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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-KSB Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended March 31, 2004 Commission File No. 000-20989 UROPLASTY, INC.  Minnesota, U.S.A.
    
    41-1719250(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    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 [  ]
 Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Companys knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] Issuers revenues for its most recent fiscal year: $5,714,896 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 1, 2004 was $13,628,258. The number of shares outstanding of the issuers only class of common stock on July 1, 2004 was 4,602,033. Documents Incorporated By Reference: Portions of the Companys Proxy Statement for its 2004 Annual Meeting of Shareholders (the
Proxy Statement), are incorporated by reference in Part III. Transitional Small Business Disclosure Format: YES [  ]
    
    NO [X]
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [  ]
    
    NO [X]




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TABLE OF CONTENTS  PART IITEM 1. DESCRIPTION OF BUSINESSITEM 2. DESCRIPTION OF PROPERTYITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONITEM 7. FINANCIAL STATEMENTSITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREPART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACTITEM 10. EXECUTIVE COMPENSATIONITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 13. EXHIBITS AND REPORTS ON FORM 8-KITEM 14. CONTROLS AND PROCEDURES.SIGNATURESFinancial StatementsCode of EthicsLetter re Change in Certifying AccountantSubsidiaries of the CompanyConsent of Independent Public Accounting FirmCertifications by the CEO and Controller - 302Certifications by the CEO and Controller - 906EXHIBIT 99.1    Table of Contents  
 PART I Uroplasty, Inc. (Uroplasty, or the Company) 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 Company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 Companys Securities and
Exchange Commission filings. Forward-looking statements may be contained in the Managements Discussion and
Analysis or Plan of Operation and other sections of this filing. 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 Factors Affecting the Business section of this filing. 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. 
 ITEM 1. DESCRIPTION OF BUSINESS Overview Uroplasty is a medical device company that develops, manufactures, and markets
a family of injectable implant products used for soft-tissue augmentation for
specific indications in urology, urogynecology, colon and rectal,
otolaryngology and plastic surgery markets. The Companys products offer
physicians and their patients a minimally invasive treatment option for urinary
incontinence, vesicoureteral reflux, fecal incontinence, vocal cord
rehabilitation and dermal augmentation. Uroplastys products are CE marked in
Europe (similar to FDA approval in the United States), allowing the products to
be sold throughout the European Union, and are also marketed in other major
markets throughout the world, including Canada, Australia, and many Latin
American and Pacific Rim countries. The Companys products are not sold in the
United States because submissions have not yet been made to the Food and Drug
Administration (FDA) for marketing in the United States. However, the
Company is currently conducting a multi-center clinical trial with its urethral
bulking agent, Macroplastique®Implants pursuant to a U.S. FDA Investigational
Device Exemption (IDE), as a minimally invasive, office-based procedure for
treating female stress urinary incontinence. This study is required as part of
a Premarket Approval Submission to the FDA for marketing within the United
States. Restatement Information During the fiscal 2004 year end close process, the Company determined that its
pension plan, covering 18 employees in The Netherlands, had historically been
reported as a defined contribution plan, but should have been reported as a
defined benefit plan. The Company pays premiums to an insurance company to
fund annuities for these employees, however, the Company is responsible for
funding additional annuities based on continued service and future salary
increases. Furthermore, the Company discovered an error in how the effect of
exchange rates on cash and cash equivalents was recorded in our Statement of
Cash Flows. The Company has restated its March 31, 2003 consolidated balance
sheet, the fiscal 2003 consolidated results of operations, the fiscal 2003
consolidated statement of cash flows and related footnote Page 2




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disclosures for the impact of accounting for the pension plan as a defined
benefit plan and for the correction of the effect of exchange rates on cash and
cash equivalents. Additional information regarding the effects of the restatements is included in
Note 2 to the Companys audited consolidated financial statements included
under Exhibit 13 of this Form 10-KSB. All comparisons and references in this
Form 10-KSB to the results for fiscal year 2003 are to the restated results. MACROPLASTIQUE® Implants The Companys key product is Macroplastique, an injectable soft tissue-bulking
agent used to treat stress urinary incontinence (SUI), the most common form
of urinary incontinence. It is designed to restore the patients urinary
continence immediately following treatment. SUI refers to the involuntary loss
of urine as a result of activities that increase intra-abdominal pressure, such
as coughing, laughing, or exercising. Macroplastique is also used to treat
vesicoureteral reflux (VUR), a condition, occurring mostly in children, in
which urine flows backward from the bladder into the kidney. Additionally, men
who experience incontinence as a result of prostate surgery are also candidates
for Macroplastique treatment. Macroplastique is a proprietary composition of heat vulcanized, highly
textured, solid, soft, irregularly shaped polydimethylsiloxane (solid silicone)
implants suspended in a biocompatible carrier gel. The Company markets
Macroplastique through Uroplasty BV, The Netherlands, on the basis that its
out-patient minimally invasive treatment can lead to lower surgical risk with
shorter recovery time and that it is less expensive when compared to invasive
alternatives. With its successful safety and clinical use in patients outside
the United States since 1991, the Company believes Macroplastique has
advantages of being a soft-textured, biocompatible material that is
nonabsorbing, nondegrading, nonmigrating, and cost effective. Additionally,
the product requires no skin testing prior to use and it does not require
refrigeration for storage. Although Macroplastique is traditionally implanted with the aid of an
endoscope, the Company also markets a patented, non-endoscopic delivery kit
called the Macroplastique Implantation System (MIS) for treatment of female
stress urinary incontinence outside the United States. The advantages of this
product are its ease of use and consistent product placement, therefore making
the MIS delivery an attractive alternative to be used as a minimally invasive,
office-based treatment for female stress urinary incontinence. Urinary Incontinence and Vesicoureteral Reflux Markets Urinary incontinence is an involuntary loss of urine having emotional, social,
and hygienic consequences. In varying degrees, urinary incontinence is a
problem suffered by millions of people worldwide. The Agency for Health Care
Policy and Research (AHCPR), a division of the Public Health Service, U.S.
Department of Health and Human Services, estimates that urinary incontinence
affects about 13 million people in the United States of which, 85% or 11
million are women. The same agency estimates the total cost of treating
incontinence (management and curative approaches) of all types in the United
States as $15 billion. The National Association for Incontinence (NAFC)
estimates up to 15% of female stress urinary incontinence is a result of
intrinsic sphincter deficiency (ISD). Urethral Bulking Agents (UBA) are
currently recommended by AHCPR as first-line treatment for woman with ISD who
do not have coexisting urethral hypermobility. Male patients can benefit from
a urethral bulking agent procedure such as Macroplastique, and according to the
AHCPR, UBA is recommended as first-line surgical treatment for men with ISD.
According to the American College of Surgeons, there are approximately 400,000
prostate surgeries performed each year in the United States, and up to 20% of
these men develop incontinence following the procedure. Urinary incontinence
can result in a substantial decrease in a persons quality of life, and is
often the main reason a family moves an elderly person to nursing home care.
The Company expects the incidence of urinary incontinence will rise as the
percentage of elderly people continues to increase. VUR is primarily a pediatric concern, with a prevalence estimated to be up to
2% of the U.S. pediatric population according to research published in
Pediatric Radiology. Approximately 15,000 surgical procedures are performed
each year to address this VUR issue. Patients in this population with VUR
grades 1 through 4 are candidates for Macroplastique treatments. Globally, the
use of Macroplastique to correct VUR can save patient costs related to
continued use of antibiotics for treating these patients for chronic urinary
tract infections. Left untreated, VUR can lead to more serious related health
complications. Types of Urinary Incontinence Page 3




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The mechanisms of urinary incontinence are complicated and involve the
interaction between several anatomical structures. In females, urinary
continence is controlled primarily by the sphincter muscle. This muscle
surrounds the urethra and provides constrictive pressure to prevent urine from
flowing out of the bladder. Urination occurs when the sphincter relaxes as the
bladder contracts, allowing urine to flow through the urethra. The urinary
sphincter is also responsible for maintaining continence during periods of
physical stress. Incontinence may result when any part of the urinary tract
fails to function as intended. A number of conditions and disorders can cause
incontinence, including childbirth, pelvic surgery, injuries to the pelvic
region or the spinal cord, neurological diseases (e.g. multiple sclerosis,
poliomyelitis), birth defects (e.g., spina bifida), and degenerative changes
associated with aging. Stress Urinary Incontinence: SUI refers to the involuntary loss of urine due
to an increase in intra-abdominal pressure from coughing, sneezing, laughing,
straining or lifting. In women, the most common cause of SUI is hypermobility,
a lack of anatomic stability primarily caused by weak surrounding tissue,
resulting in the abnormal movement of the bladder neck and urethra. This
anatomical problem is often the result of childbirth. SUI can also be caused
by intrinsic sphincter deficiency (ISD), or the inability of the sphincter
valve or muscle to function properly. ISD can be due to congenital sphincter
weakness, deterioration of the muscular wall of the urethra after trauma,
spinal cord lesion or radiation therapy. Macroplastique is used to treat
incontinence in women suffering from SUI caused primarily by intrinsic
sphincter deficiency. Urge Incontinence: Urge incontinence refers to the involuntary loss of urine
associated with an abrupt, strong desire to urinate. Urge incontinence often
occurs with neurologic problems causing the bladder to contract and empty with
little or no warning. Overflow Incontinence: Overflow incontinence is associated with an
over-distention of the bladder. This can be the result of an underactive
bladder or an obstruction in the bladder or urethra. Mixed Incontinence: Mixed incontinence is the combination of both urge and
stress incontinence (and, in some cases, overflow). Since prostate enlargement
often obstructs the urethra, older men often have urge incontinence coupled
with overflow incontinence. Management and Treatment of Urinary Incontinence There are two general approaches to dealing with urinary incontinence. One
approach is to manage symptoms with items such as pads or diapers. The other
approach is to undergo curative treatments in an attempt to restore continence,
such as injection of urethral bulking agents or by invasive surgeries. The
Company believes the treatment of urinary incontinence should start first with
the least invasive therapy and then move to more invasive therapies only when
needed. Management of Urinary Incontinence Absorbent Products: Absorbent products are the most common form of management
for urinary incontinence because men and women can use them without consulting
a physician. The cost of adult diapers and pads can be substantial and create
a continuous financial burden for patients. Additionally, this management
technique may require frequent changing of diapers and pads to control patient
embarrassment due to odor and/or soiling. Behavior Modification: Techniques used in behavior modification include
bladder training, scheduled voiding, and pelvic floor muscle exercises known as
Kegels. Some of the tools used in conjunction with these training regimes are
vaginal cones or weights, biofeedback devices, and electrical stimulation.
These techniques are not effective in all patients, however, the Company
believes biofeedback or one of the other behavior modification techniques
should be used as a first line of treatment. Penile Compression Devices: Penile clamps are reserved for temporary use with
male incontinence. Complications such as penile and urethral erosion, penile
edema, pain, and obstruction can be associated with extended and/or improper
use. Pelvic Floor Support Devices: A pessary is a doughnut-shaped device made of
flexible materials designed to temporarily reduce pelvic prolapse and alleviate
symptoms of pelvic relaxation in females with and without incontinence. When
these devices are misused or neglected, complications such as ulceration of the
vagina and rectovaginal and vesicovaginal fistula can occur. Persons using
pessaries require frequent, regular monitoring. Occlusion Devices: Urethral occlusion devices, or plugs, of various designs
are temporarily applied to occlude the urethra and/or bladder. They are
disposable products and either fit over the urethral opening or in the urethra
and/or bladder to obstruct the involuntary leakage of urine. Problems with
these devices include urinary tract infections, treatment compliance, and
progressive urethral dilation that may require larger plugs over time. Page 4




