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, 1998.   

 
  
                   UROPLASTY, INC.                  
(Name of Small Business Issuer in its Charter.)  
  
    Minnesota, U.S.A.                  41-1719250      
(State or other jurisdiction of    (I.R.S. Employer  
incorporation or organization)     Identification No.)  
  
2718 Summer Street NE, 
Minneapolis, Minnesota   55413       
(Address of principal executive offices)  
  
Issuer's telephone number, including area code:  
(612) 378-1180  
  
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no 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 registrant 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 Registrant'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]

State issuer's revenues for its most recent fiscal year........$4,335,908....

State 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 a specified date within 
the past 60 days.  (See definition of affiliate I Rule 12b-2 of the Exchange
Act.) $_not applicable_, as of May 26, 1998.  However see Item 5, hereof. 

Note:	If determining whether a person is an affiliate will involve an 
unreasonable effort and expense, the issuer may calculate the aggregate 
market value of the common equity held by non- affiliates on the basis of 
reasonable assumptions, if the assumptions are stated.


(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check whether the Issuer filed all documents and reports required to be 
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of 
securities under a plan confirmed by a court. 

		YES [ ]        NO [ ]   Not subject to Exchange Act at time  [X]

APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practicable date: 4,192,525 shares on 
May 26, 1998

DOCUMENTS INCORPORATED BY REFERENCE

     None of the type referenced. 


Transitional Small Business Disclosure Format 
YES [ ]        NO [X]






PART I



Introduction

   Uroplasty, Inc. is referred to in this Report as "Uroplasty" or the
"Registrant".

Item 1.  Description of Business


General

   The Registrant designs, develops, manufactures and markets medical 
products primarily for the treatment of urinary incontinence.  The 
Registrant's key product is Macroplastique(R), an injectable soft tissue 
bulking agent currently used to treat certain types of stress urinary 
incontinence ("SUI"), the most common form of urinary incontinence.  
SUI refers to involuntary loss of urine as a result of activities that 
increase intra-abdominal pressure, such as coughing, laughing or exercising.  
Macroplastique also is used to treat vesicoureteral reflux ("VUR"), a 
condition occurring mostly in children in which urine flows backward from 
the bladder into the kidney.  In addition, some doctors in Europe are 
beginning to use Macroplastique to treat incontinence in men recovering 
from prostate surgery.  In June 1996, Macroplastique received a CE mark in 
Europe (similar to FDA approval in the United States), allowing the product 
to be sold throughout the European Union.  Macroplastique is not sold in the 
United States because it has not been approved for marketing by the Food and 
Drug Administration ("FDA").  Through this offering, the Registrant seeks 
to fund its efforts to obtain FDA pre-market approval for Macroplastique, 
which would allow the Registrant to enter the U.S. female stress urinary 
incontinence treatment market.

   It is estimated that urinary incontinence afflicts about 5% of the 
general population and women comprise about 85% of the sufferers. In 
Europe, currently the Registrant's largest market, approximately 17 million 
people suffer from various forms of urinary incontinence and about 14.5 
million of these sufferers are women. Bulking agents such as Macroplastique 
are used to treat women with SUI caused by intrinsic sphincter deficiency, 
estimated by the Registrant to comprise 10% of the female incontinence 
market or about 1.4 million women in Europe alone.  VUR is primarily a 
pediatric concern, with a prevalence estimated to be as high as 1% of the 
pediatric population.  The Registrant estimates that about half of this 
population are candidates for Macroplastique treatments. Of the estimated 
2.6 million European men who are incontinent, the Registrant believes about 
25% are candidates for treatment with Macroplastique.

   Macroplastique consists of soft, flexible, solid, highly textured 
particles of heat vulcanized polydimethylsiloxane (solid silicone) suspended 
in a water-based biocompatible carrier solution.  Macroplastique is not a 
silicone gel, the compound which became controversial in its use in breast 
implants.  Macroplastique was first introduced in the European urological 
marketplace in 1991 and has been used to treat approximately 15,000 patients 
over the last seven years with no reported serious product related adverse 
incidents.


Urinary Incontinence Market

   Urinary incontinence is an involuntary loss of urine, so severe it has 
social and/or hygienic consequences.  In varying degrees, urinary 
incontinence is a problem suffered by millions of people worldwide.   
The Agency for Health Care Policy and Research (a division of the Public 
Health Service, U.S. Department of Health and Human Services) estimated in 
1996 that there were approximately 13 million adults with urinary incontinence 
in the United States.  The same agency estimated the total cost (utilizing 
all management and curative approaches) of treating incontinence of all 
types in the United States as $15 billion in 1996.  Urinary incontinence can 
result in a substantial decrease in a person's quality of life and is often 
the main reason a family commits an elderly person to nursing home care.

   The Registrant estimates there are approximately 11 million female 
urinary incontinence sufferers in the United States and 14.5 million female 
urinary incontinence sufferers in Europe.  Of these populations, the 
Registrant believes that there are approximately 1 million American women 
and 1.4 million European women who are suitable for treatment with 
Macroplastique.  The Registrant expects that the incidence of urinary 
incontinence will rise as the percentage of elderly people continues to 
increase.


Types of Urinary Incontinence

   The mechanisms of urinary incontinence are complicated and involve the 
interaction between several anatomical structures.  In females, urinary 
continence is primarily controlled by the urinary sphincter.  This muscle 
surrounds the urethra and provides constrictive pressure to prevent urine 
from flowing out of the bladder.  Urination occurs when the urinary 
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.  Urinary incontinence may 
result when any part of the urinary incontinence tract fails to function as 
intended. A broad range of conditions and disorders can cause incontinence, 
including birth defects (e.g. spina bifida), pelvic surgery, injuries to 
the pelvic region or the spinal cord, neurological diseases, (e.g. multiple 
sclerosis, poliomyelitis) and degenerative changes associated with aging.
 

   Stress Urinary Incontinence:  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, which results 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 urinary sphincter valve or muscle 
to function properly.  ISD can be due to congenital sphincter weakness or 
deterioration of the muscular wall of the urethra after trauma, 
prostatectomy, spinal cord lesion or radiation therapy.  To date, 
Macroplastique has been used to treat incontinence in women suffering from 
SUI caused by intrinsic sphincter deficiency. 

   Urge Incontinence:  Urge incontinence refers to the involuntary loss of 
urine associated with an abrupt and strong desire to urinate.  Urge 
incontinence often occurs with neurologic problems, causing the bladder to 
contract and empty with little or no warning.  Urge incontinence is 
typically caused by central nervous system lesions (such as a stroke) which 
impair inhibition of bladder contraction, and local irritating factors such 
as urinary infection or bladder tumors.

   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 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 the symptoms of urinary incontinence, such as with 
pads or diapers.  The other approach consists of curative measures that 
attempt to restore continence, such as surgery or treatment with bulking 
agents.  The Registrant suggests the treatment of stress urinary 
incontinence should proceed from the least invasive to the most invasive 
therapy.


Management of Urinary Incontinence

   Absorbent Products:  Absorbent products are probably the most common 
treatment for urinary incontinence of all types; most men and women use 
these products without consulting a physician.  The cost of diapers and 
pads can be substantial, thus creating a continuous financial burden for 
patients.  Additionally, this management technique requires frequent 
changing of diapers and pads to control patient embarrassment due to odor.

   Behavior Modification:  The techniques used in behavior modification include 
bladder training, scheduled voiding and pelvic floor muscle exercises 
("kegels").  Some of the tools used in conjunction with these training 
regimes are vaginal cones or weights, biofeedback devices and electrical 
stimulation.  While these are typically low-risk procedures, they do not 
work for many patients and even where effective they only partly alleviate 
the symptoms and are seldom curative.

   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 occur if clamps are improperly used.

   Pelvic Organ Support Devices:  Pelvic organ support devices such as 
pessaries (doughnut-shaped devices made of flexible materials) are designed 
to temporarily reduce pelvic prolapse and alleviate symptoms of pelvic 
relaxation in females with and without incontinence. Complications can 
result when these devices are misused or neglected and can include 
ulceration of the vagina and rectovaginal and vesicovaginal fistula.  
Persons using pessaries require frequent and regular monitoring. 

   Occlusion Devices:  Urethral occlusion devices, or "plugs," consist of tiny 
disposable products intended to be used by a sub-segment of stress 
incontinent women (women that are younger, more physically active, and are 
motivated to use a disposable urethral plug on a daily basis).  The primary 
problems with this device are urinary tract infections, treatment compliance 
and progressive urethral dilation which may require larger plugs over time.

   Urinary Catheters and Collection Devices:  There are four types of urinary 
catheters:  1) intermittent (inserted through the urethra into the bladder 
every 3 to 6 hours for bladder drainage; may be appropriate for the 
management of acute or chronic urinary retention);  2) indwelling (closed 
sterile system inserted through the urethra to allow for 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 like a condom and 
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 which is the best 
catheter option for the patient.

   Drug Therapy:  Drug treatment is used to manage multiple types of urinary 
incontinence. These drugs tend to fall into one of two categories: those 
that manage urge urinary incontinence by affecting the contraction of the 
muscle tissue of the bladder and those that manage stress urinary 
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, stress urinary incontinence 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 
involves a 3-10 day hospital stay with several months required for full 
recovery.  In men, the main surgical option is an implanted artificial 
urinary sphincter.  However, 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:  Bulking agents are inserted with a needle into 
the area around the urethra, thereby augmenting the sphincter.  Hence, these 
materials are often called "bulk-enhancing agents" or "injectables." Bulking 
agents may be either synthetic or biologically derived.  Bulking agents are 
an attractive alternative to surgery because they are considerably less 
invasive than many of the surgical procedures described above.  For this 
reason, bulking agents represent a particularly 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.  
Active women also can benefit from the use of bulking agents since their 
use will often allow the patient to return to normal activities in a matter 
of days instead of weeks for fully invasive surgical procedures.  The 1996 
Clinical Practice Guidelines published by the U.S. Department of Health and 
Human Services recommend periurethral bulking agents as first line treatment 
for men with intrinsic sphincter deficiency and for women with intrinsic 
sphincter deficiency who do not have co-existing hypermobility.  

   The two major types of bulking agents are biologically derived agents and 
synthetic bulking agents.  Biologically derived bulking agents include 
injections of autologous fat and bovine collagen.  Fat injections involve 
complex, invasive harvesting of the patient's own fat cells and reinjecting 
them into the bladder neck.  Another procedure involves the injection of 
processed bovine collagen. The two most commonly used synthetic bulking 
agents are Macroplastique (polydimethylsiloxane) and Teflon(R)paste 
(polytetrafluoroethylene, also known as PTFE).


Macroplastique

   The Registrant's Macroplastique product is an injectable soft tissue bulking 
agent primarily used to treat stress urinary incontinence in women. 
Macroplastique is a proprietary composition of heat vulcanized, highly 
textured, solid, soft and irregularly shaped polydimethylsiloxane (solid 
silicone)  particles suspended in a biocompatible carrier solution.  Based 
on the Registrant's clinical experience, Macroplastique does not cause 
chronic inflammation, is not absorbable by the body and does not migrate.  
Macroplastique is used to provide permanent bulking or augmentation of the 
urethral sphincter.  The actual implantation of Macroplastique is minimally 
invasive and can be accomplished using less than 30 minutes of the 
physician's time in an inpatient or outpatient setting.  It is designed to 
restore the patient to normal urinary continence almost immediately 
following treatment.  Macroplastique is also used to treat vesicoureteral 
reflux, a condition occurring primarily in children, and urinary 
incontinence in men after prostate surgery.

   The Registrant markets Macroplastique on the basis that its use can lead to 
lower surgical risk, shorter recovery time and less expense than more 
invasive alternatives. The advantages of Macroplastique, in the Registrant's 
view, include the following:

No Absorption/Migration:  The Macroplastique elastomer particles are soft, 
heavily textured and irregularly shaped, to provide numerous surfaces to 
allow for rapid deposit of host collagen (a form of scar tissue) between the 
individual particles and around the periphery of the injected product. The 
highly irregular shapes of optimally sized particles minimize the potential 
for migration by the propensity of individual particles to interlock with 
each other to form larger agglomerates. 

   Biocompatible:  The medical grade polydimethylsiloxane used in 
Macroplastique is commonly utilized in many other biomedical applications 
and has a well-documented safety record for biomedical usage.  For example, 
such elastomers have been and are used for long term implants such as 
pacemaker leads and hydrocephalic shunts.  Macroplastique itself has 
undergone extensive testing to confirm its favorable biocompatibility 
characteristics.

   Clinical Experience:  The Registrant's seven year clinical experience with 
more than 15,000 patients, all outside the United States, supports the 
effectiveness of Macroplastique.  During this time period, no serious 
product-related adverse reaction of any kind has been reported to the 
Registrant.

