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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 September 30, 2003

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 November 1, 2003 was $11,696,725.

The number of shares outstanding of the issuers only class of common stock on November 1, 2003 was 4,529,672.

Transitional Small Business Disclosure Format:

YES [  ]           NO [X]



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|                                                       |  |  |  |  |  |  |  | 
|------------------------------------------------------ |  |  |  |  |  |  |  | 
|CONSOLIDATED BALANCE SHEETS                           
|CONSOLIDATED STATEMENTS OF OPERATIONS                 
|CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|EX-31 Certifications by CEO & CFO - Section 302       
|EX-32 Certifications by CEO & CFO - Section 906       
|EX-99.1 Press Release                                 



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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS




UROPLASTY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(unaudited)

September 30, 2003
    
    
    March 31, 2003AssetsCurrent assets:Cash and cash equivalents
    
    $
    2,996,150
    
    
    
    3,375,981Accounts receivable, net
    
    
    746,527
    
    
    
    969,556Inventories
    
    
    518,543
    
    
    
    455,114Other
    
    
    348,238
    
    
    
    188,192Total current assets
    
    
    4,609,458
    
    
    
    4,988,843Property, plant, and equipment, net
    
    
    874,017
    
    
    
    833,234Intangible assets, net
    
    
    51,854
    
    
    
    48,214Total assets
    
    $
    5,535,329
    
    
    
    5,870,291


See accompanying notes to consolidated financial statements.

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UROPLASTY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(unaudited)

September 30, 2003
    
    
    March 31, 2003Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    329,527
    
    
    
    199,673Income tax payable
    
    
    154,198
    
    
    
    Accrued liabilities
    
    
    237,008
    
    
    
    349,937Current maturities long-term debt
    
    
    40,092
    
    
    
    37,502Total current liabilities
    
    
    760,825
    
    
    
    587,112Long-term debt less current maturities
    
    
    474,713
    
    
    
    462,787Total liabilities
    
    
    1,235,538
    
    
    
    1,049,899Shareholders equity:Common stock $.01 par value; 20,000,000
shares authorized, 4,529,672 and
4,488,971 shares issued and outstanding
at September 30, 2003 and
March 31, 2003, respectively
    
    
    45,297
    
    
    
    44,890Additional paid-in capital
    
    
    8,823,909
    
    
    
    8,457,901Accumulated deficit
    
    
    (4,006,995
    )
    
    
    (3,163,156
    )Vendor deposit
    
    
    (140,000
    )
    
    
    (112,000
    )Deferred compensation
    
    
    (164,406
    )
    
    
    Accumulated other comprehensive loss
    
    
    (258,014
    )
    
    
    (407,243
    )Total shareholders equity
    
    
    4,299,791
    
    
    
    4,820,392Total liabilities and shareholders equity
    
    $
    5,535,329
    
    
    
    5,870,291


See accompanying notes to consolidated financial statements.

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UROPLASTY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Net sales
    
    $
    1,175,073
    
    
    $
    1,288,875
    
    
    
    2,534,662
    
    
    
    2,597,974Cost of goods sold
    
    
    274,186
    
    
    
    355,289
    
    
    
    679,773
    
    
    
    775,003Gross profit
    
    
    900,887
    
    
    
    933,586
    
    
    
    1,854,889
    
    
    
    1,822,971Operating expensesGeneral and administrative
    
    
    456,769
    
    
    
    299,661
    
    
    
    922,045
    
    
    
    572,128Research and development
    
    
    420,190
    
    
    
    481,790
    
    
    
    858,763
    
    
    
    1,001,208Selling and marketing
    
    
    342,394
    
    
    
    259,664
    
    
    
    764,804
    
    
    
    513,8271,219,353
    
    
    
    1,041,115
    
    
    
    2,545,612
    
    
    
    2,087,163Operating loss
    
    
    (318,466
    )
    
    
    (107,529
    )
    
    
    (690,723
    )
    
    
    (264,192
    )Other income (expense)Interest income
    
    
    6,608
    
    
    
    9,728
    
    
    