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Urinary Catheters and Collection Devices: There are four types of urinary
catheters: 1) intermittent (inserted through the urethra into the bladder as
needed for bladder drainage; may be appropriate for the management of acute or
chronic urinary retention); 2) indwelling (a closed sterile system inserted
through the urethra to allow bladder drainage; may be needed for short-term
treatment and for terminally ill patients); 3) suprapubic (requires
percutaneous or surgical introduction of a catheter into the bladder through
the abdominal wall, for short-term use following gynecologic, urologic and
other types of surgery or as an alternative to long-term urethral catheter use
in men); and 4) external collection (devices made from latex rubber, polyvinyl
or silicone resembling a condom, are secured on the shaft of the penis by a
double-sided adhesive, latex or foam strap and are connected to urine
collecting bags by a tube; may be useful for short-term maintenance). The type
and severity of incontinence and the patients physical and mental condition
determine the best catheter option for the patient. Drug Therapy: Drug treatment is used to manage multiple types of urinary
incontinence. These drugs generally fall into one of two categories: those
managing urge incontinence by affecting the contraction of the muscle tissue of
the bladder, and those managing stress incontinence by either affecting
contraction of the muscle tissue of the bladder neck or improving the quality
of the mucosal lining of the bladder neck and urethra. Drugs seldom cure
stress urinary incontinence and the potential side effects include urinary
retention, nausea, dizziness, blurred vision, and the possibility of unwanted
interactions with other drugs. Curative Treatments for Urinary Incontinence Surgery: In women, SUI can be surgically corrected through various suspension
and sling procedures. In these procedures, the physician elevates and
stabilizes the urethra and bladder neck. Current surgical procedures require
vaginal or abdominal incisions and are typically performed under general
anesthesia. Surgery is expensive, traumatic, and can involve a hospital stay
with several weeks required for full recovery. In men, the main surgical
option is an implanted artificial urinary sphincter. It carries with it the
inherent risks of device malfunction, tissue erosion and atrophy, and
infection. In practice, the artificial urinary sphincter is rarely applicable
to the management of uncomplicated stress incontinence. Injectable Bulking Agents: Urethral Bulking Agents (UAB)s are inserted with a
needle into the area around the urethra, thereby augmenting or bulking the
sphincter. Hence, these materials are often called bulking agents, or
injectables. Urethral bulking agents may be either synthetic or biologically
derived and are an attractive alternative to surgery because they are
considerably less invasive than the surgical procedures described above.
Active women benefit from the use of urethral bulking agents since they will
often return to normal activities in a matter of days instead of weeks for
fully invasive surgical procedures. Bulking agents also represent a desirable
treatment option for the elderly or infirm who may not otherwise be able to
withstand the trauma and morbidity resulting from a fully invasive surgical
procedure. Additionally, the use of a UBA does not preclude the use of more
invasive treatments if the need arises. The two major types of urethral bulking agents are biologically derived and
synthetic agents. Biologically derived bulking agents include injections of a
patients own fat cells, polysaccharides (not commercially available in the
U.S.) or bovine collagen. Fat injections involve complex, invasive harvesting
of the patients own fat cells and reinjecting them into the bladder neck.
Some of these biological agents require pre-treatment allergy skin tests, and
since the body resorbs these agents over time, subsequent reinjections may be
necessary. Macroplastique (polydimethylsiloxane) is a synthetic silicone
elastomer bulking agent. Although physicians and patients may question the
silicone issue, we are confident we provide support and documentation to show
the difference between Uroplastys solid silicone elastomer product and the
silicone gel products that were associated with the breast implants. Other
synthetic bulking agents are composed of polytetrafluoroethylene (PTFE; not
commercially available in the U.S.) and pyrolytic carbon-coated beads. Marketing, Distribution, and Sales The Company markets and sells Macroplastique and related ancillary products
only in countries outside the United States. The Company has a direct sales
force in the United Kingdom and international sales managers in The Netherlands
to manage and train a network of distributors selling the Companys products
outside the United States in approximately 40 countries including Canada,
Australia, and countries within Europe, Latin America and the Pacific Rim.
Each of the Companys distributors has a territory-specific distribution
agreement including requirements indicating they may not sell injectable
products that compete directly with Macroplastique. Collectively, the
Companys distributors accounted for approximately 66% and 62% of total net
sales in fiscal years 2004 and 2003, respectively. Other Products In addition to the urological applications, the Companys implantable tissue
bulking material is also marketed outside the United States for reconstructive
and cosmetic plastic surgery under the trade name Bioplastique Implants,
otolaryngology vocal cord rehabilitation applications under the trade name VOX
Implants, and fecal incontinence Page 5




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applications under the trade name PTQ Implants. In The Netherlands and United
Kingdom only, the Company distributes certain wound care products in accordance
with a Distributor Agreement. Under the terms of the Distributor Agreement,
the Company is not obligated to purchase any minimum level of wound care
products. Collectively, these other products accounted for 19% and 15%
respectively, of the Companys net sales in fiscal 2004 and fiscal 2003. Government Regulations The Companys medical device products are subject to regulation by various
governmental agencies depending upon where the products are manufactured and/or
sold. In markets such as the United States and Europe, these regulations are
substantial and can significantly affect a companys ability to obtain and/or
maintain approval for manufacturing and distribution of medical device
products. In order to market its products within the European Union, the Company has
obtained CE marking for its products (i.e., marketing approval). In addition,
the Company maintains registration to the rigorous ISO13485 quality standard
and is subject to periodic surveillance audits by its Notified Body to ensure
adherence to this standard and the requirements of the European Medical Device
Directives (MDD) and the Canadian Medical Device Requirements. Changes in
existing requirements or adoption of new requirements or policies could
adversely affect the ability of the Company to comply with regulatory
requirements. Failure to comply with regulatory requirements could have a
material adverse effect on the Companys business, financial condition, and
results of operations. There can be no assurance the Company will not be
required to incur significant costs to comply with laws and regulations in the
future, or that laws or regulations will not have a material adverse effect
upon the Companys business, financial condition, or results of operations. The Company maintains facilities in the United States, United Kingdom, and The
Netherlands, each of which has numerous federal, state, and local laws relating
to such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. To the best of our knowledge, the Company
complies with all applicable local, state and national laws. There can be no
assurance the Company will not be required to incur significant costs to comply
with such laws and regulations now or in the future or that such laws or
regulations will not have a material adverse effect upon the Companys ability
to do business, financial condition, or results of operations. The Company is structured such that The Netherlands subsidiary conducts
business as a manufacturer and international sales office and is responsible
for the worldwide distribution of its products outside of the United States
through our network of independent distributors. Our Clinical Research
Department dealing with clinical research outside the US is based in our
Geleen, The Netherlands facility. The United Kingdom subsidiary is responsible
for direct sales and distribution of the Companys products to hospitals and
physicians within the United Kingdom and Ireland. Medical devices that can be shown to increase or improve cost and clinical
effectiveness are likely to perform more favorably in both a changing
reimbursement and regulatory climate. The need to provide data from Health
Technology Assessments (HTA) and Evidence Based Medicine (EBM) and their
expanding use in domestic healthcare policy is a trend which medical device
manufacturers must anticipate and plan in the early stage of medical device
development. Uroplasty Clinical Research Department (CRD) activities outside the United
States are streamlined to best support reimbursement decision making in line
with HTA and EBM impact on the medical device market as healthcare reform
develops in Europe (See Third-Party Reimbursement). Clinical studies and scientific community awareness programs continue to
demonstrate the safety and efficacy of Uroplasty products. The CRD based in the
Netherlands actively encourages and implements clinical trials by designing
single arm and randomized controlled trials for the purpose of HTA and EBM.
This data is important to support distributors in securing product
reimbursement in their territories. Publications of clinical data in peer reviewed journals add to the scientific
community awareness of our products in respect of patient indications,
technique and expected outcomes. The CRD also provides a range of activities
designed to support surgeons in their clinical evaluation study design,
abstract preparation, manuscript creation and/or review and submission. The CRD
works closely with our Sales and Marketing Department and Regulatory
Departments in the area of technical support, submissions, literature review,
and analysis and synopsis of presentations and publications on Uroplasty and
competing products. Recent clinical trials have been designed to provide outcome evidence on new
products recently developed by Uroplasty. These include randomized controlled
clinical trials on PTQ Implants (formally PTP Implants) and clinical studies
on the Macroplastique® Sling Support Kit (MIS-SK). Evidence-based clinical
research broadens the surgeons acceptance by providing detailed information
related to product safety and efficacy when applied to patient selection and
comparative surgical and non-surgical treatment regimens. Only by recognition
of the complexity of our product, Page 6




