##### Table of Contents



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, 2005
 Commission File No. 000-20989
 UROPLASTY, INC.
  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
 (612) 378-1180
   þ o
   o þ
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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 6. EXHIBITSSIGNATURESCertification of CEO and CFO Pursuant to Section 302Certification of CEO and CFO Pursuant to Section 906    Table of Contents  
  
 ITEM 1. FINANCIAL STATEMENTS
   June 30, 2005
    
    
    March 31, 2005(unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    6,958,238
    
    
    $
    1,492,684Accounts receivable, net
    
    
    920,824
    
    
    
    944,527Inventories
    
    
    700,390
    
    
    
    547,476Income tax receivable
    
    
    91,636
    
    
    
    114,189Other
    
    
    248,105
    
    
    
    161,920Total current assets
    
    
    8,919,193
    
    
    
    3,260,796Property, plant, and equipment, net
    
    
    1,077,918
    
    
    
    1,040,253Intangible assets, net
    
    
    289,676
    
    
    
    39,100Deferred tax assets
    
    
    89,001
    
    
    
    103,075Total assets
    
    $
    10,375,788
    
    
    $
    4,443,224
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June 30, 2005
    
    
    March 31, 2005(unaudited)Liabilities and Shareholders EquityCurrent liabilities:Current
maturities  long-term debt
    
    $
    41,616
    
    
    $
    44,606Accounts payable
    
    
    361,886
    
    
    
    362,994Accrued liabilities
    
    
    613,220
    
    
    
    478,682Warrant liability
    
    
    2,058,971
    
    
    
    Total current liabilities
    
    
    3,075,693
    
    
    
    886,282Long-term
debt  less current maturities
    
    
    419,950
    
    
    
    461,265Accrued pension liability
    
    
    302,919
    
    
    
    303,781Total liabilities
    
    
    3,798,562
    
    
    
    1,651,328Shareholders equity:Common stock $.01 par value;
20,000,000 shares authorized, 6,846,739 and
4,699,597 shares issued and
outstanding at June 30, 2005 and
March 31, 2005, respectively
    
    
    68,467
    
    
    
    46,996Additional paid-in capital
    
    
    14,796,566
    
    
    
    9,366,644Accumulated deficit
    
    
    (7,953,700
    )
    
    
    (6,491,387
    )Accumulated other comprehensive loss
    
    
    (334,107
    )
    
    
    (130,357
    )Total shareholders equity
    
    
    6,577,226
    
    
    
    2,791,896Total liabilities and shareholders equity
    
    $
    10,375,788
    
    
    $
    4,443,224
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Three Months EndedJune 30,2005
    
    
    2004Net sales
    
    $
    1,645,653
    
    
    $
    1,752,496Cost of goods sold
    
    
    420,828
    
    
    
    463,558Gross profit
    
    
    1,224,825
    
    
    
    1,288,938Operating expensesGeneral and administrative
    
    
    690,564
    
    
    
    391,112Research and development
    
    
    630,598
    
    
    
    580,053Selling and marketing
    
    
    664,033
    
    
    
    527,9571,985,195
    
    
    
    1,499,122Operating loss
    
    
    (760,370
    )
    
    
    (210,184
    )Other income (expense)Interest income
    
    
    27,380
    
    
    
    5,879Interest expense
    
    
    (4,809
    )
    
    
    (5,184
    )Warrant expense
    
    
    (686,295
    )
    
    
    Foreign currency exchange loss
    
    
    (1,199
    )
    
    
    (9,411
    )(664,923
    )
    
    
    (8,716
    )Loss before income taxes
    
    
    (1,425,293
    )
    
    
    (218,900
    )Income tax expense
    
    
    37,020
    
    
    
    66,459Net loss
    
    $
    (1,462,313
    )
    
    $
    (285,359
    )Basic and diluted loss per common share
    
    $
    (0.23
    )
    
    $
    (0.06
    )Weighted average common shares
outstanding:Basic and diluted
    
    
    6,351,245
    
    
    
    4,591,136
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AccumulatedAdditional
    