    17,117
    
    
    
    22,593Interest expense
    
    
    (5,404
    )
    
    
    (6,059
    )
    
    
    (11,248
    )
    
    
    (12,339
    )Foreign currency exchange gain (loss)
    
    
    (4,210
    )
    
    
    (12,687
    )
    
    
    (6,571
    )
    
    
    407,333Settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180,000Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157
    )(3,006
    )
    
    
    (9,018
    )
    
    
    (702
    )
    
    
    597,430Income (loss) before income taxes
    
    
    (321,472
    )
    
    
    (116,547
    )
    
    
    (691,425
    )
    
    
    333,238Income tax expense
    
    
    72,248
    
    
    
    
    
    
    
    152,414
    
    
    
    Net income (loss)
    
    $
    (393,720
    )
    
    $
    (116,547
    )
    
    
    (843,839
    )
    
    
    333,238Basic income (loss) per common share
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    
    (0.19
    )
    
    
    0.11Diluted income (loss) per common share
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    
    (0.19
    )
    
    
    0.11Weighted average common shares outstanding:Basic
    
    
    4,487,222
    
    
    
    3,893,506
    
    
    
    4,485,606
    
    
    
    3,109,992Diluted
    
    
    4,487,222
    
    
    
    3,893,506
    
    
    
    4,485,606
    
    
    
    3,123,517


See accompanying notes to consolidated financial statements.

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UROPLASTY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended September 30, 2003 and 2002
(Unaudited)

Six Months EndedSeptember 30,2003
    
    
    2002Cash flows from operating activities:Net income (loss)
    
    $
    (843,839
    )
    
    
    333,238Adjustments to reconcile net income (loss) to net cash
provided by (used in) operations:Depreciation and amortization
    
    
    76,462
    
    
    
    107,581Stock-based consulting expense
    
    
    164,407
    
    
    
    1,508Changes in operating assets and liabilities:Accounts receivable
    
    
    223,029
    
    
    
    (53,286
    )Inventories
    
    
    (63,429
    )
    
    
    67,847Other current assets
    
    
    (160,046
    )
    
    
    (24,394
    )Accounts payable
    
    
    129,854
    
    
    
    34,090Accrued liabilities
    
    
    41,269
    
    
    
    (82,143
    )Net cash provided by (used in) operating activities
    
    
    (432,293
    )
    
    
    384,441Cash flows from investing activities:Payments for property, plant and equipment
    
    
    (56,231
    )
    
    
    (38,504
    )Payments for intangible assets
    
    
    (15,080
    )
    
    
    (675
    )Net cash used in investing activities
    
    
    (71,311
    )
    
    
    (39,179
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (19,470
    )
    
    
    (26,517
    )Net proceeds from issuance of stock
    
    
    9,602
    
    
    
    2,265,316Net cash used in financing activities
    
    
    (9,868
    )
    
    
    (2,238,799
    )Effect of exchange rates on cash and cash equivalents
    
    
    133,641
    
    
    
    (122,075
    )Net increase (decrease) in cash and cash equivalents
    
    
    (379,831
    )
    
    
    2,461,986Cash and cash equivalents at beginning of period
    
    
    3,375,981
    
    
    
    1,046,121Cash and cash equivalents at end of period
    
    $
    2,966,150
    
    
    
    3,508,107Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    12,095
    
    
    
    13,240Cash paid during the period for income taxes
    
    
    
    
    
    
    Restricted shares issued for mold purchase
    
    $
    
    
    
    
    20,600


See accompanying notes to consolidated financial statements.

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UROPLASTY, INC. AND SUBSIDIARIES

Notes to the Interim Consolidated Financial Statements
(Unaudited)

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. 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, 2003.

The consolidated financial statements presented herein as of September 30, 2003
and for the three and six-months periods ended September 30, 2003 and 2002
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.