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indications, analysis of the contributing variables, presentation and
publication of the clinical outcomes will Uroplasty provide the physicians,
patients and reimbursement systems with the evidence they require to make
informed decisions. As a result of our corporate structure, the U.S. regulation regarding medical
exports that are not FDA approved does not materially affect our business. In
the United States, the Company must comply with the Federal Food, Drug, and
Cosmetic Act, as amended, which is enforced by the FDA. The FDA has determined
urethral bulking agents such as Macroplastique are Class III devices subject to
a Pre-Market Approval (PMA) application prior to marketing in the United
States. A PMA is a rigorous submission for the U.S. FDA requiring the
manufacturer to substantiate claims of safety and effectiveness with valid
scientific evidence. The PMA process is lengthy and expensive with no
guarantee of final approval at its completion. In some instances, the FDA may
decide additional testing or clinical studies are necessary to support the PMA
submission. Such a decision considerably lengthens the time and expense
required for obtaining U.S. marketing approval. If the FDA approves the PMA
submission, it may still place certain conditions on the manufacturer such as
the initiation of a post-marketing study or restrictions to the products
intended use. After PMA approval, the Company must comply with FDA regulations to maintain
its U.S. marketing approval. The Companys manufacturing facilities will be
subject to routine inspections by the FDA to ensure compliance with U.S.
Quality System Requirements (QSR). Even though the Company is in compliance
with ISO13485, the European Medical Device Directives and the Canadian Medical
Device Requirements, there can be no assurance the FDA would find the Companys
quality system to be in compliance with all relevant aspects of the U.S.
requirements. The Company is also subject to a variety of state and local laws
and regulations where its product will be manufactured and/or marketed. Any
applicable state or local regulations may hinder the Companys ability to
market its products in those states or localities. Third-Party Reimbursement Reimbursement systems vary significantly by country. Third-party payors consist
of government health programs, private health insurance plans, managed care
organizations and other similar programs. Outside of the United States,
government managed health care systems control reimbursement for devices and
procedures such as Macroplastique. Reimbursement for Macroplastique has been
successful in multiple international markets where hospitals and physicians
have been able to get budgets approved by fund-holder trusts or global hospital
budgets. Physicians or hospitals that apply, but do not receive satisfactory
reimbursement from either third-party payors or the government, may choose not
to use Macroplastique, and the sales of our products could be affected. Upon
FDA approval to market Macroplastique in the United States, Uroplasty will need
to apply for and gain acceptance from Medicare and other third-party payors.
There is no uniform policy for reimbursement throughout the United States, and
no guarantee Macroplastique will be reimbursed at the levels expected by the
Company, if at all. Product Liability The medical device industry is subject to substantial litigation. The Company
is a manufacturer of a long-term implantable device and consequently faces an
inherent business risk of exposure to product liability claims resulting from
alleged adverse effects to the patient. The Company currently carries $2
million of worldwide product liability insurance on a claims made form, plus
another policy specific to the United Kingdom only. There can be no assurance,
however, the Companys existing insurance coverage limits are adequate to
protect the Company from any liabilities it might incur in connection with the
clinical trials of Macroplastique or the initial commercialization of
Macroplastique in the United States. There can be no assurance that liability
claims will not exceed coverage limits. Such insurance is expensive and in the
future may not be available on acceptable terms, if at all. Furthermore, the
Company does not expect to be able to obtain insurance covering its costs and
losses as a result of any recall of its products due to alleged defects,
whether such a recall is instituted by the Company or required by a regulatory
agency. A product liability claim, recall, or other claim with respect to
uninsured liabilities or in excess of insured liabilities could have a material
adverse effect on the business, financial condition, and results of operations
of the Company. Manufacturing The Company manufactures its tissue bulking products at its own facilities.
Components are manufactured in the United States, and finished products are
manufactured in The Netherlands from medical grade materials obtained from
suppliers qualified by the Companys Quality Department. The Companys
facilities utilize dedicated heating, ventilation, and high efficiency
particulate air (HEPA) filtration systems for the manufacturing areas to
provide a controlled working environment. All manufacturing processes are
performed by trained production technicians according to written procedures
approved by the Companys Quality Department. All critical manufacturing
processes are performed in a cleanroom environment. An outside vendor
sterilizes the Companys products using validated methods and returns the
products to the Company for final inspection and testing. Page 7




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The Companys manufacturing facilities and systems are periodically audited by
an independent registrar to ensure compliance with ISO13485, the European
Medical Device Directives and the Canadian Medical Device Requirements. Prior
to marketing the product in the United States, the Company will also be
inspected by the U.S. FDA for U.S. Quality System Requirements (QSR) and will
be subject to additional state, local, and federal government regulations
applicable to the manufacture of the Companys products. See Description of
Business  Government Regulations. Competition Competition in the urinary incontinence products market is intense. The Company
faces competition from existing manufacturers of management and curative
treatments, competing manufacturers of commercially available bulking agents,
and from companies developing new or improved treatment methods. The Company
believes the principal competitive factors among treatment methods include
physician and patient acceptance of the method in managing or curing
incontinence, cost and availability of third-party reimbursement, marketing and
sales capability, and the existence of meaningful patent protection. The
Companys ability to compete in this market also will depend on the consistency
of its product quality as well as delivery and product pricing. Other factors
within and outside the Companys control include its product development and
innovation capabilities, clinical study results, ability to obtain required
regulatory approvals, ability to protect its proprietary technology,
manufacturing and marketing capabilities, and ability to attract and retain
skilled employees. Soft-tissue injectable bulking agents competing directly with Macroplastique
outside the U.S. include Contigen® manufactured by C.R. Bard, Inc., Zuidex® and
Deflux® manufactured by Q-Med AB, Durasphere® manufactured by Carbon Medical
Technologies, and Coaptite® manufactured by BioForm, Inc. In contrast to the
products currently approved for sale outside this country, Macroplastique,
marketed outside the United States since 1991, is a synthetic material that
will not degrade, become resorbed or migrate, and does not require the patient
to have a skin test prior to the procedure. The silicone-elastomer material
has been studied for over 50 years in medical use for such urological
applications as penile implants, stents and catheters. The Uroplasty patented
Macroplastique Implantation System (MIS) offers a unique, non-endoscopic,
minimally invasive out-patient procedure that can be performed in the
physicians office. The Company expects continued competition with Johnson &
Johnson, American Medical Systems, C.R. Bard Inc., Mentor, Boston Scientific
Corporation and others who manufacture urinary incontinence surgical products
such as sling devices. These companies have the advantage to bundle their
incontinence products or devices onto contracts that require a hospital to
purchase the incontinence device in order to maintain discounts on other
product lines. Many of the Companys competitors and potential competitors have significantly
greater financial, manufacturing, marketing and distribution resources, and
experience than the Company. In addition, many of the Companys competitors
offer broader product lines within the urology market, which may give such
competitors the ability to negotiate exclusive, long-term supply contracts and
to offer comprehensive pricing for their products. It is possible other large
health care and consumer products companies may enter this industry in the
future. Furthermore, smaller companies, academic institutions, governmental
agencies, and other public and private research organizations will continue to
conduct research, seek patent protection, and establish arrangements for
commercializing products. Such products may compete directly with any products
that may be offered by the Company in the future. Dependence on One or a Few Major Customers During fiscal 2004, there were two large customers accounting for approximately
13% and 11% of the Companys net sales. During fiscal 2003, approximately 12%
of the Companys net sales were to one customer. Patents, Trademarks, and Licenses The Companys success depends in part on its ability to obtain and maintain
patent protection for its products, preserve its trade secrets, and operate
without infringing the proprietary rights of third parties. The Company seeks
to protect its technology by filing patent applications for patentable
technologies it considers important to the development of its business based on
an analysis of the cost of obtaining a patent, the likely scope of protection,
and the relative benefits of patent protection compared to trade secret
protection, among other considerations. The Company also relies upon trade
secrets, know-how, and continuing technological innovation to develop and
maintain its competitive position. Multiple patents covering the Macroplastique materials, processes, and
applications have been issued to the Company by the Patent Offices in the
United States, United Kingdom, Japan, Germany, The Netherlands, and Canada.
Such patents will expire in the U.S. at various times between 2010 and 2013.
Applications are also currently pending in various other European countries.
There can be no assurance any of the Companys pending and/or future U.S.
and/or foreign patent applications will result in issued patents, or that any
issued patents will be of sufficient scope or strength to provide meaningful
protection of the Companys products. The coverage sought in a patent
application can be denied or significantly reduced before the patent is issued.
In addition, there can be no assurance any current and/or future U.S. and/or
foreign patents of the Company will not be challenged or circumvented by
competitors or others, or that such Page 8




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patents will be found to be valid or sufficiently broad to protect the
Companys technology or provide the Company with any competitive advantage.
Should attempts be made to challenge, circumvent, or invalidate the Companys
patents in the U.S. Patent and Trademark Office or courts of competent
jurisdiction, including administrative boards or tribunals, the Company may
have to participate in legal or quasi-legal proceedings therein to maintain,
defend, and/or enforce its rights in these patents. Any legal proceedings to
maintain, defend, and/or enforce the Companys patent rights could be lengthy
and costly, with no guarantee of success. The Company also relies heavily upon trade secrets and other proprietary
information. The Company seeks to maintain the confidentiality of such
information by requiring employees, consultants, and other parties to sign
confidentiality agreements, and by limiting access by parties outside the
Company to such information. There can be no assurance, however, these measures
will prevent the unauthorized disclosure or use of this information or that
others will not be able to independently develop such information.
Additionally, there can be no assurance any agreements regarding
confidentiality and non-disclosure will not be breached, or, in the event of
any breach, that adequate remedies would be available to the Company. In 1992, the Company agreed to settle alleged patent infringement claims by
Collagen Corporation (now Inamed Corporation). Under the settlement agreement,
the Company pays Collagen a royalty of 5% of net sales in the U.S. of
Macroplastique products with a minimum of $50,000 per year. The agreement is
through May 1, 2006. Claims by competitors, such as Inamed Corporation and other third parties, that
the Companys products allegedly infringe the patent or other intellectual
property rights of others, could have a material adverse effect on the Company.
There has been substantial litigation regarding patent and other intellectual
property rights in the medical device industry, and intellectual property
litigation may be used against the Company as a means of gaining a competitive
advantage. Intellectual property litigation is complex, time-consuming, and
expensive, and the outcome of such litigation is difficult to predict. Any
future litigation, regardless of outcome, could result in substantial expense
to the Company and significant diversion of the efforts of the Companys
technical and management personnel. An adverse outcome in any litigation could
subject the Company to significant liabilities to third parties, require
disputed rights to be licensed from others, if licenses to such rights could be
obtained, or require the Company to cease making, using, or selling certain
products. There can be no assurance that any licenses required under any
patents or proprietary rights would be made available on terms acceptable to
the Company, if at all. In addition to being costly, protracted litigation to
defend or prosecute intellectual property could result in the Company being
unable to commercialize Macroplastique on a timely basis or at all, and could
have a material adverse effect on the Companys business, financial condition,
and results of operations. Although the Company intends to apply for additional patents and vigorously
defend issued patents, management believes its success as a business will
depend primarily upon its development and marketing skills, and the quality and
economic value of its products rather than on its ability to obtain and defend
patents. The Company has a Royalty Agreement with three individuals, two of whom are
former Officers and Directors. Under such Agreement, the Company pays
royalties, in the aggregate, of three to five percent of net sales of
Macroplastique and Bioplastique, subject to a monthly minimum of $4,500. The
royalties payable under this Agreement will continue until the patent
referenced in the Agreement expires in 2010. In December 1995, the Company obtained a license from a British surgeon, which
became superseded by a subsequent Agreement entered into by the parties in
October 1998. Pursuant to this subsequent Agreement, the Company received an
absolute assignment of a patent relating to the Macroplastique Implantation
System in return for a royalty of 10 British pounds for each unit sold during
the life of the patent. The Company began commercialization of the product
outside the U.S. in March 2000. Research and Development The Company has a Research and Development program to develop new products in
the field of incontinence. The Company is also continually evaluating
potential improvements as well as new methods and devices for the implantation
of Macroplastique and on new applications for this material. R&D expenses also
include the costs of clinical studies including the U.S. clinical trial
currently underway pursuant to the IDE approved by the FDA. Expenditures for
R&D totaled $1,820,690 and $2,061,754 for the fiscal years ended March 31, 2004
and 2003, respectively. None of these costs were borne directly by customers. Compliance with Environmental Laws Compliance by the Company with applicable environmental requirements during its
fiscal years ended March 31, 2004 and 2003 has not had a material effect upon
its capital expenditures, earnings, or competitive position. Page 9