   Minimally Invasive/Cost Effective:  Macroplastique is designed to offer 
surgeons and their patients a minimally invasive, long-lasting and 
cost-effective treatment for female and male stress urinary incontinence 
and vesicoureteral reflux. The Registrant has developed an implantation 
procedure for Macroplastique that is technologically feasible, easily 
performed and effective.


Marketing, Distribution and Sales 

   The Registrant markets and sells Macroplastique and the related 
ancillary products used in the implantation procedure only in countries 
outside the United States, primarily in Europe.  The Registrant uses a 
direct sales force of six persons in the United Kingdom and three persons 
in the Netherlands.  For approximately 20 other countries in which the 
Registrant markets Macroplastique, it uses a network of distributors, for 
whom training is provided by the Registrant's technical staff in the 
Netherlands.


Other Products

   The Registrant also sells the materials contained in Macroplastique 
for plastic surgery applications under the name Bioplastique(TM)Implants, in 
limited markets.  In addition, the Registrant has been selling some 
specialized wound care products as a distributor.	

   The Registrant recently introduced a new product to the gynecology and 
urology market called the UroScope(TM).  This is a modified short endoscope 
specifically designed for the administration of Macroplastique in females.


Government Regulations 

   As a medical device manufacturer, the Registrant is subject to government 
regulations in every market where its products are sold.  In markets such 
as the United States and Europe, these regulations are substantial and play 
a significant role in the Registrant's designing, testing, manufacturing, 
and marketing of its products.

   In order to market its products within the countries of the European Union, 
the Registrant is required to obtain CE marking for its products.  To 
obtain CE marking, a product must comply with the requirements set forth in 
Council Directive 93/42/EEC published in Volume 36 (12 July 1993) of the 
Official Journal of the European Communities.  This document is often called 
the "Medical Device Directives" (MDD) in Europe.  The requirements for new 
medical devices set forth in this document are based upon their relative 
risk to the patient.  Medical devices that present a low risk to the patient 
(Class I devices) have relatively few requirements for CE mark authorization.  
Medical devices that present a greater risk to the patient such as long-term 
implantables (Class IIb and III) have more rigorous requirements for CE mark 
approval.  CE mark authorization is granted by organizations called 
"Notified Bodies" that are approved by their respective national 
"Competent Authorities" (which are usually referred to as national Health 
Ministries) to conduct medical device evaluations.  Notified Bodies are 
technical expert organizations that serve as the auditing and certifying 
arm of the Competent Authorities.

   Under the European MDD, Macroplastique is considered a Class IIb device.  
To obtain the CE Mark for Macroplastique, the Registrant was required to 
submit extensive information regarding the product design, labeling, safety, 
preclinical and clinical testing results to its Notified Body for 
evaluation by expert reviewers.  In addition, the Registrant maintains 
registration to rigorous quality standards ISO 9001 and EN46001 (EN46001 
references ISO 9001 with additional medical device requirements).  After 
successfully demonstrating full compliance to the MDD, the Notified Body 
issued a "Certificate of Authorization" to the Registrant in June 1996 
which allowed the Registrant to place the CE mark on Macroplastique.  With 
CE marking, Macroplastique can be marketed throughout the European Union 
after fulfilling any additional national requirements.  The Registrant is 
subject to periodic surveillance audits by its Notified Body to ensure it 
adheres to the requirements of the MDD.  Changes in existing requirements 
or adoption of new requirements or policies could adversely affect the 
ability of the Registrant to comply with regulatory requirements. Failure 
to comply with regulatory requirements could have a material adverse effect 
on the Registrant's business, financial condition and results of operations. 
There can be no assurance the Registrant 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 
Registrant's business, financial condition or results of operations.

   The Registrant 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. There can be no assurance 
that the Registrant 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 
Registrant's ability to do business.

   In the United States, the Registrant must comply with the Federal, Food, 
Drug and Cosmetic Act, as amended, which is enforced by the Food and Drug 
Administration (the "FDA").  These regulations are complex but generally 
function by associating a level of risk with a proposed product.  Products 
which are lower risk, such as surgical gloves (considered a Class I device) 
have fewer requirements for marketing than products which are life 
sustaining, diagnostic, or long-term implants (considered Class III devices).  
The FDA has determined that 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 application is a rigorous submission that requires the manufacturer 
to substantiate the product's 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.  A typical PMA submission 
includes very detailed, technical descriptions of the proposed device, the 
device's manufacturing and quality control systems, the pre-clinical 
(biocompatibility) testing performed on the device, and the results of 
human clinical studies.  After receiving the PMA submission from the 
manufacturer, the FDA will normally review the information for 1-2 years.  
During this time period the FDA usually assembles a panel of clinicians to 
make a non-binding recommendation of whether to approve the product.  The 
FDA will also conduct an onsite inspection of the manufacturer to establish 
that the FDA's manufacturing and quality system requirements (called Good 
Manufacturing Practices, or GMP's) will be followed during the production 
of the device.  In some instances, the FDA will decide that 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 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 approval of the PMA submission, the Registrant must comply with other 
FDA regulations to maintain its U.S. marketing approval.  The Registrant's 
manufacturing facilities will be subjected to routine inspections by the 
FDA to ensure that the Registrant is in compliance with GMP regulations.  
Because the Registrant's quality system has already achieved ISO 9001 
registration, the Registrant believes that few additional elements will be 
required to satisfy the GMP regulations.  However, there can be no 
assurance that the FDA would find the Registrant's quality system to be in 
compliance with all relevant aspects of the requirements (See Business 
Manufacturing).  The Registrant must also comply with U.S. Medical Device 
Reporting (MDR) regulations, which require companies to document and 
investigate device malfunctions or any deaths or serious injuries that may 
be associated with the use of their products.  The FDA will also scrutinize 
all labeling and marketing claims made by the Registrant to ensure that 
only the product indications specifically approved by the FDA are promoted 
by the Registrant.  

   The Registrant is also subject to a variety of state and local laws and 
regulations in those states or localities where its product will be 
marketed. Any applicable state or local regulations may hinder the 
Registrant's ability to market its products in those states or localities. 


Third-Party Reimbursement
 
   Throughout much of the world, the Registrant sells Macroplastique to 
hospitals and other users who often transfer the cost of the medical 
product and services to various third-party payers, such as government 
health programs, private health insurance plans, managed care organizations 
and other similar programs.  These third-party payers may deny or 
substantially limit reimbursement if they believe that a medical device 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. In some markets, medical device manufacturers 
are being forced to demonstrate the clinical efficacy and cost-effectiveness 
of their products to third-party payers before these organizations will 
agree to provide reimbursement to users.  Changes to third-party 
reimbursement policies in the United States, Europe and other potential 
Macroplastique markets could result in diminished revenues to the 
Registrant.

   In most European nations and other Macroplastique markets, third party 
reimbursement is currently available for Macroplastique for the treatment 
of urinary incontinence.  Within the United States, third-party 
reimbursement is currently available for certain bulking agents and the 
Registrant expects to obtain third-party reimbursement for Macroplastique 
if and when the product is approved for marketing.  However, there is 
currently no uniform policy for reimbursement in the United States and no 
guarantee Macroplastique will be reimbursed at the levels expected by the 
Registrant, if at all.  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 Registrant for Macroplastique.
 

Product Liability

   The medical device industry is subject to substantial litigation.  The 
Registrant 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 Registrant currently carries product liability insurance but there can 
be no assurance the Registrant's existing insurance coverage limits are 
adequate to protect the Registrant from any liabilities which 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 Registrant 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 Registrant 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 Registrant.


Manufacturing

   The Registrant manufactures Macroplastique at its own facilities in The 
Netherlands from medical grade materials obtained from qualified suppliers. 
The Registrant's facilities utilize dedicated heating, ventilation, and 
high efficiency particulate air (HEPA) filtration systems for the 
manufacturing area to provide a controlled working environment.  All 
manufacturing processes, including material storage and handling, gowning,
and cleaning are performed according to written procedures approved by the 
Registrant's quality department.  All critical manufacturing processes are 
performed in a cleanroom environment by trained production technicians.  An 
outside vendor sterilizes Macroplastique using a validated method and 
returns the product to the Registrant for final inspection and testing.

   The Registrant currently purchases all raw materials from single sources. 
Alternative suppliers for these materials do exist should the current 
suppliers discontinue production or distribution. However, the Registrant 
would need to complete additional testing to qualify the materials obtained 
from any new suppliers.  Additionally, limited notice of the need to switch 
suppliers for either of these materials could result in production delays 
and inventory depletion.

   The Registrant's manufacturing facilities are periodically audited by an 
independent registrar to ensure compliance with ISO 9001 and EN 46001 
quality system requirements.  Prior to marketing the product in the United 
States, the Registrant will also be inspected by the U.S. FDA and will also 
be subject to any additional state, local and federal government 
regulations in both the United States and The Netherlands applicable to the 
manufacture of the Registrant's products.  See Business Government 
Regulations.


Competition

   Competition in the urinary incontinence products market is intense. The 
Registrant faces competition from existing manufacturers of management and 
curative treatments for urinary incontinence, including competing 
manufacturers of commercially available bulking agents, as well as from 
companies developing new or improved treatment methods for urinary 
incontinence. The Registrant believes the principal competitive factors 
among treatment methods for urinary incontinence include physician and 
patient acceptance of the method in managing or curing incontinence, cost 
and the availability of third-party reimbursement, marketing and sales 
capability and the existence of meaningful patent protection.  The 
Registrant's ability to compete in this market also will depend on the 
consistency of its product quality and delivery and product pricing. Other 
factors within and outside the Registrant's control include its product 
development and innovation capabilities, ability to obtain required 
regulatory approvals, ability to protect its proprietary technology, 
manufacturing and marketing capabilities and ability to attract and retain 
skilled employees.

   Current major competitors who compete in the urinary incontinence management 
and treatment market include Kimberly-Clark Corp. and Procter & Gamble Co. 
for adult diapers and absorbent pads; Empi, Inc. and MedCare Technologies, 
Inc. with electrical pelvic floor stimulators and behavioral treatments; 
Abbott Laboratories, Warners Wellcome and Hoechst Marion Roussell for 
pharmaceutical treatments; C. R. Bard, Inc., Kendall Co., Mentor Corp. and 
Baxter International for catheter/urine collection bag drainage systems; 
and American Medical Systems, Inc., a division of Pfizer, Boston Scientific 
Corporation, Influence, Inc. and Johnson & Johnson for sling procedures and 
artificial sphincter implants. The Registrant believes that some of its 
current competitors and others that do not have injectable bulking products 
are also seeking to develop competing bulking agents.

   There are currently at least two injectable soft tissue bulking agent 
products that compete directly with Macroplastique, both of which are 
supplied by companies with considerably larger financial and other resources 
than Uroplasty.  These products are Urethrin(R), manufactured and distributed 
only outside the United States by Mentor, Inc. and Contigen(R), manufactured 
by Collagen Corporation and distributed by C.R. Bard, in both the United 
States and foreign markets.  The Registrant expects other devices for 
treating urinary incontinence by means of soft tissue injection therapy will 
become available in the future and competition will continue to intensify.  
In addition, Advanced Uroscience, Inc. and the Convatec division of Bristol, 
Meyers, Squibb are seeking regulatory approval for an injectable bulking 
agent.

   Many of the Registrant's competitors and potential competitors have 
significantly greater financial, manufacturing, marketing, distribution and 
technical resources and experience than the Registrant. In addition, many 
of the Registrant'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 that 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 which may be offered by the Registrant in the future.


Dependence on One or a Few Major Customers

   Approximately 14% of the Registrant's total sales during the fiscal year 
period ended March 31, 1998 were made to ABS, the distributor covering 
France.  ABS holds 100,000 shares of Uroplasty common stock. 


Patents, Trademarks, and Licenses

   The Registrant's success depends in part on its ability to obtain and 
maintain patent protection for its products, to preserve its trade secrets 
and to operate without infringing the proprietary rights of third parties. 
The Registrant seeks to protect its technology by filing patent applications 
for patentable technologies that 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 
Registrant 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 Registrant by the United States, 
United Kingdom, German and Japanese Patent Offices.  Applications are also 
currently pending in various other countries, including Canada and other 
European countries.  There can be no assurance that any of the Registrant's 
pending or future U.S. 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 Registrant'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 that 
any current or future U.S. or foreign patents of the Registrant will not be 
challenged or circumvented by competitors or others, or that such patents 
will be found to  be valid or sufficiently broad to protect the Registrant's 
technology or provide the Registrant with any competitive advantage.  
Should attempts be made to challenge, circumvent or invalidate the 
Registrant's patents in the U.S. Patent and Trademark Office or courts of 
competent jurisdiction, including administrative boards or tribunals, the 
Registrant may have to participate in legal or quasi-legal proceedings 
therein to maintain, defend or enforce its rights in these patents. Any 
legal proceedings to maintain, defend or enforce the Registrant's patent 
rights could be lengthy and costly, with no guarantee of success.

   The Registrant also relies heavily upon trade secrets and other proprietary 
information.  The Registrant 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 
Registrant to such information. There can be no assurance, however, that 
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 that 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 
Registrant.