The Company has identified certain of its accounting policies that it considers
particularly important for the portrayal of the Companys results of operations
and financial position and which may require the application of a higher level
of judgment by the Companys management, and as a result are subject to an
inherent level of uncertainty. These are characterized as critical accounting
policies and address revenue recognition, inventories, foreign currency
translation and transactions, and impairment of long-lived assets, each more
fully described in the Companys Annual Report on Form 10-KSB for the year
ended March 31, 2003. Based upon the Companys review, management has
determined that these policies remain its most critical accounting policies for
the three and six-months periods ended September 30, 2003, and has made no
changes to these policies during fiscal 2004.

2. Nature of Business

The Company is currently selling its products outside of the United States and
is undertaking FDA investigational clinical trials in the United States and
Canada. Based on the Companys current plans, it is anticipated the Company
will launch its products in the U.S. after obtaining FDA approval. Completing
clinical trials and obtaining FDA approval is a costly and time-consuming
process. As a result of the $2.4 million gross proceeds of a Rights Offering
completed July 2002, management believes 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, including R&D activities, associated
with existing products and markets through fiscal 2004. 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:

September 30, 2003
    
    
    March 31, 2003Raw materials
    
    $
    96,614
    
    
    
    78,910Work-in-process
    
    
    137,583
    
    
    
    163,989Finished goods
    
    
    284,346
    
    
    
    212,215$
    518,543
    
    
    
    455,114


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4. Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss), and the translation
adjustment as follows:

Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Net income (loss)
    
    $
    (393,720
    )
    
    $
    (116,547
    )
    
    
    (843,839
    )
    
    
    333,238Items of other comprehensive income
(loss):Translation adjustment
    
    
    32,567
    
    
    
    7,903
    
    
    
    149,229
    
    
    
    (83,386
    )Comprehensive income (loss)
    
    $
    (361,153
    )
    
    $
    (108,644
    )
    
    
    (694,610
    )
    
    
    249,852


5. Reconciliation of Net income (loss) and Share Amounts Used in EPS
Calculation

Basic income (loss) per common share is calculated by dividing net income
(loss) by the weighted-average common shares outstanding during the period.
Diluted income (loss) per common share for the three and six-months ended
September 30, 2003 and 2002 was calculated using the treasury-stock method to
compute the weighted average common stock outstanding assuming the conversion
of dilutive potential common shares.

Effect ofBasic Income (Loss)
    
    
    Dilutive
    
    
    Diluted Income (Loss)Per Share
    
    
    Securities
    
    
    Per ShareFor the three months ended:September 30, 2003Net loss
    
    $
    (393,720
    )
    
    
    
    
    
    
    (393,720
    )Shares
    
    
    4,487,222
    
    
    
    
    
    
    
    4,487,222Per share amount
    
    $
    (0.09
    )
    
    
    
    
    
    
    (0.09
    )For the three months ended:September 30, 2002Net loss
    
    $
    (116,547
    )
    
    
    
    
    
    
    (116,547
    )Shares
    
    
    3,893,506
    
    
    
    
    
    
    
    3,893,506Per share amount
    
    $
    (0.03
    )
    
    
    
    
    
    
    (0.03
    )For the six months ended:September 30, 2003Net loss
    
    $
    (843,839
    )
    
    
    
    
    
    
    (843,839
    )Shares
    
    
    4,485,606
    
    
    
    
    
    
    
    4,485,606Per share amount
    
    $
    (0.19
    )
    
    
    
    
    
    
    (0.19
    )For the six months ended:September 30, 2002Net income
    
    $
    333,238
    
    
    
    
    
    
    
    333,238Shares
    
    
    3,109,992
    
    
    
    13,525
    
    
    
    3,123,517Per share amount
    
    $
    0.11
    
    
    
    
    
    
    
    0.11


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The following options and warrants outstanding at September 30, 2003 and 2002
to purchase shares of common stock were excluded from diluted loss per share,
because of the anti-dilutive effect:

Number of
    
    
    Range ofOptions/Warrants
    
    
    pricesFor the three months ended:September 30, 2003
    
    
    1,737,629
    
    
    $
    0.90 to $10.50September 30, 2002
    
    
    1,707,789
    
    
    $
    1.10 to $10.50For the six months ended:September 30, 2003
    
    
    1,737,629
    
    
    $
    0.90 to $10.50September 30, 2002
    
    
    1,263,289
    
    
    $
    2.00 to $10.50


6. Shareholders Equity

The Company applies the intrinsic-value method to account for employee
stock-based compensation. As such, compensation expense, if any, is recorded on
the date of grant if the current market price of the underlying stock exceeds
the exercise price.

