UROPLASTY,
    INC. AND SUBSIDIARIES
  Index to
    Consolidated Financial Statements
 March 31,
    2010 and 2009
  TABLE OF
    CONTENTS
  Page(s)Report of Independent Registered Accounting
    Firm


F-2Financial Statements:Consolidated Balance Sheets


F-3Consolidated Statements of Operations


F-5Consolidated Statements of Shareholders
    Equity and Comprehensive
    Loss


F-6Consolidated Statements of Cash Flows


F-7Notes to Consolidated Financial Statements


F-8   F-1




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##### 



REPORT OF
    INDEPENDENT REGISTERED ACCOUNTING FIRM           
    F-2




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##### 



UROPLASTY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 March 31,
  2010


2009AssetsCurrent assets:Cash and cash equivalents


$2,311,269



$3,276,299Short-term investments


3,500,000



4,500,000Accounts receivable, net


1,287,440



1,214,049Inventories


341,497



495,751Income tax receivable


23,820



-Other


237,321



279,898Total current assets


7,701,347



9,765,997Property, plant, and equipment, net


1,230,771



1,401,229Intangible assets, net


2,533,095



3,378,648Prepaid pension asset


-



66,130Deferred tax assets


108,530



68,793Total assets


$11,573,743



$14,680,797    F-3




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##### 



UROPLASTY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 March 31,
  2010


2009Liabilities and Shareholders EquityCurrent liabilities:Accounts payable


$485,594



$604,593Current portion  deferred rent


35,000



35,000Income tax payable


10,000



56,785Accrued liabilities:Compensation


903,057



983,052Other


212,028



248,568Total current liabilities


1,645,679



1,927,998Deferred rent  less current portion


112,500



147,576Accrued pension liability


601,037



296,646Total liabilities


2,359,216



2,372,220Commitments and contingencies


-



-Shareholders equity:Common stock $.01 par value; 40,000,000 shares
    authorized, 14,946,540 shares issued and outstanding at
    March 31, 2010 and 2009


149,465



149,465Additional paid-in capital


36,178,126



35,763,619Accumulated deficit


(26,617,161
)


(23,413,350
)Accumulated other comprehensive loss


(495,903
)


(191,157
)Total shareholders equity


9,214,527



12,308,577Total liabilities and shareholders equity


$11,573,743



$14,680,797    F-4




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##### 



UROPLASTY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
   2010


2009Net sales


$11,863,202



$14,742,182Cost of goods sold


2,058,855



2,283,975Gross profit


9,804,347



12,458,207Operating expensesGeneral and administrative


2,798,900



3,428,959Research and development


1,785,405



2,551,075Selling and marketing


7,576,776



9,255,025Amortization


845,553



845,52413,006,634



16,080,583Operating loss


(3,202,287
)


(3,622,376
)Other income (expense)Interest income


92,736



196,714Interest expense


(14,476
)


(17,160
)Foreign currency exchange loss


(37,552
)


(13,843
)Other, net


(853
)


(6,747
)39,855



158,964Loss before income taxes


(3,162,432
)


(3,463,412
)Income tax expense


41,379



114,708Net loss


$(3,203,811
)


$(3,578,120
)Basic and diluted loss per common share


$(0.21
)


$(0.24
)Weighted average common shares outstanding:Basic and diluted


14,944,354



14,922,502    F-5




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##### 



UROPLASTY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE
    LOSS
 Years ended
    March 31, 2010 and 2009
  AccumulatedAdditional



Other

TotalCommon Stock

Paid-in

Accumulated

Comprehensive

ShareholdersShares

Amount

Capital

Deficit

Income (Loss)

EquityBalance at March 31, 2008


14,916,540


$
149,165


$
35,014,313


$
(19,835,230
)

$
274,473


$
15,602,721Share-based consulting and compensation expense


30,000



300



749,306



-



-



749,606Comprehensive loss


-



-



-



(3,578,120
)


(465,630
)


(4,043,750
)Balance at March 31, 2009


14,946,540



149,465



35,763,619



(23,413,350
)