   In 1992, the Registrant and its then parent, Bioplasty, Inc., were 
sued by Collagen Corporation, which alleged that Macroplastique infringed 
on one of its U.S. patents for a bulking agent.  The parties entered into a 
license and settlement agreement in 1993 pursuant to which the Registrant 
pays Collagen a royalty of 5% of net sales of certain products sold in the 
United States with a minimum of $50,000 per year.  Recently, the Registrant 
received several letters from Collagen's counsel questioning whether 
additional royalties were payable as a result of either the manufacture or 
sale by the Registrant of Macroplastique in the United States.  The 
Registrant's position is that royalties are payable only on "net sales" in 
the United States, and, there having been none, no additional royalties are 
payable.  Collagen has not brought any new or renewed legal action in 
connection with its claims and allegations. There can be no assurance, 
however, that Collagen or any other third party will not pursue legal 
action with respect to these matters. 

   Claims by competitors such as Collagen and other third parties that the 
Registrant's products allegedly infringe the patent or other intellectual 
property rights of others could have a material adverse effect on the 
Registrant. 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 Registrant 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 Registrant and significant 
diversion of the efforts of the Registrant's technical and management 
personnel. An adverse outcome in any litigation could subject the Registrant 
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 Registrant 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 
Registrant, if at all. In addition to being costly, protracted litigation 
to defend or prosecute intellectual property could result in the Registrant 
being unable to commercialize Macroplastique on a timely basis or at all, 
and could have a material adverse effect on the Registrant's business, 
financial condition and results of operations.

   Although the Registrant intends to apply for additional patents and 
vigorously defend issued patents, management believes that 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 Registrant has a Royalty Agreement with three individuals, two of 
whom are former officers and directors.  Under such Agreement, the 
Registrant pays royalties, in the aggregate, of three to five percent of 
net sales of Macroplastique, subject to a monthly minimum of $4,500.  The 
royalties payable under this Agreement will continue for the life of the 
patent referenced in the Agreement.

   In December 1995, the Registrant obtained a license for a urethral 
guiding device designed to make implantation of Macroplastique easier and 
more precise.  Under this agreement, the Registrant made a cash payment of 
approximately $30,000 to the licensor and will make royalty payments at the 
rate of 10% of the worldwide net sales of this device for a period of 10 
years.


Research and Development

   The Registrant has an active Research and Development program working to 
develop new products in the field of incontinence.  The Registrant is also 
continually working on new methods and devices for the implantation of 
Macroplastique and on new applications for this material. Expenditures for 
research and development totaled $778,082 and $610,677 for the fiscal years 
ended March 31, 1998 and March 31, 1997, respectively.  None of these costs 
were borne directly by customers.

   For fiscal year 1999, the Registrant's research and development expenses 
will increase  significantly.  This is due, in part, to the accounting 
protocol of treating regulatory expenses as research and development 
expenses.  See "Management's Discussion and Analysis".

   The Registrant has acquired the rights to a urethral guiding device 
designed to make implantation of Macroplastique in women simpler and more 
precise.  The Registrant intends to introduce this device late in fiscal 
year 1999.  The Registrant currently does not intend to charge doctors 
separately for this product.  Instead, the Registrant will provide an 
implantation kit including Macroplastique, the urethral guiding device and 
administration needles.  The Registrant expects the new device to make 
implantation easier and allow it to be performed on an outpatient basis at 
the doctor's office.  Currently, Macroplastique is injected using a more 
cumbersome endoscope and patients are usually admitted to the hospital and 
put under general anesthesia during the procedure.

   The Registrant is developing a pubovaginal sling which is a surgically 
implanted device providing support for the bladder neck and urethrea.  This 
device is expected to expand the Registrant's product line to cover a 
broader range of female SUI.  The Registrant intends to introduce this 
product into the U.S. market in early fiscal 2000, pending submission and 
approval of a 510(k) review by the FDA.


Compliance with Environmental Laws

   Compliance by the Registrant with applicable environmental requirements 
during its fiscal years ended March 31, 1998 and 1997 has not had a 
material effect upon the capital expenditures, earnings or competitive 
position. 


Employees

   As of March 31, 1998, the Registrant had thirty-eight employees, of 
which thirty-two were full-time, two temporary and four part time.  None of 
such employees has a collective bargaining agreement with the Registrant.


Former Parent, and Current Subsidiaries

   The Registrant was incorporated in January 1992 as a wholly-owned 
subsidiary of Bioplasty, Inc., which was primarily a manufacturer and 
distributor of breast implants.  Because of extensive products liability 
litigation brought against Bioplasty and all other manufacturers of breast 
implant products, Bioplasty, Inc. and Uroplasty, Inc. filed for protection 
from creditors under Chapter 11 of the United States Bankruptcy Code in 
April 1993.  On January 31, 1994, the U.S. Bankruptcy Court confirmed the 
Joint Plan of Reorganization (the "Plan") of Bioplasty, Inc. and Uroplasty, 
Inc.  Under the Plan, all equity interests held by Bioplasty, Inc. in 
Uroplasty, Inc. were canceled and new shares of each of Bioplasty, Inc. and 
Uroplasty, Inc. were issued to creditors, claimants and certain investors.  
Such persons became the shareholders of Uroplasty, Inc.  In addition, 
under the Plan all pre-petition claims, including known and unknown 
products liability claims, against Bioplasty, Inc. and Uroplasty, Inc. were 
discharged, except for certain claims and expenses identified by name and 
amount, which were allowed by the Court. 

   In January 1995, Uroplasty, Inc. acquired from Bioplasty, Inc. in a 
tax-free exchange transaction approved by the shareholders of both 
companies all its remaining operating assets and liabilities, including the 
stock of its foreign subsidiaries, in satisfaction of obligations due 
Uroplasty, Inc. generated in the normal course of business.

   The Registrant's wholly-owned foreign subsidiaries and their respective 
principal functions are as follows:

Uroplasty BV    Incorporated in The Netherlands, is the manufacturer of 
                  Macroplastique, and sells Macroplastique outside of The  
                  Netherlands to distributors 
Uroplasty LTD   Incorporated in and acts as the sole distributor of 
                  Macroplastique, Bioplastique and wound care products in 
                  the United Kingdom
Bioplasty BV    Incorporated in and acts as a distributor of 
                  Macroplastique, Bioplastique and wound care products in 
                  The Netherlands


Item 2. Description of Property

   The Registrant owns office and warehouse space at Hofkamp 2, 6161 DC 
Geleen, The Netherlands.  In addition, the Registrant leases office, 
warehouse, laboratory and production space at 2718 Summer Street NE, 
Minneapolis Minnesota 55413-2820, USA; and office and warehouse space at 
Unit 3, Woodside business Park, Whitley Wood Lane, Reading, Berkshire RG2 
8LW, United Kingdom; and office, warehouse, laboratory and manufacturing 
space at Industrieweg 12, 5627 BS Eindhoven, The Netherlands; and office 
space at Hertogsingel 54, 6214 AE Maastricht, The Netherlands.  The 
Registrant considers its facilities adequate for its foreseeable needs.


Item 3. Legal Proceedings

   The Registrant is not, as of the date hereof, a party to any material 
pending legal proceedings, nor is its property the subject of any such 
proceedings.


Item 4. Submission of Matters to a Vote of Security Holders

   The Registrant did not submit any matter to a vote of its security 
holders during the fourth quarter of its recently completed fiscal year.


Item 5. Market for Common Stock

   As of the date hereof, there is only a limited public trading market for 
the Company's common stock.  Although one broker dealer published bid and 
ask quotations for the Company's common stock on an irregular basis during 
the period March through June, 1997, the Company is not aware of any shares 
that were either purchased or sold through such broker dealer.

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 UROP), on a quarterly basis, from July 1997, through March 
1998, and for the period April 1, 1998 through May 8, 1998.  Such quotations 
represent interdealer prices, without retail markup, markdown or 
commission, and do not necessarily represent actual transactions.

   Quarter                        Low Bid         High Bid 	
   
   July 1   September 30, 1997      $.1/2          $3.3/16	
   October 1   December 31, 1997     3              3.1/2	
   January 1   March 31, 1998        2.1/4          3.1/4
   April 1   May 8, 1998             3              5  	

   As of May 8, 1998, the Company's Common Stock was held of record by 
approximately 500 holders.  Registered ownership includes nominees who may 
hold securities on behalf of multiple beneficial owners.


Item 6. Management's Discussion and Analysis of Financial Condition and 
        Results of Operations

THIS DISCUSSION OF THE FINANCIAL CONDITION AND THE RESULTS OF OPERATIONS OF 
THE REGISTRANT SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS 
ENTIRETY BY, THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE 
WITHIN THIS ANNUAL REPORT, AND THE MATERIAL CONTAINED IN THE "RISK FACTORS" 
AND "BUSINESS" SECTIONS OF THIS ANNUAL REPORT.

Overview

   The Registrant was incorporated in Minnesota in 1992 as a wholly-owned 
subsidiary of Bioplasty, Inc.  ("Bioplasty"), a manufacturer of breast 
implants.  Bioplasty, along with other breast implant manufacturers, became 
subject to numerous product liability class action lawsuits.  As a result, 
Bioplasty and the Registrant filed for protection under Chapter 11 of the 
Federal Bankruptcy Code in 1993.  The Registrant emerged from Chapter 11 in 
February, 1994, as a separate and distinct entity from Bioplasty.

   The Registrant sells Macroplastique and the related ancillary products for 
use in augmenting soft tissues for the purpose of treating urinary 
incontinence  At this time, sales are only made outside the United States 
because the Registrant does not have regulatory approval to market its 
product in the United States.

   The Registrant's current objectives are to focus on growth in sales and 
market penetration of Macroplastique in the European market for urinary 
incontinence and vesicoureteral reflux treatment, and to begin the U.S. 
regulatory process for Macroplastique as a treatment for female stress 
urinary incontinence.

   The Registrant also sells the Macroplastique product in a different 
configuration for plastic surgery applications under the name 
Bioplastique(TM), in limited markets.  In addition, the Registrant has been 
selling some specialized wound care products as a distributor.	


Results of Operations

   During the year ended March 31, 1998, net sales were $4,335,908 compared 
to $3,334,563 during the year ended March 31, 1997. This increase of 
$1,001,345 (30%) is the result of substantially higher sales of the 
Macroplastique product line as a result of increased market penetration by 
existing distribution outlets. Unit sales of Macroplastique increased 46% 
for the same period. Sales of Macroplastique were approximately 91% of 
total sales.  It is expected that Macroplastique sales will continue to 
grow through further market penetration by existing distribution outlets, 
expansion of its distribution network and the introduction of innovations 
in Macroplastique implantation techniques.  

   The gross margin percentage improved from 77% in fiscal 1997 to 78% in 
fiscal 1998. Management believes that this high level of the gross margin 
percentage can be maintained as a result of the establishment of a new 
manufacturing facility, located in Eindhoven, The Netherlands. 

   Operating expenses increased  24% from $2,204,590 in fiscal 1997 to 
$2,736,288 in fiscal 1998. The increase in operating expenses is primarily 
attributable to an increase in the number of employees and the initiation 
of several research and development projects. General and administrative 
costs increased from $685,430 in fiscal 1997 to $994,068 in fiscal 1998. 
Research and development expenses increased from $610,677 in fiscal 1997 to 
$778,082 in fiscal 1998. Selling and marketing costs increased from 
$908,483 in fiscal 1997 to $964,138 in fiscal 1998. 

   Management believes there will be upward pressure on selling, general 
and administrative expenses as efforts continue to market Macroplastique. 
Additionally, management anticipates increased expenditures for research 
and development projects associated with U.S. regulatory activities for 
fiscal 1999.

   The operating profit for the year ended March 31, 1998, was $661,642, 
compared to $376,204 for the same period last year, an increase of 76%. 
This increase is attributed to a higher sales level and controlled 
operating expenses. 

   Income tax expense for the year ended March 31, 1998, was $111,860, 
compared to $0 for the twelve months ended March 31, 1997. The increase in 
income tax expense results primarily from the non-availability in 1998 of 
foreign net operating losses which were available in 1997.

   For the year ended March 31, 1998, net income totaled $407,841, compared 
to $218,221 for the twelve months ended March 31, 1997, an increase of 87%.


Liquidity and Capital Resources

   The Registrant and its wholly-owned subsidiaries' capital resources are 
derived from existing sales of the Registrant's products. As of March 31, 
1998, the Registrant had approximately $890,000 in cash and cash equivalents.

   There is currently no financing arrangement in place for the 
Registrant's working capital needs, and the Registrant has no material 
unused sources of liquidity other than its cash reserves and its accounts 
receivable balances. 