    
    
    
    
    Other
    
    TotalCommon Stock
    
    Paid-in
    
    Accumulated
    
    Comprehensive
    
    ShareholdersShares
    
    Amount
    
    Capital
    
    Deficit
    
    Loss
    
    EquityBalance at March 31, 2005
    
    
    4,699,597
    
    
    $
    46,996
    
    
    $
    9,366,644
    
    
    $
    (6,491,387
    )
    
    $
    (130,357
    )
    
    $
    2,791,896Private Placement
    
    
    2,147,142
    
    
    
    21,471
    
    
    
    7,493,526
    
    
    
    
    
    
    
    
    
    
    
    7,514,997Costs of Private Placement
    
    
    
    
    
    
    
    
    
    
    (690,928
    )
    
    
    
    
    
    
    
    
    
    
    (690,928
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,462,313
    )
    
    
    
    
    
    
    (1,462,313
    )Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208,159
    )
    
    
    (208,159
    )Additional pension
liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,409
    
    
    
    4,409Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,666,063
    )Balance at June 30, 2005
    
    
    6,846,739
    
    
    $
    68,467
    
    
    $
    16,169,242
    
    
    $
    (7,953,700
    )
    
    $
    (334,107
    )
    
    $
    7,949,902
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Three Months EndedJune 30,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (1,462,313
    )
    
    $
    (285,359
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    54,319
    
    
    
    40,822Loss on disposal of assets
    
    
    
    
    
    
    2,281Warrant expense
    
    
    686,295
    
    
    
    Deferred tax assets
    
    
    7,453
    
    
    
    16,220Changes in operating assets and liabilities:Accounts receivable
    
    
    (37,436
    )
    
    
    38,924Inventories
    
    
    (222,364
    )
    
    
    39,201Other current assets
    
    
    (92,228
    )
    
    
    (15,511
    )Accounts payable
    
    
    11,650
    
    
    
    (2,301
    )Accrued liabilities
    
    
    165,265
    
    
    
    (16,849
    )Accrued pension liability
    
    
    19,613
    
    
    
    (3,851
    )Additional pension liability
    
    
    
    
    
    
    1,824Net cash used in operating activities
    
    
    (869,746
    )
    
    
    (184,599
    )Cash flows from investing activities:Payments for property, plant and equipment
    
    
    (129,474
    )
    
    
    (38,748
    )Payments for intangible assets
    
    
    (266,667
    )
    
    
    (2,656
    )Net cash used in investing activities
    
    
    (396,141
    )
    
    
    (41,404
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    (10,819
    )
    
    
    (10,381
    )Net proceeds from issuance of common stock
    
    
    6,824,069
    
    
    
    41,130Net cash provided by financing activities
    
    
    6,813,250
    
    
    
    30,749Effect of exchange rates on cash and cash equivalents
    
    
    (81,809
    )
    
    
    (214
    )Net increase (decrease) in cash and cash equivalents
    
    
    5,465,554
    
    
    
    (195,468
    )Cash and cash equivalents at beginning of period
    
    
    1,492,684
    
    
    
    2,697,670Cash and cash equivalents at end of period
    
    $
    6,958,238
    
    
    $
    2,502,202Supplemental disclosure of cash flow information:Cash paid during the period for interest
    
    $
    5,056
    
    
    $
    5,496Cash paid during the period for income taxes
    
    
    15,281
    
    
    
    24,133
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1. Basis of Presentation
    2. Nature of Business and Corporate Liquidity
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3. Inventories
  June 30, 2005
    
    
    March 31, 2005Raw materials
    
    $
    302,901
    
    
    $
    193,980Work-in-process
    
    
    121,735
    
    
    
    75,337Finished goods
    
    
    275,754
    
    
    
    278,159$
    700,390
    
    
    $
    547,476
 4. Intangible Assets
  June 30, 2005GrossEstimated
    
    Carrying
    
    
    AccumulatedLives (Years)
    
