and at the ureteral orifice
(in the case of vesicoureteral reflux), the implants act as a bulking material
to restore urinary continence or to eliminate reflux of urine from the bladder
to the kidneys.

In addition to the urological applications, the Companys implantable bulking
material is also marketed by the Company outside the U.S. for reconstructive
and cosmetic plastic surgery applications and vocal cord rehabilitation under
the trade name Bioplastique. In The Netherlands and United Kingdom,
the Companys direct sales force distributes on behalf of another company
certain wound care products in accordance with an executed Distributor
Agreement. Under the terms of the Distributor Agreement, the Company is not
obligated to purchase any minimum level of wound care products.

The Companys products are currently sold by a direct sales force in the United
Kingdom, and by a network of distributors in numerous countries outside the
U.S., including Western Europe, Australia, Canada, and Central and South
America. In September 1999, the Company received unconditional approval from
the FDA pursuant to a previously filed IDE Application to initiate human
clinical studies in the U.S. for the Companys primary product Macroplastique
in the treatment of female SUI. Through various urological investigators in
various clinical sites across the U.S., the Company is currently performing the
human procedures specified by the study protocol.

The Companys current objectives are to focus on sales and marketing activities
designed to increase market penetration and sales of Macroplastique for SUI and
VUR applications in countries outside the U.S., and to efficiently and
effectively execute the Macroplastique human clinical study for treatment of
female SUI within the U.S.

In order to further reduce costs eight positions worldwide were canceled in
August 2001, either by terminating employment agreements or attrition. Three
manufacturing positions were eliminated, three administrative positions, one
position in research and development and one sales and marketing position. An
increased focusing on the Companys goals and increased efficiencies should
streamline the operations. No activities will be discontinued.

Set forth below is managements discussion and analysis of the financial
condition and results of operations for the three month periods ended June 30,
2001 and 2000.



---



Results of Operations

Net Sales: The Macroplastique product line accounts for approximately 90% of
total net sales during the periods presented. In the first quarter ended June,
2001, net sales of all products were $1,149,389, representing a $329,654 or 22%
decrease when compared to net sales of $1,479,043 for the first quarter ended
June 30, 2000. The sales decrease was due to increased competition and
restructuring of the Company.

Management expects that unit sales of Macroplastique will increase in the
remaining nine months of fiscal 2002 as a result of improving and enhancing our
distributors in existing and new geographical markets, and as a result of
enhancements to the surgical technique leading to an increased number of
implanting doctors and greater penetration of the SUI market. There can be no
assurance however, that the Companys efforts to increase sales and market
penetration will be successful.

Gross Profit: Gross profit was $969,517 and $1,180,702 for the quarters ended
June 30, 2001 and 2000, respectively, or 84% and 80% of net sales.
Manufacturing efficiencies and increased utilization of manufacturing
facilities and manufacturing related personnel had a positive effect on gross
profit margins.

General and Administrative Expense: General and administrative (G&A)
expenses decreased 17% from $329,089 during the first quarter of fiscal 2001 to
$272,610 during the first quarter of fiscal 2002. The decrease in General and
Administrative expenses is primarily attributed to the decrease in personnel as
a result of the Companys restructuring activities in late fiscal 2001.

Research and Development Expense: Research and development (R&D) expenses
decreased $92,048, or 19%, from $482,086 during the first quarter of fiscal
2001 to $390,038 during the first quarter of fiscal 2002. The decrease in R&D
expense during the quarter ended June 30, 2001 resulted principally from a
decrease in personnel related to the Companys restructuring activities in late
fiscal 2001 and consulting costs. The human clinical study costs are primarily
comprised of physician and medical fees relating to the patient procedures and
follow-up examinations, in addition to the costs of managing the study.

Selling and Marketing Expenses: Selling and marketing (S&M) costs decreased
35% from $542,189 during the first quarter of fiscal 2001 to $355,067 during
the first quarter of fiscal 2002, as a result of the fiscal 2001 restructuring
of the international sales and marketing department.

Other Income (Expense): Other income (expense) includes interest income,
interest expense, foreign currency exchange gains and losses, and other
non-operating costs when incurred. Other income (expense) was $(86,528) and
$(3,276) for the quarters ended June 30, 2001 and 2000, respectively. The
majority of the difference was due to exchange gains and losses and a $14,776
reduced interest income. Exchange gains and losses are recognized primarily as
a result of fluctuations in currency rates between the U.S. Dollar (the
functional reporting currency) and the Dutch Guilder and British Pound
(currencies of the Companys subsidiaries), as well as their effect on the
valuation of intercompany obligations between the Company and its foreign
subsidiaries.

Liquidity and Capital Resources

As of June 30, 2001, the Companys cash and cash equivalent balances totaled
$762,886. The capital resources existing at June 30, 2001 were derived from
operations during the fiscal years ended March 31, 1997 and 1998, plus the net
proceeds from the Companys sale of approximately 1.7 million shares of Common
Stock in June 1998.