   In November, 1997, due to expansion, the Registrant purchased an office 
building for its international  headquarters in Geleen, The Netherlands. 
The purchase price of the building was $590,000 and was fully financed 
through the issuance of a Note Payable, with a variable interest rate (5% 
per annum at March 31, 1998).  Monthly payments consist of $2,563 of 
principal plus variable rate interest through November 2017.  In addition, 
during the fiscal year the Registrant made other capital purchases of 
approximately $450,000, including primarily building improvements and 
equipment for a new manufacturing plant in Eindhoven, The Netherlands, 
which was financed by cash from operations.

   The proceeds of the sale of the maximum number of shares offered, in 
addition to cash generated by product sales, will be used to pursue an 
Investigational Device Exemption (IDE) application and Premarket Approval 
(PMA) application for Macroplastique with the U.S. Food and Drug 
Administration.  If only the minimum number of shares offered is sold, 
proceeds will not be sufficient to complete the PMA and additional cash 
from internal or other sources will be needed.

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


YEAR 2000 COMPLIANCE

The financial impact to the Company of year 2000 compliance has not been 
and is not expected to be material to the Company's financial position or
results of operations in any given year. The Company's existing information
system, consisting of hardware and software supplied by third parties, is
year 2000 compliant. However, because most computer systems are by their 
nature, interdependent, it is possible that non-compliant third party
computers could "reinfect" the Company's computer systems. The Company 
could be adversely affected by the year 2000 problem if it or unrelated 
parties fail to successfully address this problem. The Company intends to
develop a plan to communicate with the unrelated parties, including its
regulatory consultants with whom it deals, to coordinate year 2000 
compliance. The costs incurred in addressing year 2000 compliance will be
expensed as incurred, in compliance with GAAP. 


FORWARD-LOOKING STATEMENTS

   The Registrant may from time to time make written or oral 
"forward-looking statements", within the meaning of the Private Securities 
Litigation Reform Act of 1995, including statements contained in this 
Annual Report and in documents filed by the Registrant 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 Registrant's future performance that may cause the actual 
results, performance or achievements of the Registrant, or industry 
results, to differ materially from those expressed or implied in any such 
"forward-looking statements".  Any such statement is qualified by reference 
to the following cautionary statements.

   The Registrant's business operates in highly competitive markets and is 
subject to changes in general economic conditions, competition, customer 
and market preferences, government regulation, the impact of tax 
regulation, foreign exchange rate fluctuations, the degree of market 
acceptance of products, the uncertainties of potential litigation, as well 
as other risks and uncertainties detailed elsewhere herein and from time to 
time in the Registrant's Securities and Exchange Commission filings.

   In this Annual Report, the following sections contain "forward-looking 
statements":  "Risk Factors"; "Business"; and "Management's Discussion and 
Analysis of Financial Condition and Results of Operation".  Various factors 
and risks (not all of which are identifiable at this time) could cause the 
Registrant's results, performance or achievements to differ materially from 
that contained in the Registrant'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 Risk Factors section of 
this Annual Report.

   The Registrant 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 Registrant.


RISK FACTORS

   The securities offered hereby are highly speculative, illiquid, involve 
a high degree of risk and immediate substantial dilution and should be 
purchased only by persons who can afford to lose their entire investment.  
In evaluating an investment in such securities, prospective investors 
should carefully consider the following risk factors and other information 
contained in this Report.


Government Regulation International and United States 

   Inability to Market or Sell Macroplastique in United States; Uncertainty of 
Obtaining FDA Marketing Approval. The Registrant'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 the Registrant has been marketing Macroplastique since 1991, 
the Registrant's introduction of medical devices as well as its design, 
manufacturing, labeling, distribution, sale, marketing, advertising, 
promotion and recordkeeping procedures for its products are subject to laws 
and regulations governing medical devices contained in the European Medical 
Device Directives ("MDD").  In June, 1996, the Registrant received a 
Certificate of Authorization for affixing the CE mark (Conformite 
Europeene) on Macroplastique based upon compliance with the MDD.

   In the United States, the Registrant cannot market or sell 
Macroplastique until Investigational Device Exemption ("IDE") and 
subsequent Pre-Market Approval ("PMA") authorization for Macroplastique are 
received from the FDA.  As of the date of this Annual Report, the Registrant 
had not submitted an IDE application to the FDA to request authority to 
commence human clinical studies in the United States.  There can be no 
assurance that the requisite approvals or certifications will be granted 
or 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 Registrant's ability to commercialize its products in the United 
States.

   Even if 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 Registrant 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 or distribution of the Registrant's products and has the power 
to demand the recall of such products.  FDA medical device regulations 
depend strongly on administrative interpretation, and there can be no 
assurance that future interpretation made by the FDA or other regulatory 
bodies, with possible retroactive effect, will not adversely affect the 
Registrant.  The FDA and various other authorities either currently inspect 
or will inspect the Registrant and its facilities from time to time to 
determine whether the Registrant is in compliance with regulations relating 
to medical device manufacturing, including regulations concerning design, 
manufacturing, testing, quality control, product labeling, distribution, 
promotion and record keeping practices.  A determination that the Registrant 
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.  See Business Government 
Regulations".


Dependence on Single Product  

   The Registrant expects to derive substantially all of its revenues for 
the next several years from sales of Macroplastique.  The Registrant's 
failure to continue its commercialization of Macroplastique in Europe would 
have a material adverse effect on the Registrant's business, financial 
condition and results of operations.  The Registrant does not expect that 
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, and if the market 
changes, or if new or strengthened competition emerges, or customer 
preferences change, or if new technology causes Macroplastique to be viewed 
as a less effective treatment, the Registrant's business, financial 
condition and results of operation would be adversely affected.  Unlike 
larger companies with many products in the marketplace, the Registrant is 
dependent on one product and its fate is, consequently, much more closely 
tied to market acceptance of that product.


Dependence on Patents and Proprietary Rights  

   The Registrant's success depends in part on its ability to preserve 
trade secrets, obtain and maintain patent protection for its 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 Registrant by the Patent Offices in the United States, 
United Kingdom, Japan and Germany.  Applications are also currently pending 
in various other countries, including Canada and 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 Registrant) from introducing products 
competitive with the Registrant's products, the Registrant'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 
Registrant, or the Registrant'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 Registrant also relies upon 
unpatented trade secrets to protect its 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 Registrant's proprietary technology.  Further, no 
assurance can be given that the Registrant 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 Registrant, protect trade secrets or proprietary information 
owned by the Registrant 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 outcome in any 
litigation could subject the Registrant to significant liabilities to 
third parties, require disputed rights to be licensed from others and/or 
require the Registrant 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 
Registrant, if at all.  See Business Patents, Trademarks, and Licenses.


Uncertainty Relating to Third-Party Reimbursement  

   The success of the Registrant will depend, in part, upon, satisfactory 
reimbursement for Macroplastique procedures from third party health care 
payers.  In the United States 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 Registrant 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 that 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 Registrant for 
Macroplastique or increase the relative expense to the consumer. 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 Registrant's business, financial condition and results 
of operations. See Business Third Party Reimbursement.


Potential Unfavorable Public Reaction to Use of Silicone Products/Earlier 
Silicone Controversies  

   Macroplastique is comprised of heat vulcanized polydimethylsiloxane, which 
results in a solid flexible silicone elastomer.  The United States breast 
implant industry in the 1990's became the subject of significant 
controversies (some of which continue at this time) surrounding the 
possible effects upon the human body of the use of silicone gel in breast 
implants.  One consequence was a massive flood of products liability 
litigation, leading to the bankruptcy of several companies, including 
Uroplasty's former parent, Bioplasty, Inc., (which in turn, caused 
Uroplasty, Inc. to file for bankruptcy in 1993).  The Registrant uses only 
solid silicone material, and not semi-liquid silicone gel (as was used in 
breast implants), in its Macroplastique product.  However, since the 
controversies in the United States surrounding the use of silicone in 
breast implants have been so widespread and resulted in such extensive 
litigation, there can be no assurance that the use by the Registrant, and 
others, of solid silicone in medical devices implanted in the human body 
will not result in controversies, or even litigation.  There can be no 
assurance that studies or research unknown to date will not some day cast 
doubt, in the mind of the public, on the safety of the Registrant's 
products and the appropriateness of their intended use.

   The Registrant expects its competitors will attempt to portray silicone 
as an undesirable feature of Macroplastique, and the effects of such 
efforts cannot be predicted at this time. The earlier silicone 
controversies may adversely affect the Registrant's ability to market 
Macroplastique in the United States if and when the Registrant receives 
PMA approval from the FDA for Macroplastique.


Research and Development Expenses in Fiscal Year 1999; Expected Losses  

   The Registrant's future success will depend upon, among other factors, its 
ability to introduce and market Macroplastique on a timely basis in the 
United States, and to that end, it has committed the largest portion of the 
proceeds of this offering.  Although the Registrant has been profitable in 
fiscal years 1998 and 1997, the Registrant expects to incur significant 
operating losses in its fiscal year 1999, due largely to the significant 
costs associated with clinical trials and other aspects of the FDA approval 
process.  The development and commercialization by the Registrant of 
Macroplastique and other products in the United States will require 
substantial additional product development, clinical, regulatory and other 
expenditures for the foreseeable future.  See "Management's Discussion and 
Analysis of Financial Condition and Results of Operations," "Business," 
"Financial Statements", and "Risk Factors Need for Additional Capital".


Need for Additional Capital  

   The Registrant anticipates the proceeds from the sale of the maximum 
number of Shares together with cash flow from operations will be sufficient 
to fund its IDE submission, clinical studies and the completion of its PMA 
application to the FDA for Macroplastique.  However, if any number of 
Shares less than the maximum is sold or if the maximum number is sold and 
expenses or operating profits differ from expected levels, the Registrant 
will require additional financing to complete its PMA application to the 
FDA for Macroplastique.  Further, the Registrant will need additional 
funds in order to introduce Macroplastique to the U.S. vesicoureteral 
reflux and male incontinence markets because separate regulatory approval 
is needed for each of these conditions.  There can be no assurance that 
additional capital will be available to the Registrant when needed or on 
terms acceptable to the Registrant. The net proceeds of this offering, 
together with the Registrant's existing capital resources and any funds 
provided by future operations, will not be sufficient to fund new product 
development, and funds for such purpose may not be available, on reasonable 
terms, and there can be no assurance that other sources of funding will be 
available.  See "Use of Proceeds" and "Management's Discussion and 
Analysis".


Lack of Marketability and Liquidity of Shares/Registration Rights Do Not 
Assure Liquidity and May Not Apply in All States  

   The transferability of the Shares will be restricted, so an investment in 
the Shares should be considered illiquid for an extended period of time.  
Although purchasers of the Shares hold mandatory registration rights 
(which are contained in the Subscription and Registration Rights Agreement, 
Exhibit A hereto), which require the Registrant to use its best efforts to 
register the Shares following the completion of this offering, there can be 
no assurance that any such registration effort will be successful, and the 
Registrant may not be required to register the Shares in all states in 
which the Shares may be sold.


Highly Competitive Industry  

   Competition in the urinary incontinence management and treatment products 
market is fierce.  The medical condition treated by using the Registrant's 
product also may be managed or treated using a variety of alternative 
products or techniques, including adult diapers, absorbent pads, behavior 
therapy, pelvic muscle exercises, drugs, surgery, implantable devices, 
other injectable bulking agents and other medical devices.  There is no 
assurance the Registrant's products will be a substitute for such 
alternative products or techniques or that advancements in these 
alternative products or techniques will not make the Registrant's products 
obsolete.  In addition, the Registrant believes some of its competitors 
who do not currently have injectable bulking agents are attempting to 
develop injectable bulking agents which will directly compete with 
Macroplastique.  Many of the Registrant's existing as well as potential 
competitors have substantially greater capital resources, name recognition, 
distribution capabilities, well-known and well-established product lines 
and larger marketing, research and development staffs and facilities than 
the Registrant.  These competitors may also have greater expertise than 
the Registrant in research and development, manufacturing, marketing and 
sales and regulatory affairs.  There can be no assurance that the 
Registrant and Macroplastique will be able to compete effectively with such 
alternative products or techniques or with such competitors and potential 
competitors.

   In addition, the Registrant's ability to compete in the urinary 
incontinence treatment market will depend primarily upon physician, patient 
and healthcare payer acceptance of Macroplastique as a safe, effective and 
cost-effective treatment for stress urinary incontinence.  The Registrant's 
ability to compete in this market will also depend upon product pricing and 
the consistency of its product quality and delivery.  Other factors within 
or outside the Registrant's control include its product development and 
innovation capabilities, ability to obtain required regulatory approvals, 
ability to protect its proprietary technology, manufacturing and marketing 
capabilities and ability to attract and retain skilled employees.  See 
"Business Competition".


Risks and Effects of Technological Developments  

   The Registrant 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 Registrant's ability to 
increase sales of Macroplastique and 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 stress urinary incontinence that are 
similar to, or compete with, Macroplastique. Significant developments by 
any of these companies or advances by medical researchers at universities, 
government research facilities or private research laboratories could 
eliminate the market for Macroplastique or otherwise render Macroplastique 
obsolete. See "Business Competition."