The Company accounts for stock-based instruments granted to non-employees under
the fair value method of SFAS No. 123 and Emerging Issues Task Force (EITF)
96-18, Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services.
Under SFAS No. 123, options are recorded at their fair value on the measurement
date, which is typically the vesting date.

Consulting Agreements

On April 1, 2003, the Company executed a consulting agreement with C.C.R.I.
Corporation (CCRI) to provide investor relations and development services. The
Company pays the Consultant a monthly fee of $4,000 plus expenses. CCRI
received 35,000 shares of fully vested restricted common stock, and vested
warrants to purchase 50,000 shares of common stock at an exercise price of
$3.00 per share, and will receive vested warrants to purchase 50,000 shares of
common stock at an exercise price of $5.00 per share on November 2, 2003 unless
the agreement is sooner terminated. The November 2, 2003 warrants issuable to
CCRI will be recorded in the Companys financial statements upon issuance. The
Company recorded the fair value of the common stock and the warrants
aggregating $212,974, as of April 1, 2003, as deferred compensation in
shareholders equity. The balance is amortized over the 1 year service period.
Stock-based compensation expense for CCRI agreement for the three and
six-months ended September 30, 2003 aggregated $53,244 and $106,486,
respectively.

On April 1, 2003, the Company executed a consulting agreement with Executive
Advisory Group (EAG) to perform services for and on behalf of the Company. Mr.
Sam B. Humphries, a Director of the Company, is President of EAG. The Company
pays EAG a monthly fee of $6,000 plus expenses. EAG also received stock options
to purchase 50,000 shares of common stock, exercisable at $2.80 per share. The
Company recorded the fair value of the stock options aggregating $115,839, as
of April 1, 2003, as a deferred compensation in shareholders equity. The
balance is amortized over the 1 year service period. Stock-based compensation
expense for the EAG agreement for the three and six-months ended September 30,
2003 aggregated $28,959 and $57,921, respectively.

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The options and warrants issued to EAG and CCRI to acquire an aggregate of
100,000 shares of common stock were fully vested upon issuance. The fair value
of these instruments was determined using the Black-Scholes options pricing
model with the following variables:

Expected dividend yield
    
    
    0.00
    %Risk-free interest rate
    
    
    2.93
    %Expected volatility
    
    
    118
    %Expected life, in years
    
    
    5.00


Stock Option Grant

On April 15, 2003, the Company granted 30,000 options to its Director Sam B.
Humphries, for his services as a member of the board of directors. These
options vest over a period of five years. All vesting of these options would
accelerate when the Company receives written FDA market approval or in case a
change in control should occur.

Vendor Deposit

In September 2001, the Company executed an agreement with a vendor to
manufacture a mold for one of the Companys products. As consideration, the
Company issued to the vendor 20,000 shares of its common stock in September
2001. The Company amended the agreement in September 2002 and issued an
additional 20,000 shares of common stock to be held in escrow until completion
of the mold. The Company recorded the fair value of the restricted common stock
aggregating $140,000, as of September 30, 2003, as a vendor deposit in
shareholders equity. The final measurement of the fair value will occur when
the vendor completes and the Company accepts the mold.