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Employees As of March 31, 2004, the Company had 39 employees, of which 29 were full-time
and 10 part-time. No employee has a collective bargaining agreement with the
Company. The Company believes it maintains good relations with its employees. Incorporation and Current Subsidiaries The Company was incorporated in January 1992 as a Minnesota Corporation and a
wholly owned subsidiary of its parent. In February 1995, the Company became a
stand-alone, privately held company pursuant to a Plan of Reorganization
confirmed by the U.S. Bankruptcy Court. The Companys shares became registered
and the Company became a reporting company pursuant to a registration statement
filed with the Securities and Exchange Commission in July 1996. The Companys wholly owned foreign subsidiaries and their respective principal
functions are as follows: Uroplasty BV
    
    Incorporated in The Netherlands, is the manufacturer of
Macroplastique, Bioplastique, VOX Implants, PTQ Implants and
of all their accessories, and sells its products through
distributors.Uroplasty LTD
    
    Incorporated in the United Kingdom and acts as the sole
distributor of Macroplastique, Bioplastique, PTQ Implants,
all of their accessories, and wound care products in the
United Kingdom and Ireland.Bioplasty BV
    
    Incorporated in The Netherlands and is the distributor of
Bioplastique to subdistributors, and distributes wound care
products in The Netherlands.
 Factors Affecting the Business The following factors are important and should be considered carefully in
connection with any evaluation of the Companys business, financial condition,
results of operations and prospects. Additionally, any one or combination of
the following factors could cause the Companys actual results to materially
differ from those reflected in any forward-looking statements of the Company. Government Regulation: The Companys product, manufacturing processes, and
product development activities are subject to extensive and rigorous regulation
by governmental and regulatory authorities in foreign countries, similar to the
U.S. Food and Drug Administration (FDA). In Europe, where Macroplastique has
been used since 1991, the Companys introduction of medical devices as well as
the design, manufacturing, labeling, distribution, sale, marketing,
advertising, promotion, and record keeping procedures for the Companys
products are subject to laws and regulations governing medical devices
contained in the European Medical Device Directives (MDD). The Companys
products are not sold in the United States as of yet because submissions have
not been made to the FDA for marketing in the United States. In the United States, most of the Companys products are subject to Pre-Market
Approval (PMA) application with the FDA prior to marketing. In 1999, Uroplasty
received approval from the FDA of an Investigational Device Exemption (IDE)
relating to a U.S. clinical trial for the treatment of female stress urinary
incontinence (SUI) using Macroplastique. Upon completion of the clinical
trial, the Company plans to submit a PMA application to the FDA requesting
approval to commercialize Macroplastique in the U.S. There can be no assurance
the U.S. clinical trials will be successfully completed or that the requisite
approvals will be granted for Macroplastique or any other product on a timely
basis, or at all, or that such regulatory reviews will not involve delays that
would conflict with the Companys ability to commercialize its products in the
U.S. If and when regulatory approval to market a product is obtained from the FDA,
this approval may necessitate limitations on the indicated uses of the product.
Marketing approval can also be withdrawn by the FDA in the United States (and
by regulatory authorities in foreign countries) due to failure to comply with
regulatory requirements or the occurrence of unforeseen problems following
initial approval. The Company may be required to make further filings with the
FDA and other regulatory authorities in foreign countries under certain
circumstances, such as the addition of product claims or product reformulation.
The FDA and other regulatory authorities in foreign countries could also limit
or prevent the manufacture and/or distribution of the Companys products and
have the power to demand the recall of such products. Medical device
regulations depend strongly on administrative interpretation, and there can be
no assurance future interpretation made by the FDA or other regulatory bodies,
with possible retroactive effect, will not adversely affect the Company. The
FDA and various other authorities either currently inspect or will inspect the
Companys facilities from time to time to determine whether Uroplasty is in
compliance with regulations relating to medical device manufacturing Page 10




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including regulations concerning design, manufacturing, testing, quality
control, product labeling, distribution, promotion, and record keeping
practices. A determination that the Company is in material violation of such
regulations could lead to the imposition of civil penalties, including fines,
product recalls, product seizures or, in extreme cases, criminal sanctions. Effects of Technological Developments: The Company competes in a market
characterized by technological innovation, extensive research efforts, and
significant competition. Improvements in existing treatment options or
developments of new treatment methods may have a material adverse effect on the
Companys ability to increase sales of Macroplastique, successfully
commercialize any future products, and may render such products noncompetitive
or obsolete. Other companies are currently engaged in the development of
products and innovative methods for treating SUI that are similar to or
competing with Macroplastique and these companies may have greater financial
resources and know how than the Company. Significant developments by any of
these companies or advances by medical researchers could eliminate the market
for Macroplastique or otherwise render Macroplastique obsolete. Although
technological change has not had a direct material impact on the Company in
recent years, the potential such a change might occur is a continuing risk for
the Company. Macroplastique Market Acceptance: The Company currently sells Macroplastique
in Europe, Canada and other countries outside the United States. The Companys
products are not sold in the United States as of yet because submissions have
not been made to the FDA for marketing in the United States. Acceptance of
Macroplastique by physicians in preference to other treatment options,
including other bulking agents, will depend upon the demonstration of its
safety and effectiveness, relative performance of Macroplastique compared to
other market approved products, availability of other treatment options, and
ease of use and relative cost compared to treatment options including other
bulking agents. Physicians may elect not to use Macroplastique unless adequate
reimbursement from health care payors is available. Health care payer
acceptance of a treatment utilizing Macroplastique will require, among other
things, evidence of the cost effectiveness of this treatment as compared to
other treatment options. There can be no assurance the acceptance of
Macroplastique by urological and gynecological health care providers will
develop or continue to grow in countries where Macroplastique is already used. Single Product: The Company currently derives over 85% of its net sales from
Macroplastique and related products. Discontinuance or reduction of revenues
from Macroplastique sold outside of the U.S. could therefore have a material
adverse effect on the Companys business, financial condition, and results of
operations. The Company does not expect commercialization of other new
products will be feasible without a substantial, continuing commitment to
research and development for an extended period of time or acquisitions of new
products, or both. Also, new medical products must typically undergo clinical
trials and regulatory clearance or approval before commercialization. There
can be no assurance as to whether or when commercialization of other products
might begin, or as to the likelihood that any such initiative would be
successful. The market for medically-related products changes constantly. If
the market changes, new or strengthened competition emerges, customer
preferences change, and/or new technology causes Macroplastique to be viewed as
a less effective treatment, the Companys business, financial condition, and
results of operation would be adversely affected. Patents and Proprietary Rights: The Companys success depends in part on the
ability to preserve trade secrets, obtain and maintain patent protection for
Uroplastys products under United States and international patent laws and
other intellectual property laws, and operate without infringing upon the
proprietary rights of third parties. Patents covering the materials, process,
and applications have been issued to the Company by the Patent Offices in the
United States, United Kingdom, Japan, Germany, The Netherlands, and Canada.
Applications are also currently pending in various other European countries.
No assurances can be given that the scope of any patent protection will prevent
competitors (most of which have financial and other resources substantially
greater than the Company) from introducing products competitive with the
Companys products, the Companys patents will be held valid if subsequently
challenged, others will not claim rights in or ownership of the patents and
other proprietary rights held by the Company, or the Companys product and
processes will not infringe, or be alleged to infringe, the proprietary rights
of others. A number of patents have been issued to others in the area of injectable
bulking agents. The validity and breadth of claims covered in medical device
technology patents involve complex legal and factual questions and may
therefore be highly uncertain. The Company also relies upon unpatented trade
secrets to protect the Companys proprietary technology. No assurance can be
given that others will not independently develop or otherwise acquire
substantially equivalent techniques and/or gain access to and disclose the
Companys proprietary technology. Further, no assurance can be given that the
Company can ultimately protect meaningful rights to such unpatented proprietary
technology. There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry. Companies in the
medical device industry have employed intellectual property litigation to gain
a competitive advantage. Litigation may be necessary to enforce any patents
issued to the Company, protect trade secrets or proprietary information owned
by the Company against claimed infringement of the rights of others, or
determine the scope and validity of the proprietary rights of others. The
defense and prosecution of patent litigation or other legal and/or
administrative proceedings related to patents is costly and time-consuming
regardless of the outcome. An adverse Page 11