(191,157
)


12,308,577Share-based compensation expense


-



-



414,507



-



-



414,507Comprehensive loss


-



-



-



(3,203,811
)


(304,746
)


(3,508,557
)Balance at March 31, 2010


14,946,540


$
149,465


$
36,178,126


$
(26,617,161
)

$
(495,903
)

$
9,214,527    F-6




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##### 



UROPLASTY,
    INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYears ended March 31,
  2010


2009Cash flows from operating activities:Net loss


$(3,203,811
)


$(3,578,120
)Adjustments to reconcile net loss to net cash used in operations:Depreciation and amortization


1,138,077



1,135,800Loss on disposal of equipment


853



6,757Share-based consulting expense


-



60,093Share-based compensation expense


414,507



689,513Deferred income taxes


(39,741
)


17,594Deferred rent


(35,000
)


(35,000
)Changes in operating assets and liabilities:Accounts receivable


(56,052
)


918,959Inventories


172,723



(19,512
)Other current assets and income tax receivable


(42,827
)


50,086Accounts payable


(127,355
)


(25,781
)Accrued liabilities


(152,776
)


(655,186
)Accrued pension liability, net


39,159



13,111Net cash used in operating activities


(1,892,243
)


(1,421,686
)Cash flows from investing activities:Proceeds from sale of short-term investments


5,500,000



14,157,410Purchase of short-term investments


(4,500,000
)


(12,391,373
)Purchases of property, plant and equipment


(111,154
)


(199,704
)Proceeds from sales of equipment


2,800



-Payments for intangible assets


-



(23,282
)Net cash provided by investing activities


891,646



1,543,051Cash flows from financing activities:Repayment of debt obligations


-



(455,913
)Net cash used in financing activities


-



(455,913
)Effect of exchange rates on cash and cash equivalents


35,567



(269,197
)Net decrease in cash and cash equivalents


(965,030
)


(603,745
)Cash and cash equivalents at beginning of year


3,276,299



3,880,044Cash and cash equivalents at end of year


$2,311,269



$3,276,299Supplemental disclosure of cash flow information:Cash paid during the year for interest


$7,697



$13,612Cash paid during the year for income tax


135,032



18,335    F-7




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##### 



UROPLASTY,
    INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 March 31,
    2010 and 2009
   1.
    Summary of
    Significant Accounting Policies  Nature of Business. ® ®
        Principles of Consolidation.
  Revenue Recognition.
  Use of Estimates.
 F-8




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##### 



Disclosures About Fair Value of Financial
    Instruments.
  
    Level 1: Observable inputs such as quoted prices
    (unadjusted) in active markets for identical assets or
    liabilities.
    Level 2: Inputs other than quoted prices that are
    observable for the asset or liability, either directly or
    indirectly. These include quoted prices for similar assets or
    liabilities in active markets and quoted prices for identical or
    similar assets or liabilities in markets that are not active.
    Level 3: Unobservable inputs that reflect the reporting
    entitys own assumptions.    
    Cash equivalents and short-term investments: The
    carrying amount approximates fair value because of the short
    maturity of these instruments.
    Pension assets: We have level 2 and
    level 3 pension assets. See Note 5 to our consolidated
    financial statements.
    Notes payable: We estimated the fair value of notes
    payable based on the current rates offered to us for similar
    instruments with the same remaining maturities and similar
    collateral requirements. There was no balance outstanding on
    notes payable at March 31, 2010 and March 31, 2009.  Cash and Cash Equivalents.
  Short-term Investments. held-to-maturity
  Accounts Receivable.
 F-9




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##### 



Inventories. (first-in,
  2010


2009Raw materials

$
158,942


$
227,054Work-in-process


28,935



23,326Finished goods


153,620



245,371$
341,497


$
495,751   Property, Plant, and Equipment.
  2010


2009Land

$
164,856


$
161,829Building


751,802



737,999Leasehold improvements


345,495



324,555Internal use software


307,637



287,960Equipment


1,198,528



1,206,3712,768,318



2,718,714Less accumulated depreciation


(1,537,547)