7. Stock Option Plans

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS 123, Accounting for Stock-Based
Compensation, the Companys net income (loss) would have decreased (increased)
to the pro forma amounts shown below:

Three Months Ended
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2003
    
    
    2002
    
    
    2003
    
    
    2002Net income (loss)  As reported
    
    $
    (393,720
    )
    
    $
    (116,547
    )
    
    $
    (843,839
    )
    
    $
    333,238Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards
    
    
    (37,254
    )
    
    
    (100,283
    )
    
    
    (74,507
    )
    
    
    (169,886
    )Net income (loss)  Pro forma
    
    
    (430,974
    )
    
    
    (216,830
    )
    
    
    (918,346
    )
    
    
    163,352Net income (loss) per common share  As reported:Basic
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    $
    (0.19
    )
    
    $
    0.11Diluted
    
    $
    (0.09
    )
    
    $
    (0.03
    )
    
    $
    (0.19
    )
    
    $
    0.11Net income (loss) per common share  Pro forma:Basic
    
    $
    (0.10
    )
    
    $
    (0.06
    )
    
    $
    (0.20
    )
    
    $
    0.05Diluted
    
    $
    (0.10
    )
    
    $
    (0.06
    )
    
    $
    (0.20
    )
    
    $
    0.05


8. Foreign Currency Gains (Losses)

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For the three-month periods ended September 30, 2003 and 2002, the Company
recognized foreign currency losses of $4,210 and $12,687, respectively. For the
six-month periods ended September 30, 2003 and 2002, the Company recognized
foreign currency gains (losses) of $(6,571) and $407,333, respectively. At
September 30, 2003 and 2002, the Company had $0.2 million and $2.7 million of
dollar denominated intercompany debt at its Dutch subsidiaries. In January
2003, the Company recapitalized one of the Dutch subsidiaries with an
investment of 1.5 million euros ($1.6 million). The proceeds from the
investment were used to reduce the dollar denominated intercompany debt at the
Dutch subsidiary. Furthermore, the Dutch subsidiaries were profitable and the
generated cash flows were used to pay off the intercompany debt. These
intercompany balances are revolving in nature and are not deemed to be
long-term balances.

9. Income Tax Expense

During the quarter ended September 30, 2003, the Companys Dutch subsidiaries
recorded income tax expense of $72,248 as they have fully utilized their net
operating loss carryforwards. During the six months ended September 30, 2003,
the Companys Dutch subsidiaries recorded income tax expense of $152,414. The
income tax has been accrued and therefore included under current liabilities.
The U.S. net operating loss carryforwards cannot be used to offset taxable
income in foreign jurisdictions.

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

This Report on Form 10-QSB should be read in conjunction with the Annual Report
on Form 10-KSB for the period ended March 31, 2003.

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 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, gynecology, urogynecology, colon and rectal,
wound care, otolaryngology 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

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from
Macroplastique
and related ancillary products designed for use by urologists, gynecologists,
and uro-gynecologists for the treatment of stress urinary incontinence (SUI)
and for the treatment of vesicoureteral reflux (VUR), a condition in which
urine flows backward from the bladder to the kidney. 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 tissue
bulking material is also marketed by the Company outside the U.S. for
reconstructive and cosmetic plastic surgery applications under the trade name
Bioplastique Implants; fecal incontinence applications under the trade name
PTP Implants; and vocal cord rehabilitation under the trade name VOX
Implants. In The Netherlands and the United Kingdom, the Companys direct
sales force distributes certain wound care products on behalf of another
company 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 direct sales forces in the United
Kingdom and The Netherlands, and by a network of distributors in numerous
countries outside the U.S., including Western Europe, Australia, Canada and
Central and South America. The Company is currently conducting a multi-center
human clinical trial with its urethral bulking agent, Macroplastique, pursuant
to an FDA IDE as a minimally invasive, office-based procedure for treating
female SUI. This study is required as part of a Premarket Approval Submission
to the FDA for marketing within the United States.

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

Set forth below is managements discussion and analysis of the financial
condition and results of operations for the three and six-months periods ended
September 30, 2003 and 2002.