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outcome in any litigation could subject the Company to significant liabilities
to third parties, require disputed rights to be licensed from others, and/or
require the Company to cease making, using, or selling any products. There can
be no assurance that any licenses required under any patents or proprietary
rights would be made available on terms acceptable to the Company, if at all. Public Reaction to Silicone Products: Macroplastique is comprised of medical
grade, heat-vulcanized polydimethylsiloxane, which results in a solid, flexible
silicone elastomer. In the early 1990s the United States breast implant
industry became the subject of significant controversies surrounding the
possible effects upon the human body of the use of silicone gel in breast
implants resulting in product liability litigation, leading to the bankruptcy
of several companies, including Uroplastys former parent, Bioplasty, Inc. The
Company uses only medical grade solid silicone material in its tissue bulking
products and not semi-liquid silicone gel, as was used in breast implants.
However, there can be no assurance that the use by the Company and others of
solid silicone in medical devices implanted in the human body will not result
in controversies, litigation, or negative publicity from news media,
competitors or regulatory investigations. Furthermore, there can be no
assurance that in the event such negative publicity occurred, that it would not
have a significant adverse effect on the Companys future financial position or
results of operations. Third-Party Reimbursement: Any success of the Company will depend, in part,
upon satisfactory reimbursement for Macroplastique procedures from third-party
health care payers. In the U.S. and many foreign countries, third-party
reimbursement is currently generally available for surgical procedures for
urinary incontinence, but there is no uniform policy for such reimbursements.
The Company sells Macroplastique to physicians, hospitals and other users which
bill various third-party payers, such as government health programs, private
health insurance plans, managed care organizations, and other similar programs
for the health care products and services provided to their patients. Payers
may deny reimbursement if they determine a product used in a procedure was not
used in accordance with established payer protocols regarding cost-efficient
treatment methods, was used for an unapproved indication or was not otherwise
covered. Third-party payers are increasingly challenging the prices charged
for medical products and services and, in some instances, have pressured
medical suppliers to lower their prices. The availability of third-party
reimbursement for Macroplastique or competitors products and continuing
efforts to reduce the costs of health care by decreasing reimbursement rates
may reduce the price received by the Company for Macroplastique or increase the
relative expense to the consumer. The Company believes a material amount of
Macroplastique revenues are received from third-party payers; therefore failure
to receive sufficient reimbursement from health care payers for procedures
using Macroplastique or adverse changes in governmental and third-party payers
policies toward reimbursement for such procedures would materially adversely
affect the Companys business, financial condition, and results of operations. Raw Material / Component Suppliers: The Company currently purchases certain
materials from single, qualified and approved sources. Alternative suppliers
for all these materials exist should the current suppliers discontinue
production or distribution. However, the Company would need to complete
additional testing to qualify the materials obtained from any new suppliers.
Limited notice of the need to switch suppliers for any of these materials could
result in production delays and inventory depletion, and alternative suppliers
could charge prices significantly higher than current costs. The Company has
not experienced any shortage of these materials to date; however, no assurance
can be given that shortages of these materials will not be experienced in the
future. Research and Development Expenses and Expected Losses: The Companys future
success will depend upon, among other factors, its ability to introduce and
market Macroplastique on a timely basis in the U.S. The development and
commercialization by the Company of Macroplastique and other products in the
U.S. will require substantial clinical, regulatory, and other expenditures for
the foreseeable future. Additional Capital Requirements: 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 2005.
In the event product sales and/or expenses differ from expected levels, the
Company may require additional financing to complete the Pre-market Approval
application for Macroplastique in the U.S. Further, the Company may seek
additional funds for U.S. market introduction of Macroplastique for female SUI,
as well as for U.S. approval for the Companys products in other indications. International Operations and Currency Fluctuations: The Company currently
sells its products only outside the U.S. through its wholly owned foreign
subsidiaries. Sales and operations outside of the U.S. are subject to certain
inherent risks, including, without limitation, fluctuations in the value of the
U.S. dollar relative to foreign currencies, tariffs, quotas, taxes and other
market barriers, political and economic instability, restrictions on the import
and export of technology, difficulties in staffing and managing international
operations, difficulties in obtaining work permits for employees, difficulties
in collecting receivables, potentially adverse tax consequences, potential
language barriers, and difficulties in operating in a different culture and
legal system. There can be no assurance that any of these factors will not
have a materially adverse effect on the Companys financial condition or
results of operations. In particular, because the Companys international
sales are denominated primarily in euros, currency fluctuations in countries
where the Company does business may render the Companys products less price
competitive than those of competing companies Page 12




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whose sales are denominated in weaker currencies. The Company reports its
financial results in U.S. dollars, and fluctuations in the value of either the
dollar or the currencies in which the Company transacts business can have a
negative impact on its financial condition or results of operations.
Consequently, the Company has exposure to foreign currency exchange risks. The
Company attempts to lessen that exposure by keeping to a minimum the amount of
time trade payables and receivables are outstanding, and by denominating
product sales in a currency which historically has been more stable than other
foreign currencies. However, there can be no assurance that historical
stability of any currency is any indication of its future stability. The
currency gain in fiscal 2003 is primarily the result of a weakened 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
proceeds from the investment were used to reduce the dollar denominated
intercompany debt at the Dutch subsidiary. This resulted in less volatility for
changes in currency exchange rates in the Companys statement of operations. Limited Public Market for Common Stock; Possible Stock Price Volatility: There
is only a limited trading market for the Companys common stock. There is no
assurance that purchasers of the Companys securities will be able to resell
their shares for a profit. Announcements of new products and services by the
Company or its competitors, technological innovations by competitors, disputes
regarding patents or other proprietary rights, regulatory developments and
economic and other external factors, as well as period-to-period fluctuations
in the Companys financial results, could cause the market price of the
Companys Common Stock to fluctuate significantly. In addition, the stock
market in general, and in particular the market prices for medical technology
companies, has historically experienced significant volatility which has
affected the market price of securities of many companies and which has
sometimes been unrelated to the operating performance of such companies. Such
volatility may adversely affect the market price of the Companys Common Stock. 
 ITEM 2. DESCRIPTION OF PROPERTY The Company owns office and warehouse space at Hofkamp 2, 6161 DC Geleen, The
Netherlands. In addition, the Company leases office, warehouse, laboratory and
production space through February 2006 at 2718 Summer Street NE, Minneapolis,
Minnesota 55413-2820, USA; office and warehouse space through September 2011
(subject to a right of the Company to terminate early starting in 2006) at Unit
3, Woodside Business Park, Whitley Wood Lane, Reading, Berkshire RG2 8LW,
United Kingdom; and office, warehouse, laboratory and manufacturing space
through June 2007 at Industrieweg 12, 5627 BS Eindhoven, The Netherlands. The
Company considers its facilities adequate; however, additional office,
production, and warehouse space may be necessary upon FDA approval and
subsequent increases in production, marketing, and sales activities in the U.S. 
 ITEM 3. LEGAL PROCEEDINGS None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company did not submit any matter to a vote of its security holders during
the fourth quarter of its recently completed fiscal year. 
 PART II 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of the date hereof, there is only a limited public trading market for the
Companys Common Stock. The following table sets forth the high and low bid prices for the Companys
Common Stock, as reported in the NASDS Bulletin Board system (market symbol
UPST.OB ; formerly UROP.OB) on a quarterly basis, from April 2003 through March
2004. Such quotations represent interdealer prices, without retail markup, mark
down or commission, and do not necessarily represent actual transactions. Page 13




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Fiscal Quarters
    
    Low Bid
    
    High BidFirst Quarter
    
    $
    2.07
    
    
    $
    3.40Second Quarter
    
    
    2.85
    
    
    
    4.40Third Quarter
    
    
    3.30
    
    
    
    5.35Fourth Quarter
    
    
    4.05
    
    
    
    6.45
 As of March 31, 2004, approximately 524 holders held the Companys Common Stock
of record. Registered ownership includes nominees who may hold securities on
behalf of multiple beneficial owners. 
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION THIS DISCUSSION OF THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS OF THE
COMPANY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY
BY, THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE
WITHIN THIS ANNUAL REPORT, THE MATERIAL CONTAINED IN THE RISK FACTORS AND
BUSINESS SECTIONS OF THIS ANNUAL REPORT, AND THE CAUTIONARY DISCLOSURE ABOUT
FORWARD-LOOKING STATEMENTS AT THE FRONT OF PART I OF THIS ANNUAL REPORT. 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 from Macroplastique and related
ancillary products designed for use by urologists, gynecologists, and
uro-gynecologists for the primary 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, textured, vulcanized, medical grade silicone elastomer
implants suspended in a biocompatible carrier gel. Our minimally invasive
procedure allows for Macroplastique to be placed in the soft tissue of the
mid-urethra (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
PTQ Implants (formerly PTP Implants); and vocal cord rehabilitation under the
trade name VOX Implants. In The Netherlands and the United Kingdom, the
Company 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 sold by direct sales forces in the United Kingdom,
and by a network of distributors in numerous countries outside the U.S.,
including Europe, Australia, Canada 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 current objectives are to focus on sales and marketing activities
designed to increase market penetration and sales of Macroplastique for SUI,
VUR, and of PTQ Implants for fecal incontinence 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. The Companys net income during fiscal 2003 was the result of non-recurring
items related to foreign currency exchange gains of $530,083 and a settlement
income of $180,000. Restatements During the fiscal 2004 year end close process, the Company determined that its
pension plan, covering 18 employees in The Netherlands, had historically been
reported as a defined contribution plan, but should have been reported as a
defined benefit plan. The Company pays premiums to an insurance company to
fund annuities for these employees, however, the Company is responsible for
funding additional annuities based on continued service and future salary
increases. Furthermore, the Company discovered an error in how the effect of
exchange rates on cash and cash equivalents was Page 14




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recorded in our Statement of Cash Flows. The Company has restated its March 31,
2003 consolidated balance sheet, the fiscal 2003 consolidated results of
operations, the fiscal 2003 consolidated statement of cash flows and related
footnote disclosures for the impact of accounting for the pension plan as a
defined benefit plan and for the correction of the effect of exchange rates on
cash and cash equivalents as follows: March 31, 2003As previouslyreported
    
    As restatedBALANCE SHEET DATA:Non-current deferred tax assets
    
    $
    
    
    
    
    94,159Total current liabilities
    
    
    587,112
    
    
    
    618,828Accrued pension liability
    
    
    
    
    
    
    241,208Accumulated deficit
    
    
    (3,163,156
    )
    
    
    (3,245,329
    )Accumulated other comprehensive loss
    
    
    (407,243
    )
    
    
    (503,835
    )Total shareholders equity
    
    
    4,820,392
    
    
    
    4,641,627
 Year Ended March 31, 2003As previouslyreported
    
    As restatedSTATEMENT OF OPERATIONS DATA:Cost of goods sold
    
    
    1,599,978
    
    
    
    1,594,008Operating expensesGeneral and administrative
    
    
    1,220,271
    
    
    
    1,214,300Research and development
    
    
    2,067,725
    
    
    
    2,061,754Selling and marketing
    
    
    1,142,834
    
    
    
    1,136,863Operating loss
    
    
    (687,152
    )
    
    
    (663,269
    )Income before income taxes
    
    
    41,214
    
    
    
    65,097Income tax benefit
    
    
    
    
    
    
    (68,121
    )Net income
    
    
    41,214
    
    
    
    133,218Net income per common shareBasic
    
    $
    0.01
    
    
    $
    0.04Diluted
    
    $
    0.01
    
    
    $
    0.03CASH FLOW DATA:Net cash provided by operating activities
    
    
    292,647
    
    
    
    645,619Net cash used in investing activities
    
    
    (72,401
    )
    
    
    (71,093
    )Net cash provided by financing activities
    
    
    2,227,474
    
    
    