(1,317,485)$
1,230,771


$
1,401,229       ASC 350-40, Intangibles  Goodwill and Other,
    Internal-Use Software, ASC 350-50, Intangibles  Goodwill and Other, Web Site
    Development Costs.
  Intangible Assets.
  GrossCarrying


AccumulatedAmount


Amortization


Net valueMarch 31, 2010

$
5,472,512


$
2,939,417


$
2,533,095March 31, 2009


5,472,512



2,093,864



3,378,648  F-10




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##### 



2011

$
843,0002012


842,0002013


842,0002014


4,0002015 and beyond


2,000$
2,533,000   Impairment of Long-Lived Assets.
  Product Warranty.
  Deferred Rent. 8-year
  Foreign Currency Translation.
    Income Taxes.
   F-11




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##### 



Basic and Diluted Net Loss per Common Share.
  Number of


Range ofOptions/Warrants


exercise pricesYears ended:March 31, 2010


4,104,428


$
0.71  5.19March 31, 2009


4,215,428


$
1.82  5.30   Advertising Expenses.
  New
    Accounting Pronouncements.
  No. 2010-06, 2010-06). 820-10
 F-12




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##### 



No. 2009-05, 2009-05).
  The FASB Accounting Codification and the Hierarchy of
    Generally Accepted Accounting Principles. The Hierarchy of Generally Accepted Accounting
    Principles, tm
  Subsequent
    Events.
  2.
    Notes Payable        3.
    Shareholders
    Equity  Stock Options.
 F-13




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##### 



2010


2009Expected life, in years


4.82



4.06Risk-free interest rate


2.74%



3.13%Expected volatility


94.21%



82.70%Expected dividend yield


0%



0%       Weighted AverageWeighted Average


Weighted Average


Aggregate Intrinsic


RemainingNumber of Shares


Exercise Price


Fair Value


Value


Life in YearsBalance at March 31, 2008


2,038,100










$
1,006,000Options granted


237,000






$
1.88Options surrendered


(140,600
)Balance at March 31, 2009


2,134,500


$
3.93







-Options granted


382,500



0.84



0.60Options surrendered


(479,500
)


4.84Balance at March 31, 2010


2,037,500


$
3.14






$
506,000



4.00Options exercisable at March 31, 2010


1,764,331


$
3.40






$
258,000



4.01    F-14




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##### 



Weightedaveragegrant date


AggregateNumber of Shares


fair value


intrinsic valueBalance at March 31, 2008


-Shares granted


30,000


$
3.11Shares vested


16,000






$
49,120Balance at March 31, 2009


14,000


$
3.15Shares granted


-



-Shares vested


14,000



3.15



44,100Balance at March 31, 2010


-


$
-


$
-     Warrants.
    Other Comprehensive Loss.
  Year Ended March 31,2010


2009Net loss

$
(3,203,811
)

$
(3,578,120
)Items of other comprehensive income (loss):Translation adjustment


24,643



(554,498
)Pension related


(329,389
)


88,868Comprehensive loss

$
(3,508,557
)

$
(4,043,750
)     4.
    Commitments
    and Contingencies  Royalties.
 F-15




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##### 



Purchase Requirements.
  Operating Lease Commitments.
  2011

$
182,0002012


177,0002013


160,0002014


155,000Thereafter


13,000$
687,000     Employment Agreements.
  Product Liability.
  5.
    Savings and
    Retirement Plans       F-16




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##### 



2011

$
2932012


6142013


9632014


1,3432015


5,3632016 to 2020


319,655$
328,231       2010


2009Changes in benefit obligations:Projected benefit obligation, beginning of year

$
1,294,389


$
1,660,310Service cost


63,049



63,104Interest cost


92,823



91,589Other


(4,831)



(4,216)Actuarial result


897,250



(187,810)Foreign currency translation


(12,755)