    Amount
    
    
    Amortization
    
    
    Net valueLicensed technology
    
    
    5
    
    
    $
    292,957
    
    
    $
    33,051
    
    
    $
    259,906Patents and inventions
    
    
    6
    
    
    
    237,900
    
    
    
    208,130
    
    
    
    29,770Totals
    
    
    
    
    
    $
    530,857
    
    
    $
    241,181
    
    
    $
    289,676
 March 31, 2005Licensed technology
    
    
    5
    
    
    $
    26,290
    
    
    $
    19,718
    
    
    $
    6,572Patents and inventions
    
    
    6
    
    
    
    237,899
    
    
    
    205,371
    
    
    
    32,528Totals
    
    
    
    
    
    $
    264,189
    
    
    $
    225,089
    
    
    $
    39,100
  Remainder of 2006
    
    $
    48,2752007
    
    
    59,6562008
    
    
    59,0912009
    
    
    58,9872010
    
    
    56,704Thereafter
    
    
    6,963$
    289,676
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5. Comprehensive Loss
  Three Months EndedJune 30,2005
    
    
    2004Net loss
    
    $
    (1,462,313
    )
    
    $
    (285,359
    )Items of other comprehensive income (loss):Translation adjustment
    
    
    (208,159
    )
    
    
    (23,572
    )Additional pension liability
    
    
    4,409
    
    
    
    941Comprehensive loss
    
    $
    (1,666,063
    )
    
    $
    (307,990
    )
 6. Reconciliation of Net Loss and Per Share Amounts Used in EPS Calculation
  Basic andDiluted LossPer ShareFor the three months ended:June 30, 2005Net loss
    
    $
    (1,462,313
    )Weighted average shares
    
    
    6,351,245Per share amount
    
    $
    (0.23
    )For the three months ended:June 30, 2004Net loss
    
    $
    (285,359
    )Weighted average shares
    
    
    4,591,136Per share amount
    
    $
    (0.06
    )
  Number of
    
    
    Range of ExerciseOptions/Warrants
    
    
    PricesFor the three months ended:June 30, 2005
    
    
    3,706,338
    
    
    $0.90 to $10.50June 30, 2004
    
    
    1,710,069
    
    
    $0.90 to $10.50
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7. Shareholders Equity
  Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services
 Consulting Agreements
  Warrants
  8. Stock-based Compensation
  Three Months EndedJune 30,2005
    
    
    2004Net loss  As reported
    
    $
    (1,462,313
    )
    
    $
    (285,359
    )Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards
    
    
    (433,431
    )
    
    
    (36,007
    )Net loss  Pro forma
    
    $
    (1,895,744
    )
    
    $
    (321,366
    )Net loss per
common share  As reported:Basic and diluted
    
    $
    (0.23
    )
    
    $
    (0.06
    )Net loss per
common share  Pro forma:Basic and diluted
    
    $
    (0.30
    )
    
    $
    (0.07
    )
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9. Savings and Retirement Plans
    Three Months EndedJune 30,2005
    
    
    2004Gross service cost, net of employee contribution
    
    $
    44,861
    
    
    $
    34,033Interest cost
    
    
    25,835
    
    
    
    21,412Expected return on assets
    
    
    (14,911
    )
    
    
    (13,486
    )Amortization
    
    
    7,267
    
    
    
    13,702Net periodic retirement cost
    
    $
    63,052
    
    
    $
    55,661
  Three Months EndedJune 30,2005
    
    2004Discount rate
    
    
    4.50-5.25
    %
    
    
    5.25-5.50
    %Expected return on assets
    
    
    4.00-5.00
    %
    
    
    4.50-5.00
    %Expected rate of increase in futureGeneral
    
    
    3
    %
    
    
    3
    %Individual
    
    
    0%-3
    %
    
    
    0%-3
    %
 10. Foreign Currency Translation
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11. Income Tax Expense
  12. Business Segment Information
    AdjustmentsUnited
    
    The
    
    United
    
    andStates
    
    Netherlands
    
    Kingdom
    
    Eliminations
    
    ConsolidatedFiscal 2006Sales to customers,
three-months ended
June 30, 2005
    
    $
    
    
    