    2,222,067Effect of exchange rates on cash and
cash equivalents
    
    
    (117,860
    )
    
    
    (466,733
    )
 Critical Accounting Policies The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the U.S., which require the Company
to make estimates and assumptions in certain circumstances that affect amounts
reported. In preparing these financial statements, management has made its best
estimates and judgments of certain amounts, giving due consideration to
materiality. The Company believes that of its significant accounting policies
(more fully described in Note 1 to the consolidated financial statements), the
following are particularly important to the Page 15




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portrayal of the Companys results of operations and financial position and may
require the application of a higher level of judgment by the Companys
management, and as a result are subject to an inherent degree of uncertainty. Revenue Recognition and Accounts Receivable. The Securities and Exchange
Commissions Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition
provides guidance on the application of generally accepted accounting
principles to selected revenue recognition issues, and the Companys revenue
recognition policies are in compliance with SAB 104. The Company markets and
distributes its products through a network of distributors and through direct
sales to end-users in the United Kingdom and The Netherlands. The Company
recognizes revenue upon shipment of product to its distributors and direct
customers. There are no customer acceptance provisions or Company installation
obligations. The Companys sales terms to its distributors and customers
provide no right of return outside of the Companys standard warranty policy
(see Note 1 to the consolidated financial statements), and payment terms
consistent with industry standards apply. Sales terms and pricing to the
Companys distributors are governed by the respective distribution agreements.
The Companys distribution partners purchase the Companys products to meet
sales demand of their end-user customers as well as to fulfill their internal
requirements associated with the sales process and, if applicable, contractual
purchase requirements under the respective distribution agreements. Internal
and other requirements include purchases of products for training,
demonstration and evaluation purposes, clinical evaluations, product support,
establishing inventories, meeting minimum purchase commitments. As a result,
the level of the Companys revenue during any period is not necessarily
indicative of its distributors sales to end-user customers during that period,
which are estimated not to be substantially different than the Companys sales
to those distributors in each of the last two years. The Companys future
revenue growth may be impacted by its distributors level of inventories of the
Companys products, their sales to end-user customers and their internal
product requirements. Inventories. Inventories are stated at the lower of cost or market using the
first-in, first-out method. Reserves for slow moving and obsolete inventories
are provided based upon current and expected future product sales and the
expected impact of product transitions or modifications. While the Company
expects its sales to grow, a reduction in its sales could reduce the demand for
the Companys products, and additional inventory reserves may be required. Foreign Currency Translation/Transactions. The financial statements of the
Companys foreign subsidiaries were translated in accordance with the
provisions of SFAS No. 52 Foreign Currency Translation. Under this
Statement, all assets and liabilities are translated using period-end exchange
rates and statements of operations items are translated using average exchange
rates for the period. The resulting translation adjustment is recorded within
accumulated other comprehensive loss, a separate component of shareholders
equity. Foreign currency transaction gains and losses are recognized currently
in the statement of operations, including unrealized gains and losses on
short-term inter-company obligations using period-end exchange rates, resulting
in an increase in the volatility of the Companys Consolidated Statements of
Operations. Unrealized gains and losses on long-term inter-company obligations
are recognized within accumulated other comprehensive loss, a separate
component of shareholders equity. Impairment of Long-Lived Assets. Long-lived assets at March 31, 2004 consist of
property, plant and equipment. The Company reviews its long-lived assets for
impairment whenever events or business circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. Set forth below is managements discussion and analysis of the financial
condition and results of operations for the fiscal years ended March 31, 2004
and 2003. See Note 8 to the Consolidated Financial Statements for business
segment information. Results of Operations Net Sales: In fiscal year ended March 31, 2004, net sales of all products were
$5,714,896, representing a $371,240 or 7% increase when compared to net sales
of $5,343,656 for fiscal 2003. The sales increase is the result of 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, sales decreased approximately 8%. Management believes the
decrease in sales is related to increased competition and healthcare reform in
many European countries with procedures being limited or rationed through
reimbursement systems designed to decrease overall costs to the various
national healthcare systems. Management believes sales will increase going
forward with targeted marketing programs. The Macroplastique product line
accounts for 81% to 85% of total net sales during the periods presented. Gross Profit: Gross profit was $4,262,565 and $3,749,648 for the years ended
March 31, 2004 and 2003, respectively, or 75% and 70% of net sales. Gross
profit in any one period is highly variable depending on unit sales and
utilization of Page 16




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manufacturing capacity. Historically, the gross margin percentage has moved
between approximately 70-80% of net sales. General and Administrative Expense: General and administrative (G&A) expenses
increased 70% from $1,214,300 during fiscal 2003 to $2,069,568 during fiscal
2004. Increased foreign retirement costs, consulting, legal, insurance and
shareholder expenses, combined with general price increases and fluctuations in
foreign currency exchange rates caused the increase in G&A expenses. The
consulting fees and shareholder expenses relate 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 CCRI. Corporation to provide
investor relations and development services. The two agreements accounted for
$601,013 of the increased expense. Research and Development Expense: Research and Development (R&D) expenses
decreased $241,064, or 12%, from $2,061,754 during fiscal 2003 to $1,820,690
during fiscal 2004. The decrease in R&D expense resulted from a decrease in
clinical costs primarily due to the study completion of many patients enrolled
in the Companys IDE clinical trial. Selling and Marketing Expenses: Selling and marketing (S&M) costs increased
$577,612, or 51% from $1,136,863 during fiscal 2003 to $1,714,475 during fiscal
2004. The increase resulted from recruitment fees, staffing, and dismissal
payments, travel costs and costs relating to trade-shows, conventions and
congresses, 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 was $60,060 and $728,366 for the years ended March 31, 2004
and 2003, respectively. 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. The
Company recognized foreign currency gains of $45,882 and $530,083 for the years
ended March 31, 2004 and 2003, respectively. The currency gains are primarily
the result of a weakened 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 consolidated statement of operations. The Companys income tax expense (benefit) was $229,185 for fiscal 2004 and
($68,121) for 2003. Prior to fiscal 2003, the Company placed a full valuation
allowance on its deferred tax assets. During 2003, the Company used
substantially all its net operating loss carryforwards at its Dutch
subsidiaries and determined that the remaining deferred tax assets were
recoverable. For all periods, the Company has a full valuation allowance for
its deferred tax assets in the UK and the US. At March 31, 2003, the Company
recognized a deferred tax asset of $68,121 related to the Companys Dutch
subsidiaries pension accounting. Income tax expense for 2004 related to income
taxes at the Companys Dutch subsidiaries. The U.S. net operating loss
carryforwards cannot be used to offset taxable income in foreign jurisdictions.
Management expects continued profits for its Dutch subsidiaries and therefore
continued income tax expenses. The Dutch income tax rate is 29% for euro
22,689 of profit and 34.5% for the amount above euro 22,689. Liquidity and Capital Resources As of March 31, 2004, the Companys cash and cash equivalent balances totaled
$2,697,670. At March 31, 2004, the Company had working capital of approximately $3.7
million. During the year ended March 31, 2004, $582,181 of cash was used in
operating activities, compared to $645,619 of cash provided by operating
activities in the prior-year. The usage of cash was primarily attributable to
the net loss incurred of $1,511,293, compared to a profit of $133,218 in the
prior year. Accounts receivable, other current assets, accounts payable and
accrued expenses fluctuated due to the timing of payments and fluctuations in
foreign currency exchange rates. The Company recorded $473,013 of non-cash
stock-based compensation expense during the year ended March 31, 2004, compared
to $1,508 for the prior-year period. This increase was due to the stock-based
investor relations and other consulting agreements the Company consummated on
April 1, 2003 with C.C.R.I. Corporation and Executive Advisory Group. 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 Page 17




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inventory balances at March 31, 2004 of $1,065,176 and $519,130, respectively.
For fiscal 2005, 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 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 2005. 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. Repayments on the Companys contractual obligations, consisting of notes
payable, capital leases and operating leases, are summarized below: Payments due by periodLess than
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    1 year
    
    1-3 years
    
    4-5 years
    
    5 yearsMinimum royalty payments
    
    $
    414,667
    
    
    
    104,000
    
    
    
    216,167
    
    
    
    94,500
    
    
    
    Notes payable
    
    
    522,021
    
    
    
    42,301
    
    
    
    126,903
    
    
    
    84,602
    
    
    
    268,215Operating lease commitments
    
    
    660,529
    
    
    
    332,147
    
    
    
    323,987
    
    
    
    4,395
    
    
    
    Total contractual obligations
    
    $
    1,597,217
    
    
    
    478,448
    
    
    
    667,057
    
    
    
    183,497
    
    
    
    268,215
 The Company has a pension plan covering 18 employees in The Netherlands,
reported as a defined benefit plan. The Company pays premiums to an insurance
company to fund annuities for these employees, however, the Company is
responsible for funding additional annuities based on continued service and
future salary increases. The Company is obligated to pay royalties of 5% of net sales in the U.S. of
Macroplastique products with a minimum of $50,000 per year. The duration of
this royalty agreement is through May 1, 2006. Under another royalty agreement
the Company pays royalties, in the aggregate, of three to five percent of net
sales of Macroplastique, Bioplastique, and PTQ Implants subject to a monthly
minimum of $4,500. The royalties payable under this Agreement will continue
until the patent referenced in the Agreement expires in 2010. Under a license
agreement for the Macroplastique Implantation System the Company pays a royalty
of 10 British pounds for each unit sold during the life of the patent.
Royalties are more fully described under Patents, Trademarks, and Licenses. 
 ITEM 7. FINANCIAL STATEMENTS The information contained under the headings Consolidated Statements of
Operations, Consolidated Balance Sheets, Consolidated Statements of
Shareholders Equity and Comprehensive Income (Loss), Consolidated Statements
of Cash Flows, Notes to Consolidated Financial Statements and Report of
Independent Registered Public Accounting Firm is incorporated herein by
reference. 
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE KPMG LLP (KPMG) has been serving as our principal accountants. On June 4,
2004, KPMG declined to stand for reelection and informed us that the
client-auditor relationship between KPMG and us will cease upon completion of
KPMGs audit of our consolidated financial statements as of and for the year
ended March 31, 2004 and the issuance of Page 18