(328,588)Projected benefit obligation, end of year

$
2,329,925


$
1,294,389Changes in plan assets:Plan assets, beginning of year

$
1,063,873


$
1,333,381Contributions to plan


168,371



153,385Benefits paid


-



(4,216)Management cost


(20,825)



(17,010)Actual return on assets


512,200



(114,605)Foreign currency translation


5,269



(287,062)Plan assets, end of year

$
1,728,888


$
1,063,873     2010


2009Unrecognized net prior service benefit

$
(423,520
)

$
(447,003
)Unrecognized net losses


852,160



514,384Additional Other Comprehensive Income (gross of deferred taxes)

$
428,640


$
67,381  F-17




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##### 



2010


2009Projected benefit obligation

$
1,752,774


$
959,452Accumulated benefit obligation


1,297,262



717,254Fair value of plan assets


1,252,104



662,806       2010


2009Projected benefit obligation

$
577,151


$
334,937Accumulated benefit obligation


577,151



334,937Fair value of plan assets


476,784



401,067       2010


2009Gross service cost, net of employee contribution

$
48,103


$
48,522Interest cost


92,823



91,589Management cost


15,994



17,010Expected return on assets


5,320



16,875Amortization


(445
)


3,919Net periodic retirement cost

$
161,795


$
177,915     2010


2009Discount rate


4.70-5.50
%


6.60-6.70
%Expected return on assets


4.70-5.00
%


5.00-6.60
%Expected rate of increase in future compensation:General


3
%


3
%Individual


0-3
%


0-3
%     Plan
    Assets
   F-18




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##### 



2010


2009Target


Actual


Target


ActualAllocation


Allocation


Allocation


AllocationOther Contract (Netherlands Plan)


100
%


100
%


100
%


100
%Deposit Administration Contract (U.K. Plan)


100
%


100
%


100
%


100
%       QuotedPrices inActiveMarkets for


Significant


SignificantIdentical


Observable


UnobservableAssets


Inputs


InputsAsset Class

Total


(Level 1)


(Level 2)


(Level 3)Vested Benefit Obligation (Netherlands Plan)

$
1,252,104


$
-


$
-


$
1,252,104Deposit Administration Contract (U.K. Plan)


476,784



-



476,784



-   6.
    Income Taxes    2010


2009Income tax provision:Current:U.S. and State

$
24,229


$
4,795Foreign


24,470



73,408Deferred:U.S. and State


-



-Foreign


(7,320
)


36,505Total income tax expense

$
41,379


$
114,708  F-19




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##### 



2010


2009Statutory federal income tax benefit

$
(1,139,685
)

$
(1,177,567
)State tax benefit


(87,661
)


(81,243
)Foreign tax


(23,058
)


(55,997
)Valuation allowance increase


1,208,895



1,252,824Netherlands tax settlement


-



67,100Other


82,888



109,591Total income tax expense

$
41,379


$
114,708     2010


2009Deferred tax assets (liabilities):Depreciation

$
(210,748
)

$
(88,405
)Amortization


(923,313
)


(1,151,081
)Pension liability


94,425



42,622Stock based compensation


965,980



825,575Other reserves and accruals


113,857



86,755Deferred profit on intercompany sales


154,926



154,926Deferred rent


41,006



-Net operating loss carryforwards


9,227,408



8,404,2479,463,541



8,274,639Less valuation allowance


(9,355,011
)


(8,205,846
)$
108,530


$
68,793         non-U.S. subsidiaries.
 F-20




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##### 



7.
    Business
    Segment Information  Segment Reporting,
    All OtherUnited


United


ForeignStates


Kingdom


Countries


ConsolidatedFiscal 2010

$
6,055,978


$
1,577,882


$
4,229,342


$
11,863,202Fiscal 2009


7,980,140



1,906,185



4,855,857



14,742,182     United


United


TheStates


Kingdom


Netherlands


ConsolidatedMarch 31, 2010

$
541,005


$
3,133


$
686,633


$
1,230,771March 31, 2009


704,998



71,110



691,251



1,467,359     8.
    Subsequent
    Events  Form 10-K
 F-21