Results of Operations

Net Sales: The Macroplastique product line accounts for approximately 84% of
total net sales during the periods presented. In the second quarter ended
September 30, 2003, net sales of all products were $1,175,073, representing a
$113,802 or 9% decrease when compared to net sales of $1,288,875 for the second
quarter ended September 30, 2002. During the six months ended September 30,
2003, net sales of all products were $2,534,662, representing a $63,312 or 2%
decrease when compared to net sales of $2,597,974 during the six months ended
September 30, 2002. The sales decrease is the result of a decrease in unit
sales, offset by favorable fluctuations in foreign currency exchange rates
between the U.S. Dollar (the functional reporting currency) and the Euro and
the British Pound (currencies of the Companys subsidiaries). Excluding the
fluctuations in foreign currency exchange rates, the sales decrease is
approximately 18% for the three months ended September, 2003 and approximately
16% for the six months ended. Management believes the decrease in sales is
related to increased competition and healthcare reform in many European
countries with procedures being limited or rationed to decrease overall costs
to the health system. The Company is developing plans to address these issues.

Gross Profit: Gross profit was $900,887 and $933,586 for the quarter ended
September 30, 2003 and 2002, respectively, or 77% and 72% of net sales. Gross
profit was $1,854,889 and $1,822,971 for the six months ended September 30,
2003 and 2002, respectively, or 73% and 70% of net sales. Gross profit in any
one period is highly variable depending on unit sales and utilization of
manufacturing capacity.

General and Administrative Expense: General and administrative (G&A) expenses
increased from $299,661 during the second quarter of fiscal 2003 to $456,769
during the second quarter of fiscal 2004 and increased from $572,128 during the
six months ended September 30, 2002 to $922,045 during the six months ended
September 30, 2003. Increased pension costs, consulting, legal, shareholders
expenses, combined with general price increases and fluctuations in foreign
currency exchange rates caused the increase in G&A expenses. The consulting
fees and shareholders expense relates to the consulting agreements with the
Executive Advisory Group (EAG) to perform services for and on behalf of the
Company and the consulting agreement with C.C.R.I. Corporation to provide
investor relations and development services. The two agreements accounted for
$112,203 and $232,407, respectively, of the increased expense for the three and
six months ended September 30, 2003.

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Research and Development Expense: Research and development (R&D) expenses
decreased $61,600, or 13%, from $481,790 during the second quarter of fiscal
2003 to $420,190 during the second quarter of fiscal 2004 and decreased 14%
from $1,001,208 during the six months ended September 30, 2002 to $858,763
during the six months ended September 30, 2003. The decrease in R&D expense
resulted from a decrease in clinical costs due to the completion of the patient
enrollment phase in the Companys multi-center IDE clinical trial in February
2003.

Selling and Marketing Expenses: Selling and marketing (S&M) costs increased
32% from $259,664 during the second quarter of fiscal 2003 to $342,394 during
the second quarter of fiscal 2004 and increased 49% from $513,827 during the
six months ended September 30, 2002 to $764,804 during the six months ended
September 30, 2003. The increase resulted from additional staff, increased
travel costs, increased costs relating to trade-shows, conventions and
congresses, increased costs for marketing materials, general price increases
and fluctuations in foreign currency exchange rates.

Other Income (Expense): Other income (expense) includes interest income,
interest expense, foreign currency exchange gains and losses, settlement income
and other non-operating costs when incurred. The Companys financial results
are subject to material fluctuations based on changes in currency exchange
rates. Other income (expense) was $(3,006) and $(9,018) for the second quarter
ended September 30, 2003 and 2002, respectively and $(702) and $597,430 for the
six months ended September 30, 2003 and 2002. The majority of the differences
between periods were due to foreign currency exchange gains and losses and the
settlement proceeds from the litigation. 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 Euro and British Pound
(currencies of the Companys subsidiaries), as well as their effect on the
dollar denominated intercompany obligations between the Company and its foreign
subsidiaries. At September 30, 2003 and 2002, the Company had $0.2 million and
$2.7 million dollar denominated intercompany debt at its foreign Dutch
subsidiary. These intercompany balances are revolving in nature and are not
deemed to be long-term balances. The Company recognized foreign currency gains
and losses of $(4,210) and $(12,687) for the second quarter ended September 30,
2003 and 2002, respectively and $(6,571) and $407,333 for the six months ended
September 30, 2003 and 2002. The currency gains are primarily the result of a
weakened U.S. Dollar compared to the Euro and the currency loss the result of a
strengthened U.S. Dollar compared to the Euro. In January 2003, the Company
recapitalized one of the Dutch subsidiaries with an investment of 1.5 million
euros ($1.6 million). The Company used proceeds from the investment to reduce
the dollar denominated intercompany debt at the Dutch subsidiary, resulting in
an adjusted balance at December 31, 2002 of $0.9 million of intercompany debt
at the Dutch subsidiary subject for foreign currency transaction accounting.
This resulted in less volatility for changes in currency exchange rates in the
Companys statement of operations.