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KPMGs report thereon. In connection with the audits of the two fiscal years
ended March 31, 2004, and the subsequent interim period through July 28, 2004
(the date that KPMG completed its audit), there were no disagreements with KPMG
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements if not resolved
to KPMGs satisfaction would have caused KPMG to make reference in connection
with its opinion to the subject matter of the disagreement. KPMG cited two reportable conditions in its communications to our audit
committee on July 29, 2004 related to the restatement of our consolidated
financial statements as of and for the year ended March 31, 2003: (i) the
correcting of an error in how we account for our Dutch pension plan and (ii)
the correcting of an error in how we record the effect of exchange rates on
cash and cash equivalents on our statement of cash flows. The audit reports of KPMG on our consolidated financial statements as of and
for the years ended March 31, 2004 and 2003 did not contain any adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles; except that KPMGs report on
our consolidated financial statements as of and for the years ended March 31,
2004 and 2003, contained a separate paragraph stating As discussed in note 2
to the consolidated financial statements, the Company has restated its
consolidated financial statements for the year ended March 31, 2003. We have
requested KPMG to furnish us with a letter, addressed to the Commission,
stating whether KPMG agrees or disagrees with the statements made by us under
this item. KPMGs letter is filed as an exhibit to this Form 10-KSB in
accordance with paragraph (a)(3) of item 304 of Regulation S-B. 
 PART III 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The Companys Directors and Executive Officers are as follows: Director
    
    TermName
    
    Age
    
    Position
    
    Since
    
    expiresDaniel G. Holman
    
    
    58
    
    
    Chairman, President, CEO, CFO
    
    
    1994
    
    
    
    2006Joel R. Pitlor
    
    
    65
    
    
    Director
    
    
    1994
    
    
    
    2004R. Patrick Maxwell
    
    
    59
    
    
    Director
    
    
    1994
    
    
    
    2005Thomas E. Jamison
    
    
    44
    
    
    Director
    
    
    2000
    
    
    
    2004Sam B. Humphries
    
    
    62
    
    
    Director
    
    
    2003
    
    
    
    2006Susan Hartjes Holman
    
    
    50
    
    
    COO, SecretaryLarry Heinemann
    
    
    51
    
    
    Vice President Sales & MarketingChristopher Harris
    
    
    45
    
    
    Vice President Research & Development
Managing Director UK subsidiaryArie J. Koole
    
    
    40
    
    
    Controller
Managing Director Dutch subsidiariesMarc M. Herregraven
    
    
    39
    
    
    Vice President of Manufacturing
 All Directors are members of the Nominating Committee; all Directors except Mr.
Holman are members of the Compensation Committee; Mr. Maxwell and Mr. Jamison
are members of the Audit Committee. The Company has entered into Employment Agreements, which are terminable at
will by either party upon thirty day written notice, with Mr. Holman, Ms.
Holman, Mr. Heinemann, Mr. Harris and Mr. Herregraven, the terms of which, Page 19




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among other things, specify a base salary subject to annual adjustment by
mutual agreement of the Company and the Employee, and a severance payment to
the employee upon employment termination without cause. Any severance amounts
payable under the Agreement shall be limited to the Employees base salary for
not less than four months and not longer than twelve months after employment
termination, depending on the Employees years of service. Contemporaneously
with the execution of the Employment Agreement, each of the Officers executed
an Employee Confidentiality, Inventions, Non-Solicitation, and Non-Compete
Agreement, certain terms of which specify the Employee shall not disclose
confidential information, shall assign to the Company without charge all
intellectual property relating to the Companys business which is created or
conceived during the term of employment, shall not encourage Employees to leave
the employment of the Company for any reason and shall not compete with the
Company during the term of employment and for a period of eighteen months
thereafter. Also in connection with the execution of these Agreements, each of
these Officers, other than Mr. Herregraven, were granted varying amounts of
stock options to purchase the Companys Common Stock at the fair market value
at date of grant of $7.50 per share. In all cases, the options are exercisable
for five years or until one year after employment termination (subject to
certain termination provisions), whichever date is earlier, and vest in three
equal amounts on each one-year anniversary date subsequent to the option grant
date. The following paragraphs describe the business experience of each of the
Companys Directors and Officers. Daniel G. Holman: Mr. Holman has served as Chairman of the Board, President
and Chief Executive Officer of Uroplasty, Inc. since February 1994, as Chief
Financial Officer from June 1996 to November 1999 and as Chief Financial
Officer as of February 2001. He was Executive Vice President of Bioplasty,
Inc. from 1973 to 1985, its President from 1985 to 1987, and Secretary from
1986 to March 1992. Mr. Holman was Chairman of the Board of Bioplasty, Inc.
from March 1992, and President and CEO from February 22, 1993 to December 31,
2001. He served as Chairman of the Board and Chief Executive Officer of
Bio-Vascular, Inc. from June 1988 to September 1991, served as a Director of
Genetic Laboratories Wound Care, Inc. from February 1988 until July 1993, and
as Vice President from February 1988 through November 1992. Mr. Holman holds a
Bachelor of Arts degree in Biology from St. Cloud State University. Joel R. Pitlor: Mr. Pitlor has been a director since February 1994. He served
as a Director of Bioplasty, Inc. from January 1989 until May 1996. For over
sixteen years, he has been the owner and manager of a management consulting
firm. Mr. Pitlor is presently a Director of Precision Optics Corporation,
which is publicly held. Mr. Pitlor holds a Bachelor of Science degree from MIT
and serves as Personal Advisor to several CEOs. R. Patrick Maxwell: Mr. Maxwell was appointed a Director of Uroplasty, Inc. in
April 1994 and elected by the shareholders in August 1997. Mr. Maxwell has
over 30 years of experience as a turn around management specialist, an
entrepreneur and executive in both the business and non-profit sectors. Mr.
Maxwell is Cofounder and a Director of Telnet Services Limited of Auckland, New
Zealand since September 1995, Cofounder and Chief Financial Officer of Tele
Resources, Inc. since October 1996 and Chief Financial Officer of American
Specialty Confections since April 2000. Mr. Maxwell has served on numerous
Boards of Directors of both business and charitable organizations. He has a
B.A. in philosophy from St. Johns University and a Juris Doctor from
Northwestern University School of Law. Thomas E. Jamison: Mr. Jamison was elected a Director of Uroplasty, Inc. in
August 2000. Mr. Jamison is a shareholder of the business litigation law firm
of Fruth, Jamison & Elsass, P.A. in Minneapolis, Minnesota. From 1996 to 1999,
Mr. Jamison served as an investment banker in the Corporate Finance Department
of R.J. Steichen & Co. From 1991 to 1996, Mr. Jamison practiced law at Fruth &
Anthony, P.A. in Minneapolis. Mr. Jamison graduated magna cum laude from
William Mitchell College of Law in 1991. Sam B. Humphries: Mr. Humphries was elected a Director of Uroplasty, Inc. in
April 2003. Mr. Humphries also serves as a consultant to the CEO. Mr.
Humphries is currently the Managing Director of the Ascent Medical Technology
Fund, L.P. and has more than 25 years of healthcare and medical device industry
experience. Previously, Mr. Humphries was the President and CEO of American
Medical Systems and earlier served as its Vice President of World Wide Sales
and Marketing during its formative years. Mr. Humphries also served as
President and CEO of Optical Sensors, Inc., a medical start-up company, where
he guided the company from start-up through its initial public offering. Mr.
Humphries has served on numerous private and public Boards of Directors,
including the Board of Directors of the Health Industry Manufacturers
Association (HIMA, now AdvaMed). Currently he serves on the Board of Directors
of LifeSpex Medical, Inc., UroMetrics Medical, Inc., Micropure Medical, Inc.,
Inlet Medical, Inc., Universal Hospital Services, Inc., Ascent Private Equity,
L.L.C., and Ascent Medical Technology Fund, L.P. Susan Hartjes Holman: Ms. Holman joined Bioplasty, Inc. in September 1991 as
Director of Operations and served as Vice President of Operations and
Regulatory Affairs from April 1993 until May 1996. In November 1994, she was
appointed Vice-President of Operations and Regulatory Affairs for Uroplasty,
Inc. and was elected Secretary in September 1996. In November 2002, she was
appointed Chief Operating Officer. Prior to 1991, Ms. Holman was Director of
Operations at Bio-Vascular, Inc. in St. Paul, Minnesota from November 1989 to
September 1991. Prior to Page 20




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that time, she served at various other pharmaceutical and medical device
companies in management positions in manufacturing, quality assurance, and
research. Ms. Holman has Bachelor of Arts degrees in Biology-Microbiology and
Biomedical Science from St. Cloud State University, and has done graduate work
in the biological sciences. Ms. Holman is a Senior Member and a Certified
Quality Auditor of the American Society for Quality (ASQ), has served several
years on its Executive Committee and subcommittees, and is a member of the
Regulatory Affairs Professionals Society (RAPS) and its Ethics Task Force, and
the Henrici Society for Microbiologists. She has served on several national
and international scientific and regulatory committees, and is a cofounder for
the Biomedical Focus Conference and the Biomedical Consortium, Minneapolis, MN. Larry Heinemann: Mr. Heinemann joined Uroplasty, Inc. in September 1998 as
Director of Sales for North and South America. In July 1999 he was promoted to
Vice President of Sales and Marketing and in August 2001 was appointed as Vice
President Marketing & Corporate Development for Uroplasty, Inc. In August 2003
he was again appointed to his current position as Vice President of Sales and
Marketing. Prior to joining Uroplasty, Inc., Mr. Heinemann worked for two
divisions of C. R. Bard, Inc. From January 1996 to September 1998, he was
employed by the Bard Medical Division in the positions of Territory Manager and
Sales Training. From May 1987 to January 1996, Mr. Heinemann was employed by
the Bard Urological Division in various positions of Sales Consulting and
Training Management. Prior to that time, Mr. Heinemann was employed by
surgical device divisions of Squibb and Sterling Drug in various sales
management positions. Mr. Heinemann holds a Bachelor of Science Degree from
the School of Business of Eastern Illinois University and majored in Marketing
and Personnel Management. He is a member of SUNA (Society of Urological
Nursing Association), and served on the Board as an Industry Liaison for the
Upper Midwest Chapter. Christopher Harris: Mr. Harris joined Bioplasty Ltd. in October 1989 as Area
Sales Manager in the United Kingdom. Since September 1994, he has been the
Managing Director of the Companys subsidiary, Uroplasty LTD., in the United
Kingdom. In February 1996, Mr. Harris was appointed as Director of Corporate
Development, January 1997 as Vice President of Corporate Development, August
2001 as Vice President International Sales, and in August 2003 he was appointed
to his current position as Vice President Research & Development. Mr. Harris, a
certified nurse in the United Kingdom, practiced general surgery nursing for
two years and operating room nursing for nine years prior to 1989 and was an
active member of the National Association of Theatre Nurses (NATN) and the
Royal Collage of Nursing (RCN). Mr. Harris is an elected member of the
Institute of Directors (MinstD) in London the United Kingdom, and is a member
of the Association of Clinical Research Professionals (ACRP) and the
International Incontinence Society (ICS). Arie J. Koole: Mr. Koole joined Bioplasty B.V. in May 1993 as Financial
Manager in The Netherlands. Since January 2000 he has been the Managing
Director of the Companys subsidiaries in The Netherlands. In June 1996, Mr.
Koole was appointed as Director of Finance and in January 2000, Mr. Koole was
appointed as Controller. From 1987 to 1993, Mr. Koole was a financial auditor
with the international accounting firm Deloitte & Touche in The Netherlands.
Mr. Koole has a bachelor degree in Business Economics. Marc M. Herregraven: Mr. Herregraven joined Bioplasty, Inc. in April 1992 as
Plant Manager, became Director of Manufacturing in 1994, and Director of
Operations in 1999. In November 2002, Mr. Herregraven was appointed as Vice
President of Manufacturing. Previously he served with Advanced Bio-Surfaces,
Inc., a Minnesota-based medical device developer as Director of Manufacturing,
and with Bio-Vascular, Inc., a Minnesota-based medical device manufacturer in
an engineering function. Mr. Herregraven has a Bachelor of Science degree in
Mechanical Engineering and has been a member of the American Society for
Quality (ASQ) since 1996. Mr. Holman and Ms. Hartjes Holman became husband and wife in 1999. The Board of Directors determined that neither member of the current Audit
Committee qualifies as an Audit Committee Financial Expert. The Board does not
believe that, given the Companys current size, it is necessary or feasible to
actively search for an outside person to serve on the Board who would qualify
as an Audit Committee Financial Expert. The Committee has authority to engage
legal counsel, accountants, actuaries or other experts or consultants, as it
deems appropriate to carry out its responsibilities. On November 3, 2003 the Board of Directors approved a Code of Ethics for the
Chief Executive Officer, the Chief Financial Officer, the Controller and all
other Officers of the Company. The Code is designed to deter wrongdoing and to
promote honest and ethical behavior by the Companys Officers, as well as to
ensure compliance with applicable rules and regulations. The Code of Ethics is
filed as an exhibit to this Report on Form 10-KSB for the fiscal year ended
March 31, 2004. 
 ITEM 10. EXECUTIVE COMPENSATION The information contained under the heading Executive Compensation in the
Proxy Statement is incorporated herein by reference. Page 21