Risk of Product Liability; No Assurance Insurance is Adequate  

   The medical products industry is subject to substantial litigation. As a 
manufacturer of an implantable medical product, the Registrant faces an 
inherent business risk of exposure to product liability claims in the event 
that the use of its product is alleged to have resulted in adverse effects 
to a patient. The Registrant maintains product liability insurance, but 
there can be no assurance that its coverage limits are adequate to protect 
the Registrant from any liabilities which it might incur in connection 
with the clinical trials and commercialization of Macroplastique or any 
other product. Such insurance is expensive and in the future may not be 
available on acceptable terms, if at all. Furthermore, the Registrant 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 Registrant or required by a regulatory agency.  
Consequently, 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 Registrant. See "Business Product Liability".


Uncertainty of Future Market Acceptance  

   The Registrant sells Macroplastique in Europe and other foreign 
countries, where it has established a small, though significant, 
marketshare for the product. 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, 
ease of use and relative cost compared to other bulking agents and 
treatment alternatives.  Physicians may elect not to prescribe treatment 
using Macroplastique unless adequate reimbursement from health care payers 
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 that the acceptance of Macroplastique by 
urological and gynecological health care providers will continue to grow in 
Europe and other areas where Macroplastique is already used.


The Registrant does not sell Macroplastique in the United States  

   There can be no assurance that Macroplastique will achieve any significant 
degree of market acceptance in the United States among physicians, health 
care payers or patients, even if the safety and effectiveness of 
Macroplastique is established in the United States and the necessary 
regulatory approvals are obtained.  Even if those approvals were granted, 
the Registrant's future success in the United States market would be 
entirely dependent on the successful commercialization and market 
acceptance of Macroplastique.  Accordingly, any delay or failure by the 
Registrant in demonstrating that Macroplastique is safe and effective, 
receiving required regulatory approvals to market Macroplastique or 
achieving significant market acceptance of Macroplastique in the United 
States among physicians, health care payers and/or patients would have a 
material adverse effect on the Registrant's business, financial condition 
and results of operations.  In addition, the earlier controversies 
surrounding silicone, and possible lingering public concerns about it, 
could impede the acceptance of Macroplastique.  See "Business".


Dependence on Key Personnel

   The Registrant's success depends to a significant degree upon the 
continued contributions of its key management personnel.  The Registrant 
believes that its future success will depend in large part on its ability 
to attract and retain highly skilled managerial, engineering, operations 
and marketing personnel who are in great demand.  Failure to attract and 
retain key personnel could have a material adverse effect on the 
Registrant's results of operations.  The Registrant does not have an 
employment agreement or non-compete agreement with Daniel G. Holman, its 
Chairman, President, CEO and CFO, or Susan Hartjes-Doherty, its Vice 
President of Operations and Regulatory Affairs and Secretary.


Risks Associated with International Operations;Currency Risks  

   At this time, the Registrant only sells Macroplastique outside the United 
States through its wholly-owned foreign subsidiaries.  Sales and operations 
outside of the United States 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 
Registrant's financial condition or results of operations.  In particular, 
because the Registrant's international sales are denominated primarily in 
Dutch guilders, currency fluctuations in countries where the Registrant 
does business may render the Registrant's products less price competitive 
than those of foreign companies whose sales are denominated in weaker 
currencies.  The Registrant reports its financial results in U.S. dollars, 
and fluctuations in the value of the dollar or the currencies in which the 
Registrant transacts business can have a negative impact on its financial 
results.


Dependence on Suppliers  

   The Registrant currently purchases all raw materials from single sources.  
Alternative suppliers for these materials exist should the current 
suppliers discontinue production or distribution. However, the Registrant 
would need to complete additional testing to qualify the materials obtained 
from any new suppliers.  Additionally, limited notice of the need to switch 
suppliers for either of these materials could result in production delays 
and inventory depletion.  The Registrant 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.


Limited Public Market for Common Stock; Possible Stock Price Volatility  

   Prior to this offering, there has been only a limited public market for the 
Registrant's common stock, and there can be no assurance that an active 
trading market for the common stock will develop in the future or be 
sustained following any subsequent registration of the common stock.  
There can be no assurance that future market prices of the common stock 
will not be lower than the purchase price of the Shares sold in this 
offering.  The market price of the common stock following the offering may 
be highly volatile. Announcements of new products and services by the 
Registrant or its competitors, technological innovations, disputes 
regarding patents or other proprietary rights, regulatory developments and 
economic and other external factors, as well as period-to-period 
fluctuations in the Registrant's financial results, could cause the market 
price of the common stock to fluctuate significantly. In addition, the 
stock market in general and, in particular the market prices for medical 
technology companies, have 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 
common stock.


Absence of Long-Term Human Clinical Studies  

   Although the Registrant believes that Macroplastique is safe when used 
as recommended by the Registrant, there are no long-term well-controlled 
human clinical studies of this product.  Accordingly, no assurance can be 
given that Macroplastique, even when used as recommended, will have the 
effects intended or will not have adverse effects over a patient's lifetime.  
For example, there can be no assurance as to whether or how frequently 
patients will require additional injections of Macroplastique and whether
any such additional injections will be effective or will have a negative 
effect on physician, payer or patient acceptance.


Fluctuations In Quarterly Operating Profit and Net Income  

   The Registrant may experience variability in its net sales and operating 
profit on a quarterly basis as a result of many factors, including, among 
others, buying habits of European health care providers, size and timing of 
orders by certain customers, shifts in demand for types of products, 
technological changes and industry announcements of new products.  If 
revenues do not meet expectations in any given quarter, operating results 
may be materially adversely affected.  The Registrant may, in addition, 
experience variability in its net income on a quarterly basis as a result 
of many factors, including currency fluctuations.  As a result of these 
potential fluctuations in quarterly results, period-to-period comparisons 
of the Registrant's financial results should be approached cautiously.


Possible Adverse Market Effect of Shares Eligible for Future Sale  

   Sales of substantial amounts of Common Stock (including shares issued upon 
the exercise of outstanding options and warrants) in the public market 
could have an adverse effect on the price of the Registrant's Common Stock. 
Such sales may also make it more difficult for the Registrant to sell 
equity or equity-related securities in the future at a time and price that 
the Registrant would deem appropriate. Upon completion of this offering, if 
the maximum number of Shares offered is sold, the Registrant will have 
5,692,525 shares of Common Stock issued and outstanding. The 1,500,000 
shares offered hereby are expected to become freely tradable within 90 
days following the registration of the Shares offered because of mandatory 
registration requirements, except for any shares purchased by an 
"affiliate" of the Registrant, which will be subject to the limitations of 
Rule 144 under the Securities Act of 1933, as amended ("Rule 144").  In 
addition to the 1,500,000 shares of Common Stock offered hereby, (i) 
approximately 3,400,000 shares are eligible for immediate sale on the date 
of this Report in accordance with Rule 144(k) or otherwise; and (ii) 
approximately 1,100,000 additional shares will be eligible for sale in the 
public market beginning in July, 1998, in accordance with Rule 144; 
subject, in certain cases, to volume and manner of sale limitations under 
Rule 144.  See "Description of Securities  Shares Eligible for Future 
Sale".


Possible Adverse Effect of Anti-Takeover Provisions and Staggered Board  

   As a Minnesota corporation, the Registrant is subject to certain 
anti-takeover provisions of the Minnesota Business Corporation Act.  
The authority of the Board with regard to the anti-takeover provisions of 
such Act could have the effect of delaying, deferring or preventing a 
change in control of the Registrant, may discourage bids for the 
Registrant's Common Stock at a premium over the then prevailing market 
price of the Common Stock, and may adversely affect the market price of, 
and the voting and other rights of the holders of, Common Stock. See 
"Description of Securities".

   The Registrant's Articles of Incorporation and Bylaws include certain 
provisions (the "Staggered Board Provisions") for staggering the election 
of the members of the Board of Directors.  The Board is divided into three 
classes with each class serving for an independent term.  The 
classification of directors is intended to make it more difficult to change 
the composition of the Board.  At least two shareholders' meetings, instead 
of one, will generally be required for shareholders to effect a change in 
control of the Board.  The Staggered Board Provisions will apply to every 
election of directors, whether or not a change in the Board, in the opinion 
of some or a majority of the Registrant's shareholders, would be desirable.  
The Staggered Board Provisions relating to the removal of directors and 
the filling of vacancies are designed to protect the staggered Board 
structure in the event a third party gains control of a majority of the 
Registrant's voting power and could discourage an attempt to gain control 
of the Registrant.  See "Description of Securities".


Potential Applicability of "Penny Stock Rules"; Possible Impact on 
Liquidity of Stock  

   If the Registrant fails to become listed on Nasdaq or, after such listing, 
fails to satisfy the Nasdaq requirements to maintain listing on Nasdaq in 
the future, the Common Stock will likely continue to be quoted only in the 
local over-the-counter "pink sheets" market.  The public trading market for 
the Common Stock could be adversely affected by such limited quotation.  
In addition, the Common Stock would be subject to SEC rules under the 
Securities Exchange Act of 1934 relating to "penny stocks."  The "penny 
stock rules" apply to companies whose common stock trades at less than 
$5.00 per share or which have a tangible net worth of less than $5,000,000 
($2,000,000 if the Registrant has been operating for three or more years).  
These rules require brokers who sell securities subject to such rules to 
persons other than established customers and "institutional accredited 
investors" to complete certain documentation, make suitability inquiries 
of investors and provide investors with certain information concerning the 
risks of trading in the security.  The application of these rules may 
restrict the ability of brokers to sell the Common Stock, may adversely 
affect the liquidity of the Shares, and may affect the ability of 
purchasers in this offering to sell their Shares in the secondary market.


Immediate, Substantial Dilution to Purchasers in this Offering  

   Purchasers of the Shares offered hereby will incur immediate and 
substantial dilution in the net tangible book value of their purchased 
Shares.  Investors may also experience additional dilution as a result of 
the exercise of outstanding stock options and warrants.  See "Dilution".


No Dividends  

   The Registrant has never paid any cash dividends on its Common Stock and 
does not anticipate paying such dividends for the foreseeable future.  
See "Dividend Policy".


Net Operating Loss Carryforwards 

   Effect of International Operations on Tax Position.  The Registrant has net 
operating loss carryforwards for U.S. income tax reporting purposes of 
approximately $2,061,000, which can be used to offset U.S. taxable income 
in future years.  Sales of the Registrant's voting common shares during 
the prior three years, combined with the current equity offering will most 
likely cause a change in ownership under Section 382 of the Internal 
Revenue Code of 1996.  Section 382 limits the annual use of the 
Registrant's U.S. net operating loss carryforwards existing as of the date 
of the ownership change.  Notwithstanding the application of Section 382, 
it is not anticipated that any limitation would have a material adverse 
effect on the Registrant.


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


Item 7. Financial Statements

   The information contained under the headings "Consolidated Statements
of Operations," "Consolidated Balance Sheets," "Consolidated Statements of 
Shareholders' Equity," "Consolidated Statements of Cash Flows," "Notes 
to Consolidated Financial Statements" and Independent Auditors Report is 
incorporated herein by reference. 


Item 8. Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosure

   Not applicable.


Item 9. Directors, Executive Officers, Promoters and Control Persons; 
        Compliance with Section 16(a) of the Exchange Act

   The Registrant's Directors and Executive Officers, as of March 31, 1998, 
were as follows:

Name                  Age  Position             Director Since  Term Expires

Daniel G. Holman      52   Chairman, President, 1994            2000
                           CEO, CFO
Joel R. Pitlor        59   Director             1994            1999
R. Patrick Maxwell    53   Director             1994            1999
Carolyn A. Bruhjell   48   Director             1997            1998
	
Susan Hartjes-Doherty 44   Vice President of Operations 
                           and Regulatory Affairs, Secretary
Germain E. Willem     51   Vice President of Sales 
                           and Marketing
Christopher Harris    39   Vice President of Corporate 
                           Development


   All directors are members of the Nominating Committee; all directors 
except Mr. Holman are members of the Compensation Committee; and Mr. 
Maxwell and Ms. Bruhjell are members of the Audit Committee.

   The Registrant does not have any employment or non-compete agreement 
with Mr. Holman or Ms. Doherty, whose employment, as such, is at will.

   The following paragraphs describe the business experience of each of the 
Registrant's directors and officers.  Several of these individuals have 
served as directors or officers of Bioplasty, Inc., which filed for 
bankruptcy in April 1993.  See "Business Former Parent and Current 
Subsidiaries".Daniel G. Holman has served as Chairman of the Board, 
President and Chief Executive Officer of Uroplasty, Inc. since February 
1994, and as Chief Financial Officer since June 1996.  Mr. Holman 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  has been Chairman of the Board of Bioplasty, Inc. since March 1992, 
and President and CEO since February 22, 1993.  Mr. Holman 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 has been a director since February 1994.  Mr. Pitlor served 
as a director of Bioplasty 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 was appointed a Director of Uroplasty in April 1994 and 
elected by shareholders in August 1997.  Mr. Maxwell has been an attorney 
since 1969.  Mr. Maxwell holds and has held management positions in 
numerous other businesses (primarily temporary placement services, 
telemarketing and legal expense insurance).