At June 30, 2001, the Company had working capital of approximately $2.1
million. During the first quarter of fiscal year 2002, the Company used
approximately $259,000 of cash from operating activities.

The Company currently has no financing arrangements in place with any bank for
general working capital needs, and no material unused sources of liquidity
other than the cash, equipment leasing arrangements, and its accounts
receivable and inventory balances at June 30, 2001 of approximately $937,000
and $914,000, respectively.

The inventory balance includes approximately $150,000 for the build-up of
modified product prior to the launch of the enhanced Macroplastique
administration device, due for market release in third quarter of fiscal 2002.



---



The Company has operations in the U.S. and internationally. U.S. net operating
loss carryforwards cannot be used to offset taxable income in foreign
jurisdictions. Furthermore, repatriation of dividends to the U.S. parent may
result in additional foreign or U.S. taxes.

The Companys financial condition and results of operations could be
significantly affected by fluctuations in foreign currency exchange rates and
weak economic conditions in foreign markets where the Companys products are
distributed. The effects of these conditions could include reduced unit sales
and reduced sales in dollars when converted from foreign currency amounts.
Furthermore, because the Companys U.S. operations are funded by sales
denominated in foreign currency, strengthening of the U.S. dollar against the
Euro, Dutch Guilder and/or the British Pound could have an adverse effect on
the Companys cash flow.

Management expects continued high costs associated with the conduct of the U.S.
human clinical study for Macroplastique pursuant to the FDA approved IDE, the
subsequent PMA submission and review process, and pre-commercialization and
market launch costs in the U.S. relating to Macroplastique for female SUI.

As a result of the Companys cost reduction activities and the Companys
ability to manage the timing of the FDA clinical expenditures, management
believes that current resources and the funds generated from sale of the
Companys products outside the U.S. will be adequate to meet the Companys cash
flow needs through the remaining three quarters of fiscal 2002. Additional
funds from the sale of the Companys securities or other alternative sources
will be necessary to actively support the U.S. regulatory activities. It is the
intention of the Company to raise additional capital this fiscal year. There
can be no assurance that such alternative sources of funds will be available to
the Company.



---



PART II. OTHER INFORMATION




---

Except for the following, none of the items contained in PART II of Form 10-QSB
are applicable to the Company for the three months ended June 30, 2001.

ITEM 1. LEGAL PROCEEDINGS

On July 21, 1998, the Company announced that the United States Patent and
Trademark Office (USPTO) had informed the Company that the USPTO will, as
requested by the Company, initiate an interference proceeding (the
Interference Proceeding) between the Company and Carbon Medical Technologies,
Inc. (CMT), formerly Advanced UroScience, Inc., White Bear Lake, Minnesota,
to determine which company was the first to invent pyrolytic carbon-coated
micro beads for use in treating urinary incontinence. The USPTO has not, as of
July 23, 2001, formally declared the Interference Proceeding.

At such time as the Interference Proceeding is formally declared, it could take
the USPTO twenty-four months or more to reach a final decision concerning this
matter. Although the USPTO originally granted the applicable patent to CMT,
the Interference Proceeding may result in a determination that either
Uroplasty, Inc. or CMT is the proper holder, or that a patent should not have
been granted. An interference proceeding, like other patent litigation, can be
complex, time consuming and expensive.

Later in 1998, the Company commenced a related lawsuit against CMT for
misappropriation of trade secrets (Misappropriation Lawsuit) pertaining to
the pyrolytic carbon-coated micro beads, among other things. CMT, subsequent to
December 31, 1998, brought a counterclaim against the Company with respect to
such matter. In October 1999, the Company announced that the U.S. District
Court for Minnesota had granted a motion by CMT to dismiss the Misappropriation
Lawsuit, which the Company appealed.

Subsequently, the U.S. Court of Appeals, Eighth Circuit, notified the Company
that pursuant to the Companys request, the Companys appeal was transferred to
the Federal Circuit, and in May 2000 the Company filed its appeal of the
District Courts order granting summary judgment with the U.S. Court of Appeals
for the Federal Circuit.

In February 2001, the United States Court of Appeals for the Federal Circuit
(the Circuit Court) granted the Companys appeal of the dismissal of the
Misappropriation Lawsuit. The Circuit Court vacated the dismissal by the U.S.
District Court for Minnesota due to lack of jurisdiction and remanded the case; a motion to
dismiss the Misappropriation Lawsuit brought by CMT is now pending in Ramsey
County District Court in Minnesota.



---



SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

UROPLASTY, INC.

|      |  |                 |  |                                                                                                                                                   
|----- |  | --------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Date: |  | August 14, 2001 |  | by: /s/ DANIEL G. HOLMAN                                                                                                                          
|      |  |                 |  | Daniel G. Holman
President, Chief Executive Officer,
Chief Financial Officer (Principal Financial Officer),
Director (Principal Executive Officer)
|     
|Date: |  | August 14, 2001 |  | by: /s/ ARIE J. KOOLE                                                                                                                             
|      |  |                 |  | Arie J. Koole
Controller (Principal Accounting Officer)