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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained under the heading Principal Shareholders in the
Proxy Statement is incorporated herein by reference. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained under the heading Certain Transactions in the Proxy
Statement is incorporated herein by reference. 
 ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. incorporated by reference. Number
    
    Description2.1
    
    First Amended Joint Plan of Reorganization (Modified) of the
Company dated January 31, 1994 (Filed as Exhibit 8.1 to Form 10SB)3.1
    
    Articles of Incorporation of Uroplasty, Inc. (Filed as Exhibit 2.1
to Form 10SB)3.2
    
    Bylaws of Uroplasty, Inc. (Filed as Exhibit 2.2 to Form 10SB)4.1
    
    Form of Stock Certificate of the Company representing shares of the
Companys Common Stock (Filed as Exhibit 3.1 to Form 10SB)10.1
    
    Settlement Agreement and Release dated November 30, 1993 by and
between Bioplasty, Inc., Bio-Manufacturing, Inc., Uroplasty, Inc.,
Arthur A. Beisang, Arthur A. Beisang III, MD and Robert A. Ersek,
MD (Filed as Exhibit 6.1 to Form 10SB)10.2
    
    Purchase and Sale Agreement dated December 1, 1995 by and among
Bio-Vascular, Inc., Bioplasty, Inc., and Uroplasty, Inc. (Filed as
Exhibit 6.2 to Form 10SB)10.3
    
    License Agreement dated December 1, 1995 by and between
Bio-Vascular, Inc. and Uroplasty, Inc. (Filed as Exhibit 6.3 to
Form 10SB)10.4
    
    Lease Agreement dated January 10, 1995 between Summer Business
Center Partnership and Uroplasty, Inc. (Filed as Exhibit 6.4 to
Form 10SB)10.5
    
    Unsecured $640,000 Promissory Note dated March 30, 1994 by and
between Bioplasty, Inc., Uroplasty, Inc. and Bioplasty Product
Claimants Trust (Filed as Exhibit 6.5 to Form 10SB)10.6
    
    Agreement and Satisfaction dated January 30, 1995 by and between
Bioplasty Product Claimants Trust and Bioplasty, Inc. (Filed as
Exhibit 6.6 to Form 10SB)10.7
    
    Asset Sale and Satisfaction of Debt Agreement dated June 23, 1995
by and between Bioplasty, Inc. and Uroplasty, Inc. (Filed as
Exhibit 6.7 to Form 10SB)10.8
    
    Executory Contract Assumption Stipulation dated December 28, 1993
by and between Bioplasty, Inc., Uroplasty, Inc., and Collagen
Corporation (Filed as Exhibit 6.8 to Form 10SB)10.9
    
    Settlement and License Agreement dated July 23, 1992 by and between
Collagen Corporation, Bioplasty, Inc., and Uroplasty, Inc. (Filed
as Exhibit 6.9 to Form 10SB)10.10
    
    Employment Agreement between Uroplasty, Inc. and Daniel G. Holman
dated December 7, 1999. (Filed as Exhibit 10.10 to Form
10-KSB/03-31-2000.)10.11
    
    Employment Agreement between Uroplasty, Inc. and Christopher Harris
dated December 7, 1999. (Filed as Exhibit 10.11 to Form
10-KSB/03-31-2000.)10.12
    
    Employment Agreement between Uroplasty, Inc. and Susan Holman dated
December 7, 1999. (Filed as Exhibit 10.13 to Form
10-KSB/03-31-2000.)10.13
    
    Employment Agreement between Uroplasty, Inc. and Larry Heinemann
dated
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Number
    
    DescriptionDecember 7, 1999. (Filed as Exhibit 10.14 to Form
10-KSB/03-31-2000.)10.14
    
    Agreement, dated October 14, 1998, by and between Uroplasty, Inc.
and Samir M. Henalla (pertaining to Macroplastique Implantation
System). (Filed as Exhibit 10.15 to Form 10-KSB/A /03-31-2001)10.15
    
    Employment Agreement between Uroplasty, Inc. and Mr. Marc
Herregraven dated November 15, 2002. (Filed as Exhibit 10.15 to
Form 10-KSB/03-31-2003)10.16
    
    Consulting Agreement between Uroplasty, Inc. and Executive Advisory
Group dated April 1, 2003. (Filed as Exhibit 10.16 to Form
10-KSB/03-31-2003)10.17
    
    Stock Option Agreement between Uroplasty, Inc. and Executive
Advisory Group dated April 1, 2003. (Filed as Exhibit 10.17 to Form
10-KSB/03-31-2003)10.18
    
    Consulting Agreement between Uroplasty, Inc. and C.C.R.I
Corporation dated April 1, 2003. (Filed as Exhibit 10.18 to Form
10-KSB/03-31-2003)
 (b) The following exhibits are filed as part of this report: Number
    
    Description13
    
    Financial Statements14
    
    Code of Ethics16
    
    Letter re Change in Certifying Accountant21
    
    Subsidiaries of the Company23
    
    Consent of Independent Registered Public Accounting Firm31
    
    Certifications by the CEO and Controller pursuant to Section 302 of
the Sarbanes-Oxley Act of 200232
    
    Certifications by the CEO and Controller pursuant to 18 USC Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 200299.1
    
    Press release dated July 29, 2004
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ITEM 14. CONTROLS AND PROCEDURES. Disclosure Controls and Procedures. As of the end of the period covered by
this report, we conducted an evaluation, under the supervision and with the
participation of our principal executive officer and principal financial
officer, of our disclosure controls and procedures as defined in Rules
13(a)-15(e) under the Securities Exchange Act of 1934 (the Exchange Act).
Based on this evaluation, the principal executive officer and principal
financial officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. In particular, we note that our
disclosure controls and procedures have alerted us to make the below
disclosures with respect to our internal controls and procedures. Internal Controls and Procedures. There have been no changes in our internal
controls over financial reporting that occurred during our most recently
completed fiscal quarter that have materially affected or are reasonably likely
to materially affect our internal control over financial reporting, except as
follows: During the fiscal 2004 year end close process, we determined that our pension
plan covering 18 employees in The Netherlands had historically been reported as
a defined contribution plan, but should have been reported as a defined benefit
plan. As more fully described in Note 2 to our Consolidated Financial
Statements included as Exhibit 13 in this Form 10-KSB, we have restated our
March 31, 2003 consolidated balance sheet and the fiscal 2003 consolidated
statement of operations for the impact of accounting for this pension plan as a
defined benefit
plan. In connection with preparing the above restatement of our financial statements,
we discovered an error in how we have recorded the effect of exchange rates on
cash and cash equivalents on our statement of cash flows. As more fully
described in Note 2 to our Consolidated Financial Statements included as
Exhibit 13 in this Form 10-KSB, we have restated our fiscal 2003 consolidated
statement of cash flows for the impact of this accounting. On July 29, 2004, KPMG cited these restatements of our consolidated financial
statements as reportable conditions in its communication to our audit
committee, and we agreed with this characterization. To remediate the
situation, our accounting personnel will more carefully review our contracts
and agreements in the future and we have adopted a new internal control
procedure regarding how we record the effect of exchange rates on our statement
of cash flows. Page 24




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SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized. Dated: July 29, 2004
    
    UROPLASTY, INC.By: /s/ DANIEL G. HOLMANDaniel G. HolmanPresident, Chief Executive Officer,Chief Financial Officer (Principal Financial Officer),Director (Principal Executive Officer)
 In accordance with the Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Company and in the capacities and on
the dates indicated. Name
    
    Title / Capacity
    
    Date/s/ DANIEL G. HOLMAN
Daniel G. Holman
    
    President, Chief Executive Officer
Chief Financial Officer,
Director (Principal Executive and
Financial Officer)
    
    July 29, 2004/s/ ARIE J. KOOLE
Arie J. Koole
    
    Controller
(Principal Accounting Officer)
    
    July 29, 2004/s/ JOEL R. PITLOR
Joel R. Pitlor
    
    Director
    
    July 29, 2004/s/ R. PATRICK MAXWELL
R. Patrick Maxwell
    
    Director
    
    July 29, 2004/s/ THOMAS E. JAMISON
Thomas E. Jamison
    
    Director
    
    July 29, 2004/s/ SAM B. HUMPHRIES
Sam B. Humphries
    
    Director
    
    July 29, 2004
 Page 25