Income Tax Expense: During the quarter ended September 30, 2003, the Companys
Dutch subsidiaries recorded income tax expense of $72,248 as they have fully
utilized their net operating loss carryforwards. During the six-months ended
September 30, 2003, the Companys Dutch subsidiaries recorded income tax
expense of $152,414. The income tax has been accrued and therefore included
under current liabilities. The U.S. net operating loss carryforwards cannot be
used to offset taxable income in foreign jurisdictions.

Liquidity and Capital Resources

As of September 30, 2003, the Companys cash and cash equivalent balances
totaled $2,996,150.

At September 30, 2003, the Company had working capital of approximately $3.8
million. During the six months ended September 30, 2003, $432,293 of cash was
used in operating activities, compared to $384,441 of cash provided by
operating activities in the prior-year period. The usage of cash was primarily
attributable to the net loss incurred of $843,839, compared to a profit of
$333,238 in the prior year period. Accounts receivable decreased by $223,029,
due to the timing of payment by our customers and lower sales. Other current
assets increased by $160,046, due to pension premiums invoices received for the
period up until July 2004. Accounts payable and accrued expenses fluctuated due
to the timing of payments and fluctuations in foreign currency exchange rates.
The Company recorded $164,407 of non-cash stock-based compensation expense
during the six-months ended September 30, 2003.

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 September 30, 2003 of $746,527 and
$518,543, respectively. For fiscal 2004, management does not anticipate any
material capital expenditures.

The Companys financial condition and results of operations could be materially
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

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include reduced unit sales and reduced sales in
dollars when converted from foreign currency amounts and material gains and
losses on transactions denominated in foreign currencies. 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, and/or the British
Pound could have an adverse effect on the Companys cash flow and results of
operations.

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 U.S. Premarket Approval process, and pre-commercialization and
market launch costs in the U.S. relating to Macroplastique for female SUI.

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, including R&D activities associated with existing products and
markets through fiscal 2004. 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.

ITEM 3. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures. Within the 90 days prior to the date of
this report, Daniel G. Holman, our President, Chief Executive Officer, Chief
Financial Officer and Arie J. Koole, our Controller, Principal Accounting
Officer, carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Rule 13a-15b
under the Securities Exchange Act of 1934. Based on their review of our
disclosure controls and procedures, such officers have concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to us that is required to be included in our
periodic SEC filings.

Internal Controls and Procedures. There were no significant changes in
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

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PART II. OTHER INFORMATION

Except as indicated below, none of the items contained in PART II of Form
10-QSB are applicable to the Company for the three months ended September 30,
2003.

ITEM 2. CHANGES IN SECURITIES

( c ) Recent Sales of Unregistered Securities

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

31 Certifications by the Chief Executive Officer/Chief Financial Officer and
the Controller pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32 Certifications by the Chief Executive Officer/Chief Financial Officer and
the Controller pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (this
Exhibit is furnished pursuant to SEC rules, but is deemed not filed)

99.1 Press Release dated November 12, 2003

(b) Reports on Form 8-K

None

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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, INCby: /s/ DANIEL G. HOLMANDaniel G. HolmanPresident, Chief Executive Officer,Date: November 12, 2003
    
    Chief Financial Officer and Director (PrincipalExecutive and Financial Officer)Date: November 12, 2003
    
    by: /s/ ARIE J. KOOLEArie J. KooleController (Principal Accounting Officer)


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