Carolyn A. Bruhjell was elected a Director of Uroplasty in August 1997.  
Ms. Bruhjell is a public accountant and financial consultant.  Ms. Bruhjell  
was from 1996 through January 1998, the Controller of Integrated Network 
Technologies, Inc., Mendota Heights, Minnesota, a computer integration and 
networking Registrant.  From 1994 to 1996, Ms. Bruhjell was a Senior Audit 
Manager for Graves, McKenna, Lundeen and Almquist, PLLP, public 
accountants, as well as Treasurer for Minn Shares Inc., a closed-end 
management investment Registrant.  From 1979 to 1994, she was Co-Owner and 
Accountant for First Commercial Leasing, Inc., an equipment leasing firm. 
Ms. Bruhjell received her B.S. in Accounting from the University of 
Wisconsin.  She is a Certified Public Accountant and a Certified Management 
Accountant.

Susan Hartjes-Doherty joined Bioplasty, Inc. in September 1991 as Director 
of Operations and served as Vice President of Operations from April 1993 
until May 1996.  In November 1994, Ms. Doherty was appointed Vice-President 
of Operations for Uroplasty, Inc. and was elected Secretary in September, 
1996.  Prior to 1991, Ms. Doherty was Director of Operations at 
Bio-Vascular, Inc. in St. Paul, Minnesota from November 1989 to September 
1991.  Prior to that time, she served at various other pharmaceutical and 
medical device companies in management-oriented positions in production, 
quality assurance and research.  Ms. Doherty 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. Doherty is a senior member and a Certified Quality Auditor of the 
American Society for Quality and served several years on its Executive 
Committee and is a member of the American Society of Microbiology, and the 
Henrici Society for Microbiologists.  She has served on several national 
and international standards committees. 

Germain E. Willem joined the Registrant in November 1994 as Director of 
International Sales and Marketing and became Vice President of Sales and 
Marketing in January 1997.  Mr. Willem has 20 years of experience in 
international sales and marketing of medical devices, including the AMS 
division of Pfizer Product Group.  Mr. Willem has a degree in engineering 
from the 'Industriele Hogeschool West Vlaanderen' in Belgium.  He has been 
active in standardization organizations for medical devices both in Belgium 
and The Netherlands.

Christopher Harris joined Bioplasty in October 1989 as Area Sales Manager 
in the United Kingdom.  Since September 1994, Mr. Harris has been the 
Managing Director of the Registrant's subsidiary in the United Kingdom.  In 
February 1996, Mr. Harris was appointed as Director of Corporate 
Development and in January 1997 he was appointed Vice President of 
Corporate 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. 


Item 10. Management Compensation

   The following table sets forth, in summary form, (1) the compensation 
paid for the years shown in the table, to Daniel G. Holman, the Registrant's 
Chairman, President, CEO and CFO and to Susan Hartjes-Doherty, the 
Registrant's Vice President of Regulatory Affairs and Operations and 
Secretary; (2) the stock options and stock appreciation rights granted to 
such individuals for the years shown; and (3) long-term payouts and other 
compensation for the years shown:

<TABLE>
<CAPTION>

Summary Compensation Table

                                                                       Long Term Compensation (1)
                            Fiscal Year                                --------------------------
                            Annual Compensation                                Awards
-------------------------------------------------------------------------------------------------
                                                           Other                     Securities
Name                                                       Annual      Restricted      Under-
and                                                        Compen-       Stock         lying
Principal                                                  sation        Awards        Options
Position              Year     Salary($)    Bonus($)         ($)          ($)          SARs(#)
-------------------------------------------------------------------------------------------------
<S>                   <C>       <C>         <C>            <C>         <C>             <C>   
Daniel G. Holman      1998      161,919          --         25,632 (2)      --          70,000
CEO                   1997      154,162          --         28,818 (2)      --               0
                      1996      146,534          --         18,016 (2)      --          15,000

Susan Hartjes-Doherty 1998      102,160       5,000         --              --          40,000
Vice President        

Total Compensation for All Executive Officers
 For Fiscal Year 1998:
 (Four Persons)                        475,617

</TABLE>


(1)   There were no payouts under a "long-term incentive plan" (called 
      "LTIP") for the years shown, nor was any other form of compensation 
      paid or awarded.

(2)   Reimbursement of expatriot living expenses in The Netherlands.

      Mr. Pitlor receives a $2,000 per month consulting fee from the 
      Registrant under a month to month agreement.  All non-employee Board 
      members who do not receive any other form of compensation from the 
      Registrant receive $500 per board meeting attended.  In addition, 
      directors participate in the Registrant's option plan.


Option/SAR Grants Table

<TABLE>
<CAPTION>
	
Option Grants in Fiscal Year Ended March 31, 1998

----------------------------------------------------------------------------- 

                  Number of         Percent of
                  Securities        Total Op-
                  Underlying        tions/SARS                                        
                  Options           Granted to      Exercise or    Securities         
                  /SARS             Employees in    Base Price     Expiration     
Name              Granted(#)        Fiscal Year      ($/Share)        Date        
-----------------------------------------------------------------------------
<S>                  <C>               <C>              <C>           <C>         

Daniel G.            50,000           15.1%            $1.00       April 2002
Holman, CEO          20,000            6.0%            $3.25       February 2003

Susan Hartjes-       25,000            7.6%            $1.00       April 2002
Doherty, V.P.        15,000            4.5%            $3.25       February 2003


</TABLE>

(1)   Options for 250,000 shares were granted to officers and directors 
      during the fiscal year ended March 31, 1998.

   The Registrant adopted an Incentive Stock Option Plan (the "1995 Plan") 
in May 1995 which provided for the granting of options to purchase 350,000 
shares of stock.  At March 31, 1998 there were 177,200 options  outstanding 
under the 1995 Plan. In April 1997, the Board of Directors adopted and in 
August 1997, the Registrant's shareholders approved the 1997 Stock Option 
Plan (the "1997 Plan") pursuant to which 500,000 shares of common stock 
have been reserved. At March 31, 1998 there were 313,000 options 
outstanding under the 1997 Plan.  (In addition, the Registrant had 15,000 
options outstanding not issued pursuant to either Plan.)  Both Plans 
required that options be granted at exercise prices equal to or greater 
than the fair market value of the stock at the time of the grant.


Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table

<TABLE>
<CAPTION>
                                                   Number of
                                                   Securities       Value of
                                                   Underlying       Unexercised
                                                   Unexercised      In-the-Money
                                                   Option/SARs      Options/SARs
                 Shares acquired      Value        At FY-End (#)    at FY-End ($)
Name             on Exercise          Realized ($) Exercisable      Exercisable
----------------------------------------------------------------------------------
<S>                    <C>              <C>           <C>               <C>

Daniel G.            10,000            27,000        95,000           181,250
Holman, CEO

Susan Hartjes-          --               --          65,000           125,000
Doherty, V.P.

</TABLE>



Item 11. Security Ownership of Certain Beneficial Owners and Management

   At March 31, 1998, the Registrant had 4,191,525 shares of common stock 
outstanding and had granted options to employees and directors to purchase 
505,200 shares of the Registrant's common stock.

   The following table sets forth the number of shares of the Registrant's 
common stock beneficially owned, as of March 31, 1998, and as adjusted to 
reflect the sale of the minimum and maximum number of Shares offered 
hereby, by (i) each person known to the Registrant to be the beneficial 
owner of more than five percent of the Registrant's Common Stock, (ii) 
each director, (iii) each executive officer of the Registrant who is named 
above, and by (iv) all directors and executive officers as a group:

<TABLE>
<CAPTION>
                                                                 Percent of Class
                                                         ----------------------------------

Name and Address of              Number of Shares                          As Adjusted      
Beneficial Owner                 Beneficially Owned      Presently     Minimum      Maximum
-------------------------------------------------------------------------------------------
<S>                                  <C>                   <C>           <C>          <C>

Bruce P. Mindich 
555 White Plains Road 
Tarrytown, NY  10591                1,100,000              26.2%         21.2%        19.3%
	
Daniel G. Holman
2718 Summer Street NE 
Minneapolis, MN  55413-2820           299,981 (1)           7.0%          5.7%         5.2%
	
Robert A. Ersek, M.D. 
Continental Intervest 
630 West 34th Street, Suite 200 
Austin, TX  78205                     227,988               5.4%          4.4%         4.0%
	
Susan Hartjes-Doherty 
2718 Summer Street NE 
Minneapolis, MN 55413-2820            122,203 (2)           2.9%          2.3%         2.1%
	
Joel R. Pitlor 
19 Chalk Street
Cambridge, MA  02139                  145,000 (3)           3.4%          2.8%         2.5%
	
R. Patrick Maxwell 
Templeton & Associates 
10 South Fifth Street, Suite #990 
Minneapolis, MN  55402                 45,307 (3)           1.1%          0.9%         0.8%
	
Carolyn A. Bruhjell 
CAB Consulting 
703 Bartosh Lane 
River Falls, WI 55402                  57,488 (4)           1.4%          1.1%         1.0%
	
Directors and Executive
Officers as a Group (7 persons)       751,979 (5)(6)       16.5%         13.5%        12.4%

	
</TABLE>

(1)   Includes 95,000 shares held under options to purchase common stock.

(2)   Includes 65,000 shares held under options to purchase common stock.

(3)   Includes 45,000 shares held under options to purchase common stock.

(4)   Includes 30,000 shares held under options to purchase common stock.

(5)   Includes 362,000 shares held under options to purchase common stock.

(6)   To the Registrant's knowledge, the persons named have both voting and 
      investment power over the shares listed.



Item 12. Certain Relationships and Related Transactions


   The Registrant has a Royalty Agreement with three individuals, namely 
Arthur A. Beisang, Jr., Robert A. Ersek, M.D., and Arthur A. Beisang, III, 
M.D.  Mr. Beisang and Dr. Ersek are former officers and directors of the 
Registrant (see "Business Patents, Trademarks, and Licenses"), and, as 
far as the Registrant knows, each holds, or did hold, more than 5% of the 
Registrant's outstanding stock.  The aggregate amount of royalty expense 
recognized by the Registrant pursuant to such Royalty Agreement during each 
of the past three fiscal years was as follows.

   Fiscal Year ended 3/31/98      Uroplasty, Inc.   $ 147,860

   Fiscal Year ended 3/31/97      Uroplasty, Inc.   $ 110,495

   Fiscal Year ended 3/31/96      Bioplasty, Inc.   $   1,000
                                  Uroplasty, Inc.      64,695
                                                    --------- 
                                  Total             $  65,695

	
   On July 11, 1997, the Registrant's then second largest shareholder, the 
Bioplasty Product Claimants Trust (the "Trust"), which prior to such date 
owned 640,000 shares, or 17.5% of the Registrant's then outstanding shares 
of common stock, sold such shares to a group of investors (the "Investors").  
In connection with such transaction, the Trust sold to the Investors its 
interest in that certain Promissory Note, dated March 30, 1994, which, at 
March 31, 1997, had a principal balance outstanding of $496,000.  
Concurrently with the sale by the Trust of the 640,000 shares to the 
Investors, the Registrant agreed to convert and did convert the Note into 
496,000 shares of Common Stock, at a conversion ratio of $1.00 per share.  
The Investors, who included certain registered representatives (or their 
customers) employed by RJ Steichen & Co., the Agent, consisted of 33 
individuals, retirement accounts and corporations located primarily in the 
Minneapolis/St. Paul, Minnesota area.  The aforementioned transaction was 
facilitated by certain registered representatives of RJ Steichen & Co., but 
they were not directly compensated for their efforts by either the Trust or 
the Registrant, and the Investors did not pay a commission on the 
transaction.  There was no involvement whatsoever by the Agent as an 
entity.


Item 13. Exhibits and Reports on Form 8-K

   (a)   Exhibits incorporated by reference (Rule 12b-23). 
The following Exhibits are incorporated by reference to the Registrant's 
Registration Statement on Form 10SB, filed July 10, 1996:
                                                                 
                                                                
Number   Description                                  

2.1      First Amended Joint Plan of Reorganization (Modified), of the 
         Registrant, 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 Registrant, representing
         shares of the Registrant'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 among
         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)


         (b)      The following exhibits are filed as part of this report:

21.1     Subsidiaries of the Registrant

27.1     Financial Data Schedule 



                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange 
Act of 1934, the Registrant caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                           UROPLASTY, INC.

Dated:     May 28, 1998                   By /s/ DANIEL G. HOLMAN
                                              Daniel G. Holman
                                              Chairman, President and CEO


         In accordance with the Exchange Act of 1934, this report has been 
signed below by the following persons on behalf of the Registrant and in 
the capacities and on the dates indicated.