    $
    1,337,601
    
    
    $
    457,770
    
    
    $
    (149,718
    )
    
    $
    1,645,653Income tax expense,
three-months ended
June 30, 2005
    
    
    
    
    
    
    37,020
    
    
    
    
    
    
    
    
    
    
    
    37,020Net income (loss),
three-months ended
June 30, 2005
    
    
    (1,656,475
    )
    
    
    (12,104
    )
    
    
    44,414
    
    
    
    161,852
    
    
    
    (1,462,313
    )Long-lived assets
at June 30, 2005
    
    
    619,125
    
    
    
    741,071
    
    
    
    7,398
    
    
    
    
    
    
    
    1,367,594Fiscal 2005Sales to customers,
three-months ended
June 30, 2004
    
    
    
    
    
    
    1,445,453
    
    
    
    459,831
    
    
    
    (152,788
    )
    
    
    1,752,496Income tax expense,
three-months ended
June 30, 2004
    
    
    
    
    
    
    66,459
    
    
    
    
    
    
    
    
    
    
    
    66,459Net income (loss),
three-months ended
June 30, 2004
    
    
    (554,046
    )
    
    
    133,251
    
    
    
    14,332
    
    
    
    121,104
    
    
    
    (285,359
    )Long-lived asset
at June 30, 2004
    
    
    327,924
    
    
    
    767,538
    
    
    
    17,643
    
    
    
    
    
    
    
    1,113,105
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-looking Statements
     Overview
   
    
    Pursue regulatory approval in the U.S. for our Macroplastique, I-Stop and Urgent PC products.
    
    Build our own U.S. marketing and sales organization, using a combination of direct and independent reps;
    
    Expand distribution of our products outside of the U.S.; and
    
    Acquire or license complimentary products if appropriate opportunities arise.
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Critical Accounting Policies
  Revenue Recognition
 Accounts Receivable
 Inventories
 Foreign Currency Translation/Transactions
 Impairment of Long-Lived Assets
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Results of Operations
 Three-month period ended June 30, 2005 compared to three-month period ended June 30, 2004
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 
 Liquidity and Capital Resources
 Cash Flows
   Sources of Liquidity.
   Commitments and Contingencies.
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Payments Due by PeriodRemainder
    
    
    
    
    
    Fiscalof Fiscal
    
    Fiscal
    
    2008 andTotal
    
    2006
    
    2007
    
    thereafterMinimum royalty payments
    
    $
    546,333
    
    
    
    228,000
    
    
    
    124,833
    
    
    
    193,500Notes payable
    
    
    461,565
    
    
    
    31,204
    
    
    
    41,605
    
    
    
    388,756Operating lease commitments
    
    
    356,805
    
    
    
    228,900
    
    
    
    96,490
    
    
    
    31,415Total contractual obligations
    
    $
    1,364,703
    
    
    
    488,104
    
    
    
    262,928
    
    
    
    613,671
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ITEM 3. CONTROLS AND PROCEDURES.
  Internal Control Matters
  
    
    A significant deficiency is defined as a control deficiency, or combination of
deficiencies, that adversely affects a companys ability to initiate, authorize, record,
process or report external financial data reliably in accordance with generally accepted
accounting principles such that there is more than a remote likelihood that a misstatement
of the companys financial statements that is more than inconsequential will not be
prevented or detected.
    
    A material weakness is a significant deficiency, or combination of significant
deficiencies, that result in more than a remote likelihood that a material misstatement of
the financial statements will not be prevented or detected.
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PART II. OTHER INFORMATION
  
 ITEM 1. LEGAL PROCEEDINGS
  
 
 ITEM 6. EXHIBITS.
    Page 19




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SIGNATURES
  UROPLASTY, INC.Date: August 10, 2005
    
    by:
    
    /s/ SAM B. HUMPHRIESSam B. HumphriesPresident and Chief Executive OfficerDate: August 10, 2005
    
    by:
    
    /s/ DANIEL G. HOLMANDaniel G. HolmanChief Financial Officer
 Page 20