   Name                 Title/Capacity                          Date

/s/ DANIEL G. HOLMAN    President, Chief Executive Officer      May 28, 1998 
Daniel G. Holman        Chief Financial Officer, 
                        Director (Principal Executive Officer,
                        Principal Financial Officer, Principal
                        Accounting Officer)

/s/ JOEL R. PITLOR      Director                                May 28, 1998
Joel R. Pitlor

/s/ R. PATRICK MAXWELL  Director                                May 28, 1998 
R. Patrick Maxwell

/s/ CAROLYN A. BRUHJELL Director                                May 28, 1998 
Carolyn A. Bruhjell



Exhibit 13

UROPLASTY, INC. AND SUBSIDIARIES

Consolidated Financial Statements

March 31, 1998 and 1997




TABLE OF CONTENTS

                                                             Page(s)

Independent Auditors' Report                                   F-2

Financial Statements:

   Consolidated Balance Sheets                                 F-3

   Consolidated Statements of Operations                       F-4

   Consolidated Statements of Shareholders' Equity             F-5

   Consolidated Statements of Cash Flows                       F-6

Notes to Consolidated Financial Statements                  F-7 - F-16



Independent Auditors' Report

The Board of Directors and Shareholders
Uroplasty, Inc.:


We have audited the accompanying consolidated balance sheets of 
Uroplasty, Inc. and subsidiaries as of March 31, 1998 and 1997, and the 
related consolidated statements of operations, shareholders' equity, and 
cash flows for the years then ended. These consolidated financial statements 
are the responsibility of the Company's management. Our responsibility is 
to express an opinion on these consolidated financial statements based on 
our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the 
overall financial statement presentation. We believe that our audits 
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of 
Uroplasty, Inc. and subsidiaries as of March 31, 1998 and 1997, and the 
results of their operations and their cash flows for the years then ended 
in conformity with generally accepted accounting principles.

As discussed in footnote 7, the fiscal 1997 consolidated financial 
statements have been revised to reflect a prior period adjustment.


KPMG Peat Marwick LLP

April 23, 1998



UROPLASTY, INC. AND SUBSIDIARIES

Consolidated Financial Statements

March 31, 1998 and 1997

<TABLE>
<CAPTION>
	
CONSOLIDATED BALANCE SHEETS
March 31, 1998 AND 1997

                                                1998        1997
<S>                                           <C>          <C>                                                
Assets
		
Current assets:										
   Cash and cash equivalents            $    889,541     814,603 
   Accounts receivable trade, 
      less allowance for doubtful
      accounts of $64,930 in 1998 
      and $124,000 in 1997                   766,835     502,744 
      Inventories                            294,424     387,373 
      Prepaid expenses                       184,628     105,625 
						
Total current assets                       2,135,428   1,810,345 

Property, plant, and equipment             1,261,059     241.075 
Less accumulated depreciation                216,529      92,745 
										
                                           1,044,530     148,330 

Intangible assets, net of accumulated 
   amortization of $64,252 in 1998 
   and $44,500 in 1997                       101,586      80,030 
										
Total assets                            $  3,281,544   2,038,705 
										
Liabilities and  Shareholders' Equity

Current liabilities:										
   Accounts payable                          358,782     160,811 
      Accrued liabilities:
         Compensation and payroll taxes       81,526      62,364 
         Royalties                            16,900      12,400 
         Other                               116,755      95,575 
      Capital lease obligations current 
         maturities                           16,463      32,191 
      Note payable-current maturities         30,756      36,954 
										
Total current liabilities                    621,182     400,295 
										
Capital lease obligations, less current 
   maturities                                 31,893           0
Note payable, less current maturities        577,713     407,994 
										
Total liabilities                          1,230,788     808,289 
										
Shareholders' equity
   Common stock $.01 par value; authorized 
      20,000,000 shares 4,191,525 and 
      3,649,525 issued and outstanding at 
      March 31, 1998 and 1997, 
      respectively                            41,915      36,495 
   Additional paid-in capital              2,432,599   1,963,560 
   Accumulated deficit                      (256,629)   (664,470)
   Cumulative translation adjustment        (162,129)   (100,169)
   Note receivable shareholder                (5,000)     (5,000)
										
Total shareholders' equity                 2,050,756   1,230,416 

Commitments and contingencies (note 4)

Total liabilities and 
   shareholders' equity                 $  3,281,544   2,038,705 

<FN>										
See accompanying notes to consolidated financial statements.

</TABLE>

<PAGE>
<TABLE>

UROPLASTY, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended March 31, 1998 and 1997
<CAPTION>										
										
                                                1998        1997
<S>                                             <C>          <C>
			
		
Net sales                              $   4,335,908   3,334,563 
Cost of goods sold                           937,978     753,769 
										
Gross profit                               3,397,930   2,580,794 
										
Operating expenses:
   General and administrative                994,068     685,430 
   Research and development                  778,082     610,677 
   Selling and marketing                     964,138     908,483 
										
                                           2,736,288   2,204,590 
										
Operating profit                             661,642     376,204 
										
Other income (expense)
   Interest income                             8,294       2,389 
   Interest expense                          (20,732)    (36,884)
   Liquidation loss on foreign subsidiary          0     (12,307)
   Foreign currency exchange loss           (129,503)   (204,315)
   Other                                           0      93,134 
										
                                            (141,941)   (157,983)
										
Net income before income taxes               519,701     218,221 
										
Income tax expense                           111,860           0
										
Net income                             $     407,841     218,221 
	

</TABLE>

									
Net income per common share            $        0.10        0.06
										
Net income per common share 
   assuming dilution                            0.09        0.06
										
Weighted average common shares outstanding:
   Basic                                   4,026,571   3,575,609 
   Diluted                                 4,321,132   3,670,275 
										
[FN]										
See accompanying notes to consolidated financial statements.

<TABLE>
<CAPTION>

UROPLASTY, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity

Years ended March 31, 1998 and 1997

                                Common Stock    Additional Accu-   Cumulative             Total		
                                                Paid in    mulated translation Note       shareholders'
                               Shares    Amount capital    deficit adjustment  receivable equity		

<S>                             <C>       <C>     <C>         <C>     <C>        <C>        <C>

Balance at March 31, 1996   3,472,525  $ 34,725  1,811,830 (882,691)(224,922)  (5,000)    733,942
Issuance of 130,000 shares
   of common stock            130,000     1,300    128,700        0        0        0     130,000

Issuance of 17,000 shares of 
   common stock pursuant to 
   stock option exercise       17,000       170      8,330        0        0        0       8,500

Issuance of 30,000 shares of 
   common stock for note 
   payable conversion          30,000       300     14,700        0        0        0      15,000

Net income                          0         0          0  218,221        0        0     218,221
															
Translation adjustment              0         0          0        0  124,753        0     124,753
																
Balance at March 31, 1997   3,649,525    36,495  1,963,560 (664,470)(100,169)  (5,000)  1,230,416

Issuance of 46,000 shares of 
   common stock pursuant to 
   stock option exercise       46,000       460     23,540        0        0        0      24,000

Issuance of 496,000 shares of 
   common stock for note 
   payable conversion, net of 
   $5,146 of conversion costs 496,000     4,960    436,499        0        0         0    441,459

Stock options issued in lieu 
   of cash compensation             0         0      9,000        0        0         0      9,000

Net income                          0         0          0  407,841        0         0    407,841

Translation adjustment              0         0          0        0  (61,960)        0    (61,960)

Balance at March 31, 1998   4.191.525  $ 41.915  2.432.599 (256.629)(162,129)   (5,000) 2,050,756 

<FN>
See accompanying notes to consolidated financial statements.

</TABLE>

UROPLASTY, INC. AND SUBSIDIARIES  

Consolidated Statements of Cash Flows

Years ended March 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                1998        1997
<S>                                              <C>         <C> 

Cash flows from operating activities:
   Net income                            $   407,841     218,221
   Adjustments to reconcile net income 
   to net cash provided by operations:
      Depreciation and amortization          121,640      63,913
      Loss on disposal of assets                   0      45,000
      Liquidation loss on foreign
         subsidiary                                0      12,307 
      Stock options issued in lieu 
         of cash compensation                  9,000           
      Changes in operating assets and 
      liabilities:
         Accounts receivable                (264,091)   (166,596)
         Inventories                          92,949    (130,718)
         Prepaid expenses                    (79,003)    (12,062)
         Accounts payable                    197,971     (47,592)
         Accrued liabilities                  44,842     (40,525)
										
Net cash provided by (used in) 
   operating activities                      531,149     (58,052)
										
Cash flows from investing activities:
   Payments for property, plant, 
      and equipment                       (1.045,386)    (85,276)
   Payments relating to intangible assets    (41,308)     (7,202)

Net cash used in investing activities     (1.086,694)    (92,478)
										
Cash flows from financing activities:
   Repayment of long-term obligations        (63,404)    (35,947)
   Proceeds from issuance of notes payable   684,549       8,909 
   Net proceeds from issuance of stock        24,000     138,500 
   Payments received on note receivable            0      22,595 

Net cash provided by financing activities    645,145     134,057 

Effect of exchange rates on 
   cash and cash equivalents                 (14,662)    112,446 

Net increase in cash and cash equivalents     74,938      95,973 

Cash and cash equivalents 
   at beginning of year                      814,603     718,630 
										
Cash and cash equivalents 
   at end of year                         $  889,541     814,603 

										
Supplemental disclosure of 
   Cash Flow information:	
   
   Cash paid during the year 
      for interest                        $   20,732      37,425 
   Cash paid during the year 
      for income taxes                        87,522           0 

Supplemental disclosure of 
   non-cash financing activities:	
   During the years ended March 31, 1998 and 1997, $441,459 and $15,000,
   respectively, in notes payable were converted into common stock.
									
<FN>
See accompanying notes to consolidated financial statements.

</TABLE>									



UROPLASTY, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 1998 and 1997


(1)	Summary of Significant Accounting Policies


(a)   Nature of Business

      Uroplasty, Inc. (the Company or UPI) is a manufacturer and 
distributor of urological and plastic surgery implantable medical devices. 
The primary focus of the Company's business is the marketing of an 
implantable device for the management of stress urinary incontinence and 
vesicoureteral reflux. Currently, all sales of the Company's products are 
to customers outside the United States by the Company's foreign 
subsidiaries.

(b)   Principles of Consolidation

      The consolidated financial statements include the accounts of the 
Company and its wholly owned foreign subsidiaries. All significant 
intercompany accounts and transactions have been eliminated.

(c)   Revenue Recognition

      The Company recognizes revenue upon shipment of product to customers. 

(d)   Cash and Cash Equivalents

      The Company considers highly liquid debt instruments purchased with 
an original maturity of three months or less to be cash equivalents. 

(e)   Patents

      Patents are stated at cost and are amortized over six years using the 
straight line method. 

(f)   Income Taxes

      Deferred tax assets and liabilities are recognized for future tax 
consequences attributable to differences between the financial carrying 
amounts of existing assets and liabilities and their respective tax bases.

(g)   Use of Estimates

      The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the 
financial statements and the reported amounts of revenues and expenses 
during the reporting period. Actual results could differ from these 
estimates.

(h)   Inventories

      Inventories are stated at the lower of cost, (first-in, first-out 
method), or market (net realizable value), and consist of the following at 
March 31, 1998 and 1997:


                                                1998        1997	

Raw materials                                $47,891      88,864
Work-in-process                              118,973     136,204
Finished goods                               127,560     162,305

                                            $294,424     387,373



(i)   Property, Plant, and Equipment

      Property, plant, and equipment are carried at cost and consist of the 
following at March 31, 1998 and 1997:


                                                1998        1997

Land                                        $129,465           -
Building                                     526,639           -      
Equipment                                    604,955     241,075
					
                                           1,261,059     241,075
					
Less accumulated depreciation               (216,529)    (92,745)
					
                                          $1,044,530     148,330


      Depreciation is provided for using both straight-line and accelerated 
methods over useful lives of four to seven years for equipment and 40 years 
for the building. Maintenance and repairs are charged to expense as 
incurred. Renewals and betterments are capitalized and depreciated over 
their estimated useful service lives.

(j)   Research and Development

      Research and development costs are expensed as incurred.

(k)   Foreign Currency Translation

      The financial statements of the Company's foreign subsidiaries were 
translated in accordance with the provisions of Statement of Financial 
Accounting Standards No. 52. 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 as a separate 
component of shareholders' equity. Foreign currency transaction gains and 
losses are recognized currently in net income.

(l)   Stock Based Compensation

      The Company applies the intrinsic value method described in 
Accounting Principles Board (APB) Opinion No. 25 in accounting for the 
issuance of stock incentives to employees and directors and, accordingly, 
no compensation expense has been recognized in the financial statements. 
Effective April 1, 1996, in accordance with Statement of Financial 
Accounting Standards No. 123 (SFAS 123), Accounting for Stock Based 
Compensation, pro forma information reflecting compensation cost for such 
issuances is presented in the Shareholders' Equity footnote.

(m)   Net Income Per Common Share

      Effective December 31, 1997, the Company adopted Statement of 
Financial Accounting Standards No. 128 (SFAS 128), Earnings per Share. 
SFAS 128 simplifies the computation of earnings per share ("EPS") 
previously required by replacing primary and fully diluted EPS with basic 
and diluted EPS. Under SFAS 128, basic EPS is calculated by dividing net 
earnings by the weighted-average common shares outstanding during the 
period. Diluted EPS reflects the potential dilution to basic EPS that 
could occur upon conversion or exercise of securities, options, or other 
such items, to common shares using the treasury stock method based upon 
the weighted-average fair value of the Company's common shares during the 
period. Reconciliations of basic and diluted average common shares 
outstanding are as follows:


                                                1998        1997
					
Average common shares outstanding          4,026,571   3,575,609
Assumed conversion of stock options          294,561      94,666
					
Average common and 
assumed conversion shares                  4,321,132   3,670,275

	
      Options to purchase 17,753 and 8,740 shares of common stock at $3.19 
and $3.25 per share, respectively, were outstanding during 1998 but were 
not included in the computation of diluted earnings per share because the 
exercise prices of the options were greater than the average market price 
of the common shares. The options expire from 2002 to 2004.

(n)   Reclassifications

      Certain prior year amounts have been reclassified to conform with the 
current year presentation.

(o)   New Accounting Pronouncements

      Statement of Financial Accounting Standards No. 130 (SFAS 130), 
Reporting Comprehensive Income, and Statement of Financial Accounting 
Standards No. 131 (SFAS 131), Disclosures about Segments of an Enterprise 
and Related Information, were issued in June 1997. SFAS 130 and SFAS 131 
are effective for fiscal years beginning subsequent to December 15, 1997 
and, therefore, will be adopted by the Company on April 1, 1998. The 
Company does not expect the adoption of SFAS 130 or SFAS 131 to result in 
any substantive changes in its disclosure, except that comprehensive income 
will be adjusted by the amount of the annual translation adjustment.


(2)	Long-term Debt

      Long-term debt consists of the following at March 31, 1998 and 1997:


			

                                                1998        1997

Non-interest bearing, unsecured promissory
note payable, discounted at 8% per annum,
$16,000 quarterly payments, remaining 
balance due February 1999                   $      -     444,948

Mortgage note, monthly payments of $2,563 plus
variable rate interest through November 2017
(rate at March 31, 1998 - 5%)                608,469           -

Less current maturities                       30,756      36,954

                                            $577,713     407,994


      The promissory note payable was converted into 496,000 shares of 
common stock during 1998.

      Future payments of long-term debt are as follows:


      1999                                             $  30,756
      2000                                                30,756
      2001                                                30,756
      2002                                                30,756
      2003                                                30,756
      Thereafter                                         454,689
			
                                                       $ 608,469


(3)   Shareholders' Equity

      (a)   Stock Options

      Pursuant to the Uroplasty, Inc. Qualified Incentive Stock Option 
Plans, the Company has reserved 677,200 shares of its common stock for 
issuance to employees and directors. Employee options vest on the date of 
grant and director options vest evenly over two years. Outstanding options 
generally expire five years from date of grant. Options are granted at the 
discretion of the directors and are exercisable in amounts equal to or 
greater than the fair market value of the Company's common stock at date of 
grant. The plans provide for the exercise of options during a limited 
period following termination of employment, death, or disability.


   Stock option activity under these plans is summarized as follows:


                                    Weighted-average
                                    Shares                exercise price
                                    outstanding           per share

Balance at March 31, 1996                    246,700                0.50
      Granted                                  3,000                1.00
      Exercised                              (17,000)               0.50
      Canceled                                (9,500)               0.50

Balance at March 31, 1997                    223,200                0.51
      Granted                                328,000                1.58
      Exercised                              (46,000)               0.52

Balance at March 31, 1998                    505,200          $     1.20


      At March 31, 1998, the range of exercise prices and weighted-average 
remaining contractual life of outstanding options was $0.50- $3.25 and 3.8 
years, respectively. 

      (b)   Fair Value of Stock Plans

      The Company applies APB Opinion No. 25, Accounting for Stock Issued 
to Employees in accounting for its stock incentive plans for designated 
persons and, accordingly, no compensation cost has been recognized in the 
financial statements for employee and director stock options granted under 
its stock option plans. Had the Company determined compensation cost based 
on the fair value at the grant date for its stock options under SFAS 123, 
Accounting for Stock-based Compensation, the Company's net income would 
have decreased to the pro forma amounts shown below:

                                                1998        1997
					
Net income:				
      As reported                         $  407,841     218,221
      Pro forma                              167,695     217,705
					
      Net income per common share - basic:				
      As reported                               0.10        0.06
      Pro forma                                 0.04        0.06
					


      Pro forma net income only reflects options granted in 1998, 1997, and 
1996. Therefore, the full impact of calculating compensation cost for stock 
options under SFAS 123 is not reflected in the pro forma net income amounts 
presented above because compensation cost is reflected over the options' 
vesting period and compensation cost for options granted prior to April 1, 
1995 is not considered.



      The per share weighted-average fair value of stock options granted 
during 1998 and 1997 was $0.97 and $0.17, respectively, on the date of 
grant, using the Black-Scholes option-pricing model with the following 
weighted-average assumptions:


                                                1998        1997
					
      Expected dividend yield                   0.0%        0.0%
      Risk-free interest rate                   6.0%        6.5%
      Expected volatility                     156.0%        0.0%
      Expected life, in years                   3.0         3.0
					


(4)   Commitments and Contingencies

      (a)   License Agreement

      On December 7, 1995, the Company entered into an agreement as 
licensee to obtain exclusive patent rights covering certain 
injection-related instrumentation. Under this agreement, the Company made 
a cash payment of approximately $30,000 to the licensor and will make 
royalty payments at the rate of 10% of the worldwide net sales for a period 
of 10 years.  No additional payments have been made in either fiscal 1998 
or 1997.

      (b)   Savings and Retirement Plans

      The Company sponsors various plans for eligible employees both 
domestically as well as in the United Kingdom and the Netherlands. The 
total contibution expense associated with these plans was $43,782 and 
$13,985 for the years ended March 31, 1998 and 1997, respectively.

      (c)   Operating Lease Commitments

      UPI leases office, warehouse, and production space under four 
operating leases and leases various automobiles for its European employees. 
Future minimum lease payments under noncancelable operating leases with an 
initial or remaining lease term in excess of one year for the ensuing years 
ending March 31 are as follows:


      1999                                            $  279,959
      2000                                               193,606
      2001                                                98,159
      2002                                                56,728
      2003                                                11,211

                                                      $  639,663

	
      Total rent expense paid for operating leases was $241,732 and 
$167,999 in 1998 and 1997, respectively.



      (d)   Capital Lease Obligations

      UPI leases various equipment under noncancelable capital leases. The 
leases call for aggregate monthly payments of $2,034 with various 
expiration dates through July 2002. Equipment includes $85,854 and $46,661 
of cost and $22,070 and $10,340 of accumulated amortization as of March 31, 
1998 and 1997, respectively, related to these leases.

      Future minimum capital lease payments are as follows as of March 31, 
1998:


      1999                                            $   20,371
      2000                                                17,783
      2001                                                10,146
      2002                                                 8,665
      2003                                                 4,667
			
                                                          61,632
			

      Amount representing interest                       (13,276)
			
      Present value of capital lease payments             48,356
			
      Current maturities                                  16,463
			
      Obligations under capital leases  
         less current maturities                       $  31,893


      (e)   Royalties

      Under the terms of an agreement with former officers and directors of 
the Company, UPI pays royalties equal to between three percent and five 
percent of the net sales of certain products, subject to a specified 
monthly minimum of $4,500. The royalties payable under this agreement will 
continue for the longer of the term of the patent or ten years from the 
date of this agreement, which began in November, 1993. Total expense 
recognized under the agreement was $147,860 and $110,495 for the years 
ended March 31, 1998 and 1997, respectively.

      Under the terms of a settlement agreement for a patent suit brought 
by a competitor in 1991, UPI is obligated to pay the plaintiff a royalty 
equal to five percent of the net sales of certain products in the United 
States, or a minimum of $50,000 per year as long as the products are being 
marketed abroad. Total expense recognized under the agreement was $50,000 
for each of the years ended March 31, 1998 and 1997.

(f)   Contingencies

      The Company, as of March 31, 1998, is not party to any material 
pending legal proceedings; however, because of the nature of its business, 
it may become subject to certain claims and lawsuits filed in the ordinary 
course of business that could adversely affect the Company's financial 
position.


(5)   Income Taxes

      The components of income tax expense for each of the years in the 
two-year period ended March 31, 1998 consist of the following:


                                                1998        1997

      Income tax provision:
         Current:
            U.S. and state                 $   1,000           -  
            Foreign                          111,000           -  

            Total income tax expense       $ 112,000           -  

      Effective tax rates differ from statutory federal income tax rates 
for the year ended March 31, 1998 and 1997 as follows:


                                                1998         1997

Statutory federal income tax rate               34.0%        34.0%
State income taxes, net of federal benefit      (1.2)         2.0
Valuation allowance decrease                   (22.6)       (36.0)
Other permanent differences                      2.0          0.0
Impact of foreign operations                     9.6          0.0

                                                21.8%         0.0%

	
      Deferred taxes as of March 31, 1998 and 1997 consist of the 
following:


                                                1998        1997

Deferred tax assets:
      Other reserves and accruals          $  14,000       8,000
      Deferred profit on intercompany sales  208,000     300,000
      Net operating loss carryforwards     1,001,000   1,031,000

                                           1,223,000   1,339,000

Less valuation allowance                  (1,223,000) (1,339,000)

                                           $       -           -     

	
      At March 31, 1998, the Company had U.S. net operating loss 
carryforwards (NOL) of approximately $2,061,000 for U.S. income tax 
purposes, which begin to expire in 2012, and a foreign NOL of 
approximately $739,000, which carries forward indefinitely. U.S. net 
operating loss carryforwards cannot be used to offset taxable income in 
foreign jurisdictions. In addition, U.S. tax rules impose limitations on 
the use of net operating losses following certain changes in ownership. 
Such a change in ownership may limit the amount of these benefits that 
would be available to offset future taxable income each year, starting with 
the year of ownership change.



      The Company has not reflected any benefit of such net operating loss 
carryforwards in the accompanying financial statements in accordance with 
Financial Accounting Standards Board Statement No. 109.


(6)   Major Customers and Domestic and Foreign Operations

      During fiscal 1998 and 1997, approximately 12% and 14% of the 
Company's net sales were to one customer.

      Information regarding operations in different geographies for the 
years ended March 31, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>


                                    United                Adjustments
                                    States       Europe   and eliminations    Consolidated

Fiscal 1998
<S>                                  <C>          <C>           <C>                <C> 

Sales to unaffiliated customers $        -    6,335,002         (1,999,094)      4,335,908
Income from operations            (719,552)   1,056,408            324,786         661,642
Other income (expense)              99,104     (240,649)              (396)       (141,941)
Net income (loss)                 (621,010)     704,461            324,390         407,841

Identifiable assets at
      March 31, 1998            $3,919,360    2,391,218         (3,029,034)      3,281,544


Fiscal 1997

Sales to unaffiliated customers $        -    3,972,740           (638,177)      3,334,563
Income from operations             201,931      909,960           (735,687)        376,204
Other income (expense)              29,764       57,058           (244,805)       (157,983)
Net income                         231,694      967,024           (980,497)        218,221

Identifiable assets at
      March 31, 1997            $4,434,731    3,032,906         (5,428,932)      2,038,705



(7)   Liquidation Loss on Foreign Subsidiary-Prior Period Adjustment

      In 1997, the Company liquidated its interest in a wholly owned 
foreign subsidiary and recognized a net gain of $59,245 in the statement of 
operations. However, cumulative translation losses of $71,552 related to 
the Company's net investment in this subsidiary were excluded from the gain 
or loss on liquidation.

      Statement of Financial Accounting Standards No. 52, Foreign Currency 
Translation, requires that upon complete or substantial liquidation of an 
investment in a foreign entity, the amount attributable to that entity and 
accumulated in the translation adjustment component of equity shall be 
removed from the separate component of equity and shall be reported as part 
of the gain or loss on sale or liquidation of the investment for the period 
during which the sale or liquidation occurs.

      Accordingly, the net loss on liquidation charged to other income in 
1997 is $12,307, rather than previously reported net gain on liquidation of 
$59,245. At March 31, 1997 this adjustment reduces previously reported 1997 
net income by $71,552 and increases the accumulated deficit, which  
increase is offset within shareholders' equity by an equivalent reduction 
in the cumulative translation adjustment.




</TABLE>